Blockchain technology has been a buzzword in the finance and technology industries for years now. Primarily introduced in 2008 through the invention of Bitcoin as a currency, blockchain has proliferated into a variety of sectors, including healthcare, supply chain management, and most importantly, insurance.
Insurance, by definition, is a process by which individuals transfer risk to a third-party intermediary, typically an insurance company, in exchange for a premium. The intermediary, then, collects these premiums into a pool and subsequently allows policyholders who experience loss to draw from that pool of funds. However, the insurance industry remains one of the most fraud-prone sectors in the business world.
Insurance fraud has cost policyholders and companies billions of dollars every year worldwide. Fraudulent activities, such as falsification of medical bills, car accidents, and disabling injury claims, amongst others, lead to an increase in premiums paid by innocent policyholders.
While traditional methods continue to aid in identifying fraudulent activities, insurance companies are slowly beginning to turn to blockchain technology for a more secure and efficient insurance system. Blockchain technology has the capability of providing a safe and secure means of preventing fraud while ensuring an expedited claims management process.
Blockchain technology’s distributed ledger system enables trust, as every transaction is recorded, with all information being available for public scrutiny. From the point of policy inception, the client’s data is entered into the blockchain system and validated by all parties involved.
The insurance company, in turn, can then develop products that can effectively serve clients while reducing the need for reinsurers, thus reducing the potential for fraud. Furthermore, the client data, policies, and claims are stored forever on a database anyone can access, cutting the time used in filing for claims significantly.
Blockchain technology has proven invaluable to insurance industries globally. Notably, insurers can achieve great efficiency in their operations by improving fraud prevention measures and hastening claim verification and processing times, resulting in happier policyholders. Overall, considering the benefits, it’s evident that blockchain technology presents insurance companies with an incredible opportunity to safeguard their businesses while promoting transparency to clients.
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