Blockchain car insurance
Subscribe now. Among others, blockchain technology improves the following areas within the insurance industry:. Our team has created the Heat Map below to highlight the hotspots of blockchain startups disrupting the insurance industry on a global level:. Get in touch! Blockchain-based solutions are already transforming the industry — helping insurers onboard clients more reliably, automating claims submission, easing reinsurance processes and designing smart insurance contracts , among other features. Our team of innovation analysts conducted thorough and extensive research on the potential of blockchain in the insurance industry, encompassing over startups working in the field.
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Content:
- Why is blockchain so interesting for insurance companies?
- Cryptocurrency Insurance Could Be a Big Industry in the Future
- MG's Astor to use blockchains to manage insurance claims, resale values
- Blockchain at the service of road accidents
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- Get covered against smart contract failure & exchange hacks.
- Blockchain in Insurance: Use Cases and the Way Forward
- Leveraging Blockchain To Smoothen The InsurTech Journey
- Blockchain app gets uninsured off Finland’s roads
- Car insurance blockchain platform isometric vector image
Why is blockchain so interesting for insurance companies?
Insurance is about information—gathering it, evaluating it, and disbursing or receiving payments based on it. Clearly, an insurer might dramatically improve its results through the application of digital technology. That many insurers have not yet achieved this is a function of an opposing force: the zeal with which most insurers guard their data. When an event requires an exchange of information, most insurers strive to share the least amount possible, in many cases using manual, paper-based processes.
But what if there were a technology that changed this? Blockchains have the potential to make other digital technologies, such as advanced analytics, artificial intelligence AI , and automation software, much more productive. Certain blockchain hurdles remain, so the value capture is still a few years off. Blockchains, which have appeared on the business radar only recently, are digital ledgers that are set up in a distributed fashion. When an update is submitted to a blockchain ledger, participants in the network are asked to approve the update as part of an automated process.
Approved updates are timestamped, encrypted, and added to the block. The new block becomes part of the blockchain: an immutable record of all transactions and agreements of interest to the participants.
See Exhibit 1. Indeed, a blockchain achieves its greatest value when there are multiple participants and its ownership and operation are distributed. In such cases, the distributed setup and the possibility of not having to pay a licensing fee some blockchain software is available as open-source code can keep the cost of operating the blockchain relatively low for each participant.
This is true of both public blockchains, which are open to all, and private blockchains, which require an invitation and are the blockchains most insurers are considering today. The benefits of blockchain technology, which are all relevant to the insurance industry, could make it possible for insurance providers to implement digital initiatives on a large scale—a goal that has thus far eluded them.
Making Insurance More Efficient. Such an insurer would store all the transactional data relating to its contracts on a blockchain or several blockchains. If a claim were filed with an all-blockchain insurer that required an exchange of information or a settlement, the transaction might well be conducted automatically.
The number of steps, and the costs, would be much higher. Insurers can organize a blockchain that involves insurance only or they can incorporate aspects of the surrounding ecosystem.
Such a blockchain could help insurers accelerate the processes of getting know-your-customer information and of generating quotes. An insurance-only blockchain could also drastically reduce the cost of motor claim settlements and could achieve them in much less time than it takes to handle them traditionally.
See Exhibit 2. Although insurance ecosystem blockchains are at an earlier stage of development, there are some worth noting. For instance, the marine cargo company Maersk is participating in such a blockchain with XL Group and several ports and customs authorities around the world. Ecosystem blockchains can give insurers external data that can be used, for example, to do a better job of setting prices and limiting their exposure to fraud. Spotting fraud is the responsibility of insurance adjustors who use their observations and experience to flag suspicious claims.
Digital technology is not used to a significant extent in support of either premium pricing or fraud detection. Both insurance-only and ecosystem blockchains allow insurers to use smart contracts and thus to automate more operational activities. Consider the reduction in paperwork that could be achieved by putting flight insurance—a relatively simple type of insurance—on a blockchain. The policyholder has to gather documentation from the destination airport about the exact arrival time, while the insurer has to verify the source and accuracy of the documentation and match it against the insurance contract.
Only after those steps have been taken can payment be disbursed. All of the steps are manual, and, in many cases, the product does not generate a positive margin.
With a blockchain, the entire process could be automated. Fizzy, a service of the French insurance company AXA, already offers flight insurance that uses blockchain technology in this way. We looked for possible savings in the three main areas of insurance—distribution, risk management, and operations. Our analysis, which takes into account data from some early industry pilots, suggests that the first all-blockchain insurers could substantially lower their combined operating ratios.
In terms of personal-insurance lines, we considered motor insurers. A motor insurer would be able to use the data on a blockchain to lower its loss ratio, reduce the cost of adding new customers, and substantially improve its ability to detect fraud. All told, an all-blockchain motor insurer could have a combined operating ratio 10 to 13 points lower than that of a traditional motor insurer. See Exhibit 3.
