Blockchain has rapidly penetrated into the insurance industry, affecting insurance companies’ risk control, reinsurance, policy claims trace ability and other aspects. The technology optimizes processes,improves efficiency and accuracy and adds new impetus to the insurance industry. Specifically, blockchain has the following key applications:
Blockchain Application Model at ZhongAn Technology
- Data storage
The carrier of the policy is usually a paper contract as the insurance involves consumers, intermediaries, insurers,re insurers. In the process of policy information tracking and claim settlement,information loss, content misreading, long processing time and other issue soften occur. Decentralized record sharing through blockchain technology can solve these problems. The storage of encrypted, digitized information helps different parties to obtain information more efficiently. The digital management,tracking, and insurance of physical assets through blockchain plus the application of smart contracts and public ledgers in property and casualty insurance are particularly important.
Allianz Insurance, one of Europe’s largest insurers, has launched a blockchain model to store and update information such as policy payments, claims records, which can be verified through blockchain. The Chief Underwriting Officer at Allianz, Richard boyd said: “By replacing the human interventions which are currently embedded throughout the entire risk transfer process, frictional delays and the risks of human error are completely removed – with a radical effect on the speed and efficiency of the process”.
- Shared ledger of industry data
In property insurance, when multiple consumers file claims that involve multiple insurance companies with different claims systems, smart contracts can automatically confirm their respective coverage areas and scope of protection according to different company system sand calculate the responsibility that should be shared by all parties, which improves efficiency and accuracy. In health insurance, patients usually consult more than one doctor or visit a number of hospitals, which results in scattered medical records for the same patient in different medical institutions. The gathering of insurance companies corresponding medical institutions, duplication of information, errors, and redundancy in the transfer of information lead to inefficiency, high cost, and high error rate. Blockchain technology can establish an industry-wide synchronized information database. Data sharing can be ensured under the premise of ensuring information security by controlling medical data management rights and information access rights.
As an example, the MedRec system designed by Gem Health and the Massachusetts Institute of Technology (MIT) is a medical records and services management system built using blockchain technology.
- Risk control and fraud identification
In traditional insurance processes,information asymmetry along with complex and cumbersome written claims process gives fraudsters the opportunity to claim compensation from multiple insurers for the same incurred loss. Through the distributed ledgers on blockchain,insurance transactions and claim records can be permanently stored and shared instantly to relevant parties. The ownership mechanism established by digital certificates can also avoid identity forgery. Online transactions can also prevent insurance agents from collecting premiums through private sales orders without reporting to the company. More transparent and secured information disclosure can help prevent and identify fraud while the security of information can also be guaranteed by controlling access rights.
Everledger (a global emerging technology enterprise), created a distributed ledger using blockchain technology to record diamond ownership and provide services to buyers, seller sand insurance companies. After Everledger digitizes diamonds, digital fingerprints are engraved on the diamond and stored in the distributed ledgers.By verifying the digital fingerprints of each diamond, it is possible to identify frauds that some jewelers falsely claim that the diamond was stolen to make a claim, forge a certificate and sell it as a new diamond.
Limited by manual processes and one-time contracts, the communication between the reinsurance company and the original insurance company is inefficient, especially temporary reinsurance. Through real-time data sharing, re insurers can quickly process each claim according to the terms and conditions, avoiding cumbersome file movements during the claim.
Allianz Insurance Company has partnered with Nephila in the development of blockchain smart contracts to assist the reinsurance business. “Automation replaces countless mail exchange sand massive data file exchanges”, said Yann Krattiger, principal at Allianz Risk Transfer.When the processing efficiency of the latter stage of insurance company is improved, the reinsurance industry can save 5 to 10 billions of US dollars. Users would get better services and experiences, and even enjoy price reductions in insurance products.