Insurance industry leader, Niraz Buhari reveals the possibilities of blockchain technology in his industry

Blockchain is expected to fundamentally change the way the insurance and reinsurance industry operates by enabling closer communication between stakeholders, including suppliers, reinsurers and brokers.

Blockchain’s main characteristic, which supports the security and accuracy of transaction data, is the development of trust between parties exchanging information.

Blockchain in reinsurance streamlines important procedures such as compliance checks and reduces processing time and costs for compliance checks.

Businesses around the world continue to undergo a change thanks to blockchain technology.

Although blockchain is a commonly used term in the latest advancements, many individuals are unfamiliar with the idea.

In other words, many people are unaware of what blockchain technology is.

Simply put, a blockchain is a distributed database system that stores records of transactions and other activities. As a result, it enables signing, trading and confirmation without the need for an intermediary.

Blockchain makes it possible to carry out commercial transactions securely and transparently without the need for an intermediary.

Based on the highlighted features, the technology is poised to significantly improve the way we do business in virtually every area.

The insurance sector is one of the businesses expected to see changes in how stakeholders engage with each other.

Brokers, reinsurers and suppliers are some of the ecosystem partners that make up the insurance sector’s stakeholders.

The difficulties of the insurance sector

The problems with the current insurance system continue to have many loopholes that undermine the multi-billion dollar global sector in many ways, despite the increasing use of technology in the insurance industry.

For example, customers still contact brokers to buy new policies, and policies are still processed using paper contracts, which are prone to errors.

Efficiency assurance is made more challenging by the complexity of insurance processes.

Customers, brokers, insurers and reinsurers are all involved in constructing the main product, risk management.

Every step of the insurance processing process risks information loss, policy misunderstandings and lengthy settlement periods.

Insurance and Blockchain

Trust, transparency and immutability are three of blockchain’s core features that are relevant to the insurance sector.

Blockchain technology works in a way that offers a single source of information that is updated in real time, enabling the parties to retain the detailed information about assets, contracts and data ownership without the need for intermediaries. Microinsurance providers such as Smart Cover are already leveraging the use of Blockchain technology to provide a better and more transparent service to their customers.

Blockchain in the insurtech sector offers a single source of data (truth), which significantly reduces friction in business operations.

Distributed Ledger Technology (DTL) networks are facilitated and automated by smart contracts enabled by blockchain technology.

As a result, several insurance business sub-sectors can benefit from blockchain applications, including:

1. Risk reduction and risk management to improve efficiency.
2. Using a smart contract for property and casualty insurance to increase efficiency
3. Health insurance to promote interoperability and secure health records
4. Life insurance can help automate death claims, freeing family members from the laborious process.

Reinsurance using Blockchain

According to British Insurance News, inefficiencies in risk knowledge, placement, claims settlement and compliance pose the biggest problems for reinsurance.

Reinsurance is a crucial component of the insurance chain, and smart contracts on the blockchain are considered to have significant potential to change this industry.

According to research, blockchain technology can help shorten the time and costs associated with processing orders, settling disputes and streamlining important procedures such as compliance checks.

A greater understanding of risk and identity is also considered to be possible with blockchain, especially in light of the amount of data exchanged across many parties, including customers, brokers, reinsurers and external service providers.

Since each device needs multiple data entries and reconciliation, blockchain technology is a good choice to solve the underlying problems.

Blockchain can speed up and ease the transfer of risk from one insurance company to another, which is now a laborious procedure for settling insurance claims.

Blockchain records every transaction, including premium payments and losses, on the ledger of the insurer and reinsurer using smart contracts.

The procedure removes the institutions’ need to coordinate individual requirements and paper records.

Through the data exchanged across fixed registers, reinsurers can also distribute money to claims in real time.

They do not need to rely on the primary insurance company for information on each claim, allowing them to quickly and efficiently resolve disputes.

How Can Blockchain Help Developing Countries Get Insurance?

In underdeveloped nations, the vast majority of people lack access to health insurance.

Due to significant administrative expenses and the possibility of corruption, health insurance is quite expensive.

Customers contact insurance agents at traditional insurance companies using a “pen and pencil” technique, who then undertake contact duties to provide the best options for the consumer.

Birth certificates, treatment logs and previous insurance coverage are examples of medical documents that are vulnerable to loss and destruction.

The developing countries will find this paradigm particularly challenging.

Consistent telephone and internet access is a challenge in most developing countries.

A solution is offered by smartphones and cloud-based blockchain applications.

Final reflection

While blockchain may not be able to solve all the problems that insurance companies are currently facing, it is a crucial foundational technology that has the potential to promote stability, transparency and trust.

The capacity to automate the procedure makes the insurance sector more efficient, which is a total benefit.

To prepare for a soft launch as a SAAS model in 2022, one of our group companies, Smarttek, is now conducting further research and development in the blockchain field.