For years, the conventional insurance business has proven to be surprisingly flexible. It has eagerly accepted innovative digital processes in recent years, as new technologies have been changing the way consumers and businesses engage with each other and the way services and products are delivered.
However, there is a widespread perception that the global insurance sector is lagging behind other financial services areas, leaving much to be desired in terms of cost reduction and efficiency. Human error, fraud and cyberattacks are also major problems.
Enter regulated blockchain technology: the permissionless blockchain ecosystem for businesses that can radically change the insurance industry.
Regulated blockchain has the ability to optimise performance, security and transparency for the entire insurance industry, using public registries, enhanced cybersecurity protocols, and most importantly, the advantage of having a regulatory body control all the processes. In fact, many sectors are already using this technology, including, but not limited to, companies in industries such as real estate, banking, and entertainment.
Although the insurance industry has been eager to embrace digital technologies, much of the business is still processed on paper contracts, consumers still call by phone to buy new policies, and the list goes on and on.
This all leads to risks such as information that is lost, compromised and misinterpreted. Nearly half of the 143 US insurers polled by the Property Casualty Insurers Association of America and FICO reported that fraud has amounted to 5–10% of the costs of their claims.
The direct implication is that much remains to be done in terms of security, efficiency and customer satisfaction.
Numerous inefficiencies exist in the health insurance industry, such as duplication of medical records, manual processing of claims and inaccurate record keeping. Considerable work needs to be done in terms of efficiency and accuracy.
Interoperability of systems and devices is therefore essential to ensure that health professionals provide sufficient care to patients, but interoperability within a medical system is not easy to achieve.
With a regulated blockchain, patient records can be securely encrypted and shared among healthcare providers, fostering interoperability and enhanced security. The regulated blockchain ledger makes it possible to safely store patient data. As the operations in the ledger are automated, interoperability between medical systems is facilitated, eliminating manual processes and third parties involved in maintaining patient data. This helps medical providers save costs and focus on enhancing patient satisfaction.
Liability and property insurance consists predominantly of the automobile, commercial and home insurance. In the US in 2017, net premiums in this sector were $558.2 billion.
The handling of claims requires significant manual data entry, leaving room for human errors. Experts predict that blockchain technology could make processing applications three times faster and five times cheaper.
By using regulated blockchain ledgers and smart contracts (software that audits transactions in the system and performs automatic actions based on predefined conditions) to issue insurance policies, claims and payment processes can be automated to provide increased efficiency and accuracy.
Simply put, smart contracts have the capability to transform paper contracts into programmable code that automates claims processing.
The FBI estimates the cost of insurance fraud in the United States to be over $40 billion a year. The antiquated insurance industry processes leave much room for errors and fraud. A way to combat this would be for insurance companies to store claim information in a ledger that would help them communicate and identify suspicious behaviour.
The ledger is part of a safe, tamper-proof, and fast regulated blockchain. This is a regulated system that gives judicial authorities the power to enforce the law in case of fraud or malicious transactions.
Regulated blockchain can revolutionise current reinsurance processes by streamlining the information flow between insurers and reinsurers on a joint ledger.
Blockchain technology allows detailed premium and loss transactions to exist on an insurer’s and reinsurer’s computer systems simultaneously, thereby negating the need to reconcile the books between institutions for each claim.
Sharing data on the immutable ledger allows reinsurers to be well equipped to assign capital for claims in near–real time — thus allowing them to process and settle claims faster without having to rely on primary insurers for individual data.
According to PwC, the blockchain could save the reinsurance industry up to $10 billion globally by improving operational efficiency.
People trust their insurance agents more when there is no room for fraud or risk. And when complex claims are being handled ten times faster, there is no room for friction. In addition, when claims processing is automated, insurers can reduce operational costs and therefore prices.
Regulated blockchain is crucial in reshaping the insurance industry and freeing it from outmoded traditions. The need for innovation in the insurance industry is crucial: customers are eager for transparency, speed and cost flexibility. Our company, L3COS, is particularly tailored to meet the demands of the industry, so join the L3COS revolution now to speed up processes and reduce your operational costs.