Smart contracts and bitcoin in the Insurance industry:

Smart contracts in the Bitcoin world have been judged as a new catalyst for driving change in this arena and have been broadly discussed as a solution for various problems within the industry – from settlement process to policy issuance, from data management to client service and experience. Innovative contract technology is in the early stages of development and is expected to play an essential role in the future marketplace for insurance. Read more about interesting crypto news in trustpedia.io/stocks/.

However, the problem that stands vis-à-vis smart contracts is the lack of a clear understanding of what this technology represents for the insurance industry and how it can impact the industry.

Smart contracts are a potential solution to challenges faced by insurance companies:

Traditional insurance, in most cases, relies on two parties – The insurer and the Policyholder with very definite roles assigned to them. The policy creation process between these two parties involves many processes that have nothing to do with insurance itself – such as identity validation (identity proof), customer service, policy issuance and so on. And due to the nature of these processes, the validation of these steps can be error-prone and result in significant system downtime and loss of money. Smart contracts, in this case, can be the solution by providing a transparent policy offering process to policy applicants by automating data transfer between various parties involved in the insurance process.

The most significant advantage of smart contracts lies in their ability to store, manage, and automate data – otherwise stored in databases owned by individual organizations responsible for various steps, from identity verification to policy issuance. Innovative contract technology as a concept is not new to the insurance industry and has been used for decades by groups such as AIG, Allstate and The Hartford.

Moving towards interoperable, comprehensive health records:

With the advent of mobile technologies, many insurance companies have shifted from paper-based systems to digital ones. This trend is expected to continue with a rise in smartphone and tablet capabilities. In 2015, Health Data Management Forum published a report that discussed how health records could be managed and processed through multiple platforms, including the cloud.

 It presents an opportunity for insurance companies as it provides them with a wide range of data analysis mechanisms available today, such as electronic medical records, quality scores and even cheaper access to different types of clinical research information on the web. However, to prepare themselves for these changes in the market, insurance companies need data management solutions that can handle various types of data formats.

Detecting fraud more effectively:

The biggest problem facing insurance companies is a fraud; a massive chunk of their operational costs goes into identifying, validating data, and removing false records. Also, healthcare fraud is on the rise yearly, and more than $120 billion was lost by US healthcare providers in 2021. Recent research has shown that users can use blockchain technology to create tamper-proof, distributed digital ledgers that can be stored on multiple systems simultaneously. As a result, it makes it easier for insurers to identify fraudulent claims by giving them real-time access to hundreds of thousands of data with a single click.

Facilitating a dynamic insurer/client relationship:

The relationship between a customer and an insurer has always been one of the most critical factors impacting the insurance industry. This relationship, however, can be moulded quite easily by intelligent contracts. Smart contracts can store large amounts of data that users in these situations can use, i.e., define conditions under which a policy will be issued (e.g., cancer risk or family history) and what payments are to be made upon the death of the insured (e.g., life insurance).

Considering the overall value proposition offered by smart contracts, it is easy to see that they can help insurance companies manage data and process it faster. It will help them identify risks better and allow better risk management. The data and documentation provided through intelligent contracts will also enable insurers to create new products, improve customer service, reduce fraud, and even open new opportunities for growth in this highly competitive digital environment.

The future of smart contracts and bitcoin in the insurance industry:

With the benefits mentioned above, there is no doubt that smart contracts and bitcoin can potentially transform the insurance industry for the better. However, for them to succeed, insurance companies will need to focus on improving their infrastructure and keep a check on technological advancements around them. In addition, the industry is undergoing a significant transformation because of the emergence of cloud computing, which brings a new dimension to traditional business models and methods.

The blockchain use cases can be divided into three categories: risk assessment, insurance claims processing, and data management. Insurance companies need different types of smart contracts and technological requirements in each use case. In addition, insurance companies will have to invest time and money to create these contracts. Still, companies can mitigate their risk of low profitability with the potential benefits that users can gain from using their insurance. Therefore, based on blockchain technology and smart contract, there are high possibilities for growth in the insurance industry.