Blockchain is getting a lot of attention these days. It is a revolutionary technology that, unfortunately, has been associated with some slightly sketchy applications, such as cryptocurrencies.
But blockchain is now expanding beyond this use into other areas, and it has a lot of potential benefits for the insurance industry as well. It may be able to enhance the security, speed and efficiency of insurance transactions, resulting in savings of anywhere from 10 to 25 percent.
What Is Blockchain?
For the uninitiated, the first question is – just what the heck is this technology?
Blockchain is a technology that enables information to be distributed but not copied. It acts as a kind of protected ledger of various transactions. It can be programmed to record financial transactions or just about anything else of value.
It is in essence a distributed database. As noted by Blockgeeks.com, “Imagine a spreadsheet that is duplicated thousands of times across an entire network of computers. In addition, this network is constructed so it updates the spreadsheet automatically on a regular basis. This gives you some idea of what a blockchain is.”
Information on a blockchain is part of a shared, continually updated database. Because the database exists simultaneously across the entire network, all the information is public and verifiable by anyone. There is no centralized location that needs to be accessed – as a result, it is impossible for a hacker to get into it. The data is stored on millions of computers at the same time and can be accessed by anyone on the internet.
There is another advantage to blockchain. The way databases work today, they can only be accessed by one person at a time. So, only one person at a time can add to the database or otherwise make changes to it. Everyone else is locked out. But with blockchain, people can access the database simultaneously and make changes at any time, even if someone else is doing the same thing. It acts like a shared ledger.
How It Applies to the Insurance Industry
In the insurance industry, blockchain can be useful in several areas. One area is customer relations management. Blockchain can really help streamline the process for such things as onboarding, providing real-time proof and certificates of insurance, and simplifying policy administration, payments and other customer services.
It can also be very useful for fraud prevention because data can be shared among multiple parties at the same time.
Other potential areas where blockchain could have applications include complex multiparty lines of business, emerging markets, reinsurance and compliance.
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