In commercial insurance, we considered marine cargo insurance. We expect that an all-blockchain marine cargo insurer could lower its costs in both risk management and operations. Risk management could be improved, for instance, if the satellite-tracking system of an insured cargo company were on the same blockchain as the insurance contract. In that case, the insurer might be able to automatically detect an increased risk—if, for instance, an entire load of cargo were concentrated in a single port—and dynamically adjust premiums.
Operations costs could be substantially reduced if the local port authority with which, in the event of a claim, there is considerable information exchange were a participant on the blockchain. We calculate that a blockchain could help such an insurer reduce its combined operating ratio by 10 to 13 percentage points. In reinsurance, the combined data on a blockchain could be analyzed to show risk concentration if, for example, insured property or cargo were in a politically unstable country or jurisdiction.
And a blockchain could be helpful in automating risk trading among insurers and reinsurers involved in a specific contract. The B3i consortium, a blockchain partnership that has grown to include dozens of reinsurance companies and brokers, expects participating reinsurers to improve their loss ratios by 0. With the exception of life insurance, which puts more emphasis on investments and less on transactions, virtually all sectors of insurance could see similar benefits.
For the moment, the idea of an all-blockchain insurer—one that can reduce the administrative burden in insurance transactions and assess risk more accurately—is just that: an idea.
There are both managerial and technical obstacles to the adoption of blockchain technology. The following aspects of the business present managerial challenges:. Furthermore, achieving successful control over the following technical aspects can be challenging:.
Given the obstacles, some insurers are probably wondering whether it pays for them to be blockchain trailblazers. They may prefer to hold back until there are clear signs that blockchains for the insurance industry are going to come into wide use. It is our opinion that a wait-and-see approach is shortsighted and leaves insurers vulnerable.
Disruption could come from any one of three directions: insurance technology startups insure-techs that are already in front on digital technology and are looking for ways to extend their lead; companies from other sectors, such as ride-sharing businesses, that have the data needed to assess certain kinds of risk and could use a blockchain to build an insurance offering; and fast-moving incumbents that adopt blockchains to improve their existing operations.
Instead of assuming that they will be able to catch up if the early blockchain initiatives prove their value and touch off a race for blockchain leadership, insurers should start developing the necessary capabilities now.
Will blockchain technology start to transform insurance in the next year? In five years? Could it fall short of ever becoming a real game-changer? No one can say for sure. Certain blockchain hurdles remain. Transparent asset tracking, among the biggest advantages of blockchain technology , has caught the interest of a variety of industries, including securities trading and logistics. Creation of a Trusted Immutable Record.
Preservation of Privacy and Confidentiality. Blockchains have the capacity to keep working even if one or more nodes go down. The ledger remains live and up-to-date on all the other nodes. The distributed approach of a blockchain means that the per-node cost of storing data is significantly lower than in a centralized setup. Native Support for Automated Transactions. In a blockchain, rules governing payments and contractual amendments can be coded into the software, reducing the need for manual transactions.
Real-Time Information Delivery. As transactions are approved, new blocks and data changes show up on the ledger in something close to real time.
This particular benefit is evident primarily in private blockchains, whose processes are less resource intensive than those of public blockchains. The cryptography algorithms used for public blockchains can require several minutes to run. Data from early industry pilots suggests that the first all-blockchain insurers could substantially lower their combined operating ratios.
Obstacles to Adoption For the moment, the idea of an all-blockchain insurer—one that can reduce the administrative burden in insurance transactions and assess risk more accurately—is just that: an idea. The following aspects of the business present managerial challenges: Partnering. Creating a blockchain that draws in outside participants requires some careful calculus—especially if the outside participants are competitors. Companies have to be willing to give up certain aspects of their operations that they may have seen as differentiating them from the competition.
Whom to approach, what to propose, and how to proceed when starting a blockchain all require considerable thought. Most insurance companies have had limited exposure to blockchains. They are not clear on how a blockchain might help them strategically, and they may lack the technical expertise to set up a pilot.
These are gaps that need to be bridged. Public blockchains including the one Bitcoin uses are accessible to all and often follow the governance approach used by open-source communities. By contrast, the blockchains that make sense for insurance companies are private: limited to invited insurers, partners, and customers. This requires a different kind of governance, which can be tricky because of the need to balance benefits as the number of stakeholders rises.
Furthermore, achieving successful control over the following technical aspects can be challenging: Scalability and Computational Power. Scalability is a big issue for blockchains.
The processes by which new blocks of data are securely approved for inclusion on the ledger—so-called consensus mechanisms—are extremely computer intensive in public blockchains.
By contrast, participants in private blockchains can address this problem upfront. An intruder could hack into secondary software for instance, into wallets and, once in the system, steal the blockchain encryption keys. Robustness of the Software. For the most part, blockchains have been implemented as proof-of-concept projects in small-scale environments.
As they look to go beyond pilots and get more out of blockchain technology, insurers will have to make sure that they are working with mature and proven software. Standards and Protocols.
