For centuries, insurance has been around. Although technology has continuously changed entire industries over the past decade, the multi-trillion-dollar global insurance industry remains stuck in the past in many ways. Policies are sometimes processed on paper contracts, meaning claims and payments are prone to errors and often require supervision by humans. This is compounded by the inherent complexity of insurance, involving consumers, brokers, insurers, and reinsurers, as well as the main product of insurance—potential danger. Each step in this collaborative effort represents a potential failure argument in the overall system where information can be lost, policies misinterpreted, and settlement times prolonged. Enter blockchain technology, a form of shared record keeping that is cryptographically secured.
Both insurance giants and startups are trying to use blockchain technology to prevent insurance fraud and track medical records digitally. Traditionally, insurance has been a stagnating technological switch take-up indicator. Many risk surveys say that blockchain distributed ledger technology is most undoubtedly in the minds of boards and leaders as it should be, but those same surveys will disclose that insurers are struggling to understand how beneficial it can be for their businesses and how it is implemented and the costs incurred with doing so.
Since the distributed ledger is immutable, data cannot be modified or altered once stored and can also be viewed on the same blockchain network for everyone. These characteristics will make insurance practices and policies transparent and build trust between customers and insurance companies. Immutability will also leverage insurance companies to fight and save their costs against fraudulent claims.
Blockchain offers a well-organized system for inserting smart documents or smart contracts by enabling secure, error-free connections and transactions with the client or insurance policyholder. The incorporation of blockchain and big data has become one of the insurance industry's best practices enabling organizations to ensure material efficiency and safe monitoring by the compliance officer, who with the help of a machine learning system will be able to cast a net much larger than the previous one.
More specifically, as technology usage accelerates, businesses should buy cyber terrorism and business interruption coverage to protect against potentially larger cyber incidents in the future. To further minimize risk, companies should be implementing employee education to help them understand vulnerabilities, as well as keeping abreast of the third-party vendors they bring in their doors.
As mentioned earlier, technology is still to be analyzed and many more applications and features will appear in the future that will be able to fight current issues and create a faster, more efficient and more cost-effective ecosystem for both insurance and customer.
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