The conventional insurance business has proven to be surprisingly flexible. It has eagerly accepted innovative digital processes in recent years, as new technologies have changed the way consumers and businesses engage with each other just as it has in 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, with much yet to be done in terms of cost reductions and efficiencies. Human error, fraud and cyberattacks also remain major problems.
This is where regulated blockchain technology: the permissionless blockchain ecosystem for businesses comes in as it can radically change the insurance industry for the better.
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 and consumers still call by phone to renew or buy new policies.
This all leads to enhanced but unnecessary risks such as information that can be 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 the duplication of medical records, manual processing of claims and inaccurate record keeping. It is clear that considerable work remains to be done in terms of efficiency and accuracy.
The interoperability of systems and devices is therefore essential to ensure that health professionals are able to provide sufficient care to their patients, but interoperability within medical systems has until now not been 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 car, commercial and home insurance. In the US in 2017, net premiums in this sector were $558.2 billion.
The handling of claims still requires significant manual data entry, leaving room for human error. 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, both claims and payment processes can be automated which will provide increased efficiency and accuracy.
Put simply, 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 a lot of room for error and fraud. One way to combat this would be for insurance companies to store claim information in a distributed ledger that would help them communicate and identify suspicious behaviour.
The ledger is part of a safe, fast and tamper-proof, regulated blockchain. L3COS is a regulated blockchain technology that as it has given government oversight allows judicial authorities the power to enforce the law should there be fraud or malicious transactions.
The regulated blockchain can also revolutionise current re-insurance processes by streamlining the flow of information between insurers and reinsurers on a joint ledger.
Blockchain technology allows detailed premium and loss transactions to exist on both an insurer’s and the 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 re-insurers to be 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.
Regulated blockchain is crucial in reshaping the insurance industry and freeing it from outmoded traditions. The need for innovation in the insurance industry is vital: customers are eager for transparency, speed and price flexibility. 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.