Cryptocurrency Insurance Could Be a Big Industry in the Future
Nationwide is the first carrier to bring it to production and is already in testing mode. Dubbed the RiskBlock Alliance, the industry-led consortium has named its first product RiskBlock, which they tout as a blockchain framework designed specifically for the risk management and insurance industry. Plans call for Nationwide to test RiskBlock with a small group of internal customers, with an eye on expanding it in the new year. Blockchain refers to an ever-expanding list of records known as blocks that can be updated, and the records include updates plus originals. Once it is revved up, the RiskBlock proof-of-insurance tool is designed to help insurers, insureds and law enforcement simplify how they verify insurance coverage in real time, eliminating the need for paper insurance cards.
MG's Astor to use blockchains to manage insurance claims, resale values
The enterprise blockchain platform has been deployed across 23 European subsidiaries. In the first six weeks following the launch, hundreds of Allianz staff processed around , transactions supporting over 10, international accident claims. He noted that many enterprise blockchain teams went quiet after the hype cycle. As with most blockchain projects that reach deployment, the solution addresses a tricky business pain point. If a customer is insured by Allianz Hungary and gets involved in a car accident in France, the claim involves both Allianz Hungary and Allianz France, two separate legal entities. What ensues typically is back and forth email communication between the companies about the details of the claim, something that can take weeks and now takes minutes. By using blockchain, there is a single source record of the decision about each claim. That cuts time spent on administration and hence cost, and it means the claim is settled faster for the customer. Allianz uses three criteria or patterns to assess the appropriateness of blockchain to solve a business problem.
Blockchain at the service of road accidents
This will navigate you to Accenture. Despite governmental regulations, there are nearly 45 vehicles on the road without mandatory traffic insurance. The process of handling insurance neglect is quite complex, resulting in inconsistent data, complex rules allowing neglected insurance and lengthy processes for identifying and collecting penalty fees. All this leads to an inefficient vehicle insurance system. It realized that it needed a better way to prevent any money being left on the table from process inefficiencies and unpaid premiums.
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These new technologies could, for example, revolutionize the way in which claims between connected vehicles are managed in the coming years. Today, in the event of a road accident, the insurer consolidates data resulting from a report filled in by hand by the protagonists. This data may be, intentionally or not, incomplete or even false. In the future, a device installed in the vehicle could send data automatically collected on the vehicle identity and vital functions of the driver, speed, positioning of the vehicles, etc. A Smart Contract could then process this data in a completely decentralized, more objective, fairer and more secure manner.
Get covered against smart contract failure & exchange hacks.
For the last decade, blockchain innovations have been gaining traction and legitimacy, most recently with Decentralized Finance, or DeFi. DeFi refers to the entire blockchain-enabled ecosystem of products and services that have replaced more traditional financial intermediaries with software. These DeFi products may also include other financial service activities, like insurance underwriting. Now, as innovations in blockchain continue and global demand for transparent and automated insurance products are also on the rise, smart contract technology is helping accelerate experimentation and generate some real world use cases within DeFi. A smart contract refers to an insurance contract or cover that pays out when certain, predefined conditions have been satisfied.
Blockchain in Insurance: Use Cases and the Way Forward
Common ways of sustaining centralized data and trust have resulted in fragmented organizations and ineffective technology systems. Nevertheless, in a collective and collaborative economy, trust comes from transparency. It is proposed by blockchain participants with the ability to share an updated account book each time a transaction occurs via peer-to-peer replication. In the article, we will discuss what is blockchain, its importance for the insurance industry, its advantages, examples, and use cases.
Leveraging Blockchain To Smoothen The InsurTech Journey
RELATED VIDEO: Blockchain in Insurance for Streamlining Claims \u0026 Settlements - Blockchain FirmBlockchain innovation is disrupting the insurance industry. And, for good! As per a report by Markets and Markets , the global market for blockchain in insurance is expected to reach USD 1, Blockchain technology is helping the insurance sector radically transform operations by providing a myriad of benefits in the form of reduced costs, enhanced customer experiences, improved productivity, increased transparency, and more. The use of blockchain in the insurance sector is expected to grow dramatically in the years ahead. Keep reading the article to know the benefits of blockchain for the insuranc e sector and the various real-life use cases.
Blockchain app gets uninsured off Finland’s roads
In this whitepaper, we explore how conversational AI can create a better customer experience, improve agent productivity, reduce contact center traffic, and more. Many blockchain insurance projects are lingering at the proof of concept stage, but three trailblazing applications are emerging. Insurance, being one of the most conservative, centralized and walled industries, is awakening from its slumber and probing new technologies. Driven by both curiosity and fear, insurance companies seek to hire blockchain developers to help them out. Curiosity comes from blockchain promising to save time and lower transactional costs. At the same time, insurers fear this innovation as it can open up new approaches for cyber-attacks.
Car insurance blockchain platform isometric vector image
The virtual assistant applies natural language processing to talking to potential customers and filling out the contract, which relies on blockchain technology. Watson converses with potential customers by voice or text on a mobile app under the auspices of VAIOT, asking about what kind of insurance they are looking for, what they are willing to pay, and other key questions. Once all of the relevant information is collected, Watson suggests options for insurance, and the customer picks one, signing the contract.
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