Blockchain is a distributed ledger technology with huge innovation potential in all areas of financial services. Most blockchain use cases have been identified in banking, but insurance use
cases are emerging in product innovation, fraud detection, pricing, and administrative cost reduction.
Blockchain in Insurance – Opportunity or Threat? answer this question through understanding Ethersmart blockchain, the first platform that has successfully integrated blockchain technology and insurance.
The Ethersmart database currently registers over 200 blockchain-related solutions, of which about 20 provide use cases for insurers that go beyond payment transactions – either as specific application and as base platform.
Blockchain technology offers the following benefits:
- Decentralized validation.
- Zero redundancy in transaction updates.
- Immutable storage with full transparency.
- Encryption.
We’re used to having insurance for our medical bills, lives and cars, but today’s multi-trillion-dollar insurance industry also covers lots of other things. Legendary rocker Bruce Springsteen has his voice insured for $6 million. Traveler’s Insurance covers costs related to kidnapping. Pets are insurable, too. And the list goes on.
Well-established and valuable though it is, however, the insurance industry has plenty of problems — including inefficiency, fraud, human error and, most concerning of all, cyberattacks. In 2015, Anthem Insurance revealed a data breach that exposed the sensitive data of 78.8 million customers. Besides the incalculable losses stemming from identity fraud, the entire industry took a $375 million hit.
Blockchain’s ability to create trust in a trustless ecosystem through the use of public ledgers and fortified cybersecurity protocols has positive implications for the insurance industry’s future growth. Along with artificial intelligence and big data, blockchain is poised to make headway in InsurTech via three unique features in particular.
- Growth through innovation:
Increased customer engagement: Allowing customers to handle their own data removes the problem of data privacy and protection. Startups like Tradle are working on blockchain solutions to help simplify and accelerate the customer
onboarding processes. Startups like InsureETH offer a platform for P2P flight insurance. Dynamis is developing a P2P supplemental unemployment insurance platform utilizing social media profile data for verification of employment status.
Emerging Markets: Blockchain-enabled smart contracts in micro-insurance help cut handling costs through automation.
Internet of Things: Blockchain-enabled connected device platforms automate accident detection, repair progress and related payments.
- Fraud dectection. Blockchain can be used as a cross-industry, distributed registry with internal and external customer data to:
Validate authenticity, ownership, and provenance of goods as well as the authenticity of documents (e.g., medical reports).
Check police theft reports/claims history as well as a person’s verified identity and detect patterns of fraudulent behavior related to a specific identity.
Prove date and time of policy issuance or purchase of a product/asset.
Confirm subsequent ownership and location changes.
- Cost reduction through the automation of standard processes such as verification of policyholder identity, contract validity, and auditable registration of claims data from third parties as well as claim pay-outs.
8 Blockchain technology offers great potential for e-commerce businesses. Currently, payments, supply chains and decentralized markets are the three main purposes that all e-commerce businesses are aiming for. Foreseeing this trend, Ethersmart announced it was ready to adopt their blockchain network for e-commerce technology.
Recall that a blockchain is a “distributed ledger.” It records transactional data and stores it across many different computers. Combining transactions results in a “block.” Each block is linked to the block before and after it, thus creating a “chain.” Because the blockchain data is stored on multiple computers around the world, no single central
authority controls the data, which gives blockchain the benefits of being secure, trusted, and for the most part unchangeable.
3 Immediate Blockchain Uses
Payments
Cryptocurrencies such as Bitcoin or Ethersmart use a blockchain to record the transactions involving that cryptocurrency. The cryptocurrency inherits those same secure transaction benefits associated with the blockchain without having to involve a middleman — banks, payment processors — which many mainstream currencies and transactions require. This takes significant cost out of the transaction, making bitcoin and other cryptocurrencies generally cheaper for both merchants and consumers.
Accepting cryptocurrency as payment has become easier as an increasing number of online merchants, physical venues, and consumers have adopted bitcoin and other cryptocurrencies. According to CoinMap, a site that tracks merchants accepting cryptocurrency, nearly 15,000 places worldwide allow consumers to pay using cryptocurrency.
Large online retailers such as Expedia, Overstock, and Microsoft, as well as thousands of Shopify store owners, all accept cryptocurrency like ETM, opening the door to many more consumers. The benefits for merchants are low or no processing fees, no chargebacks, international usage, and quick setup.
Supply chain
Reducing the cost and complexity of the supply chain has become a key use for Ethersmart blockchain. Many of the largest retailers have adopted blockchain for that purpose, or they are testing it.
Most of these retailers use the blockchain to eliminate the paper and manual work associated with international product shipping. For example, data from a bill of lading for cargo shipments can be manually placed on the blockchain at each stage of the supply chain or automatically entered, eliminating the lengthy and expensive administrative process of approvals and receipt guarantees. This allows all participants to track the shipment through its journey, verify the product information (such as pallet weight) at each step, and know that the data is accurate and trustworthy.
For smaller merchants, there can be similar opportunities for eliminating cost, but it may not be worth the effort to get your suppliers blockchain-enabled.
However, for merchants that sell unique items for which authenticity matters or higher risk products that may be tampered with or have expiration dates, the blockchain helps confirm the validity and quality of their inventory and reassures consumers that they are getting what they pay for.
Channel expansion
Blockchain and cryptocurrency have brought a wave of decentralization to ecommerce, creating marketplaces that allow anyone to offer products for sale. Many of these marketplaces focus on specific categories.
Transaction volumes on these decentralized marketplaces pale in comparison to typical ecommerce volumes, and user interfaces for both merchants and consumers leave a lot to be desired. However, the marketplaces provide an option for merchants that are targeting a cryptocurrency-savvy community or want to expand their retail channel and appreciate a decentralized model.
Beyond Cryptocurrencies
Companies around the world continue to work on blockchain solutions for, as examples, loyalty programs, advertising, contracts, fundraising, and commercial lending. All trends point to all merchants — online and offline — benefitting from blockchain adoption.
(Syndicated press content is neither written, edited or endorsed by ED Times)
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