The Rise Of Blockchain-Based Decentralized Insurance Platforms

Source

INTRODUCTION

Costs are high in traditional insurance services and the processing of claims is slow, which affects their transparency. Many policy holders struggle with the challenge of getting their claims accepted due to inefficiency at the bureaucratic level and decision making at a centralized level. In addition, manipulation of data and fraudulent activities worsen trust in the industry. There are, however, some Insurance providers who are adopting the use of blockchain technology because of improvement in efficiency, transparency, and security that it brings.

Having claimed that, Decentralized insurance services uses other technologies as well, such as smart contracts for policy and claim processes. These contracts operate in an automated manner whereby, instead of incurring costs with a broker, certain parameters are set. These efficiency improvements translate to lowered operational expenses and faster payments. In totality, these upgrades enhance reliability in the provision of services in the insurance industry.

With these improvements, every transaction and claim becomes easy to trace because they are all recorded in a secure ledger and this leads to a reduction in fraudulent activities and ensure equal treatment. Furthermore, DCS also encourages growth in the community where there is a lack of insurance services. More users, means that there is a potential shift in the insurance industry and blockchain technology can facilitate this.

• INCREASED TRUST AND TRANSPARENCY

No one can tamper with the ledger on which the details of the insurance policies and claims transactions are recorded within a blockchain system. As a result, transparency is greatly enhanced, which, in turn, avoids disagreements about the policy conditions, terms, and claim approvals. With policies being executed via smart contracts, there are fewer chances of discrimination or manipulation.

Within the world of commercial insurance, the justification for claim denial is often vague and unclear. Blockchain solves this problem by making the claims processing more transparent, with each step being recorded on the ledger. With concerns like these being addressed, policyholders can be sure that their claims are treated with equity. As a result, faith in the industry is positively boosted in the presence of lack of fraud and other forms of corruption. Policyholders are alleviated from anxiety and frustration in relation to the claims process as blockchain technology now permits them to verify their claim status wherever and whenever. With regards to the records, no one person can alter anything to their advantage, hence in the distributed system of blockchains, there is an increase in the transparency on all accounts. This, in turn, increases the amount of trust and greater responsiveness in the market of insurance.

• EFFICIENT CLAIMS PROCESSING

The post settlement claims processing speed of claim settlements is a recurrent problem within the insurance industry. The period between the claim and the settlement is usually prolonged because of endless factors such as rigid bureaucratic processes and manual assessments.

Now using Blockchain Technology these complex and long processes are significantly simplified using Smart contracts that automatically check the claims against preset guidelines and credit the amount requested as appropriate. This markedly brings down postponements and enhances customer experience.

Basically, with the aid of smart contracts, brokers and adjusters will no longer be needed in the claims process making it easier for insurers. This saves on management overheads and enables claims to be settled faster. Also, policyholders are able to get single-step approvals eliminating multi-step modern standardization systems used in insurance providers, which makes decentralized systems, more viable than the other option.

Source

With the advancement of digital insurance systems, fair and rapid allocation of finances is made possible. Using automated verification, fraudulent submissions are made easy to filter out and reject. Such processes increase the efficiency of both the providers and clients ensuring that such blockchain-enablement insurance provides less operational costs and more sustainability.

• REDUCED EXPENSES AND ENHANCED ACCESSIBILITY

Conventional insurance models incur a lot of operational costs, including hiring middlemen and spending on legal compliance in relation to paperwork. These costs are minimized in blockchain systems where there is no middleman and transactions are automated. Because of this, insurers can afford to charge lower premiums while still making a profit.

There are many people in developing countries who are unable to access affordable insurance. The costs associated with decentralized insurance systems and the availability of peer to peer coverage makes policies much more affordable. This means that individuals can now join insurance pools without the need for traditional service providers.

Providers of blockchain based microinsurance offer affordable coverage options for particular risks like crop loss or medical emergencies. These policies are directed towards low-income groups, and provide the necessary financial assistance during crucial times. With the low costs came increased accessibility which made insurance coverage available to a wider audience around the world.

• PREVENTION OF FRAUD AND MINIMIZATION OF RISK

In the United States, insurance fraud leads to losses exceeding $80 billion every year, which causes increased insurance premiums for honest users. With blockchain technology, all transactions are entered into the immutable ledger thus reducing fraud. Smart contracts validate a claim by comparing it against real life information.

Policies can be identified on blockchain systems stopping individuals from filing a second or fake policy claim. Policies are encrypted in a safe place stopping individuals from stealing someone else's identity. Improved data integrity offered by decentralized insurance platforms means that both customers and insurers will have a more secure environment.

Data sharing powered by blockchain technology also makes risk assessment more effective. Using the externally validated data provided by third parties, insurance companies are able to increase their risk and pricing strategies. This leads to the reduction of unnecessary losses and increases the efficiency of the insurance sector.

CONCLUSION

Source

Decreetalized blockchin based insurance models enhance transparency and efficiency while lowering costs and decreasing the likelihood of fraudulent cases. With the removal of the middleman and automated ways of dealing with claims, these platforms ensure a more democratic and universal access to insurance. Blockchain will, once again, transform the insurance sector, making it safer and more versatile for users all over the globe.