Bitcoin, the world's first cryptocurrency, led to the widespread adoption of blockchain technology. Over time, various other crypto coins, such as Ethereum and Litecoin, built their networks by enhancing this technology. As of 2022, thousands of crypto tokens exist in the virtual space, creating their market. Consequently, many companies are attempting to embrace the sophisticated blockchain network to optimize their profits.
Blockchain is applicable across all insurance types. Insurance categories like those listed below by Alex Reinhardt may employ blockchain technology to address coordination and cooperation concerns:
1. Property and Accidental Insurance
Property and Casualty (P&C) insurance protects assets like real estate, equipment, and infrastructure and provides liability insurance for accidents and injuries. Typically, these insurance forms need data collection to assess the validity and application of claims. Insurers must decide whether the policy's criteria have been satisfied and if damages are payable. This may need manual data input, analysis, and collaboration among several parties.
Claims process phases may be automated via the use of intelligent contracts. When a claim is made to an insurer, for instance, a smart contract may validate automatically that the client has valid coverage and communicate this confirmation to the organization responsible for computing damages liable. State Farm and USAA's mechanism for resolving car subrogation claims is a significant example of how blockchain technology has aided this area. The firms share a digital ledger that maintains a record of what is due; this record is then used to net out payments and facilitate a single, recurring payment.
2. Healthcare Coverage
The health insurance sector confronts two major challenges: securing medical records containing personally identifiable information (PII) and organizing access to this information across diverse parties. Due to the importance of patient confidentiality, insurance companies may be unable to access patients' medical histories. This absence of data might lead to first claims denials. While many of these first denied claims are recovered, administrative fees associated with filing an appeal may consume a substantial amount of time and resources. Moreover, segregated data may lead to additional friction between patients, doctors, and insurance companies throughout various healthcare processes.
Alex Reinhardt is positive that blockchain and zero-knowledge proofs may provide a transparent, traceable, and secure network for sensitive data like personally identifiable information. Moreover, blockchain-based technologies promote granular data access and allow patients to govern their medical data. Alex Reinhardt understands that, by 2025, BIS Research estimates that blockchain technology's rapid implementation and integration in healthcare may save more than $100 billion annually in expenditures associated with IT, operations, support services, staff, and health data breaches.
3. Reinsurance
Reinsurance is known as insurance for the insurers themselves. It becomes significant when an insurer issues several policies and their exposure to possible claims grows. Reinsuring the insurance premiums they have written may be a significant safeguard if an unanticipated catastrophe causes the insurer to pay out more than planned in a short period. Data exchange between insurers and reinsurers is difficult, time-consuming, and reliant on wasteful human labor. Risk underwriting, policy and premium management, claims administration, and financial settlement are the fundamental drivers of friction in this process.
Blockchain may simplify the flow of information within the reinsurance market by creating an immutable ledger that serves as a sole source of truth for all parties, which smart contracts can use to reconcile contracts between insurers.
4. Insuring Digital Assets
Insurance for Bitcoin, Ethereum, and other assets on blockchain networks might contain easy agreements about the custody of assets and whether policyholders are compensated if custody fails. Alternately, they may be crypto-native systems that use blockchain technology to pool funds, agree on policy contracts, and execute claims procedures that function "on the chain." This may entail insuring digital assets, blockchain networks, and apps' underlying technology and operations.
A rising number of these "crypto-native" insurance systems are currently operational. It lets users purchase insurance against risks and defects in smart contracts, which in the past have led token holders to lose millions of dollars in value.
No comments yet