Blockchain technology is not only making waves in financial circles, it’s causing something of a major upheaval in insurance circles too. The transparency and security that make blockchain the perfect technology for financial applications also help make it a great choice for the insurance industry. From lowering the cost of business to making it easier for customers to obtain competitive life insurance quotes, blockchain technology offers much to insurers and their customers.
What Is Blockchain Technology?
A blockchain is a digital ledger whose records are distributed across multiple network nodes. It’s therefore referred to as a distributed or decentralised ledger. In many ways it’s analogous to a database but with records stored contiguously over a network rather than in related tables in a central location. Furthermore, in contrast to database technology, blockchain records are never modified, they’re simply added to. Each block of records contains a reference to the unique hexadecimal number contained in the previous block’s header. These numbers are generated with a cryptographic hash function, which means there’s no way for unauthorised actors on the network to insert fraudulent records without being discovered.
Building Trust, Lowering Costs
Possibly the biggest contribution that blockchain technology can make to the insurance industry is the establishment of trust between individual organisations and potential customers. At the time of writing, if you want to request comprehensive, detailed life insurance quotes, you need to provide each insurer you approach with a copy of your medical records, a process that many people do not enjoy. If all our medical records were securely stored on a blockchain, this would no longer be necessary. We’d simply provide a key to the records that each insurer could access, taking the negative emotions and element of danger out of the process.
The cost of preparing life insurance quotes could also be considerably lower if insurers were able to access client records seamlessly via blockchain technology.
With greater interoperability between healthcare providers and life insurance providers, much of the friction that slows the existing quotation process to a crawl at times will be eliminated. A blockchain using Proof of Stake (PoS) transaction validation would easily be able to handle the necessary volume of enquiries on a daily basis.
The Opportunity to Introduce Fairer Pricing for Life Insurance
If our medical records are stored on a blockchain and can be accessed by both healthcare providers and insurers (with our permission of course), the industry will have the opportunity to introduce fairer pricing, with premiums that more accurately reflect the level of risk undertaken with each life insurance policy that is written.
Insurers will be able to analyse up-to-date medical records and data, enabling them to calculate keener prices for all types of life insurance products.
Closing Thoughts
While some insurers already use blockchain technology for certain aspects of their business, we won’t see the biggest benefits until the widespread adoption of this technology by life insurance providers and healthcare organisations across the world.
When this happens, we can expect to enjoy significant savings on a wide range of insurance products, not just those that deal specifically with life insurance coverage.
