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Banking software solutions that use blockchain are a helpful mechanism for rebuilding consumer trust. It is secure, verifiable, and transparent, which helps an organisation establish good faith. Since the insurance industry plays a part in economic growth, it should follow that consumers will trust it. However, not all consumers do; the Asian market, in particular, is distrustful of insurance.
The region, as a whole, has high levels of underinsurance. Unless insurance services and products are made readily available to a broader range of demographics, Asia’s development remains tenuous. With the introduction of blockchain, however, the insurance industry might experience some changes. Harnessing blockchain could make insurance products more appealing and relevant to new policyholders—here are a few ways it could do so.
Blockchain Can Reduce Operational Costs
Blockchain supports smart contracts, which consist of a computer code running on top of a blockchain. This kind of contract, like other types, contains rules under which parties interact with each other. The enforcement of the agreement, however, is electronic. Once the parties satisfy the pre-defined rules, the code enforces the agreement, facilitating and verifying the negotiation and performance.
This technology can also lower costs. When you have smart contracts, you can quickly access and share data without the need for lengthy verification and data entry processes. Through it, you can also enable quick information sharing and matching.
Blockchain Ensures Secure Data Storage
With blockchain-enabled cybersecurity solutions, insurance companies can store policy documents on more than one digital ledger. These records are available for evaluation and amendment but cannot be deleted or altered without prior mutual agreement. As such, blockchain can also make legal and contractual procedures more efficient.
Another way blockchain can ensure secure storage is by helping insurance companies create a public, tamper-proof database that tracks ownership and asset transfers. These can authenticate purchases, police reports, and official documents.
For example, a personal accident insurance policy issued through a blockchain allows a beneficiary to get treated and have the claim processed as he does, instead of going back and forth or waiting for months for reimbursement.
Blockchain Helps Improve Customer Experience
Pay-as-you-go insurance or usage-based insurance is one way for insurance companies to ensure a better customer experience for their policyholders. For example, in car insurance with UBI, premium rates adjust according to the number of miles driven.
This rule encourages people to drive safely and less often, so they can avail of lower premiums, a win-win for both the insurer and the plan holder. With blockchain-enabled UBI, you can determine the coverage based on a person’s lifestyle.
Blockchain Ensures Productivity For SMEs
Developing countries can increase the earnings and productivity of small businesses. With blockchain, it is easy to put in place a robust traceability and authentication system. Systems like these generate data automatically, reducing risk for companies that want to finance small or rural enterprises.
Aside from this, blockchain can likewise improve pension fund operations. With smart audit contracts, companies can ensure full compliance with fund rules, allowing employer matching, contribution calculations, investment profiles, and portability between funds. Smart audit contracts can also facilitate the registration of beneficiary designations
Using blockchain greatly benefits the insurance industry. However, it is uncertain where this technology would have the most significant impact. An insurance company needs to implement blockchain-enabled solutions as soon as possible to gain experience with the technology.
Leverage today’s technology to ensure your success tomorrow by partnering with Informatics. We are a financial software solutions company specialising in banking and insurance software development. Contact us today for enquiries.
Written by Daniele Paoletti