Blockchain Financial Technology in Insurance

Blockchain technology is part of financial technology, abbreviation of FinTech/fintech. if same this financial tech applied in insurance sector then called InsurTech. Blockchain is a hot topic nowadays especially due to introduction of cryptocurrencies in financial market. 

What is Blockchain Financial Technology?

• Blockchain fintechnology name is kept due to data stored in form of blocks which are interconnected with each other that makes a long chain. This long chain makes difficult to change data in one block due to interconnected chain of blocks. If one change is brought in one block then all changes have to be incorporated in other blocks which is very tedious task. This immutable feature of this technology makes data hard to change leading to transparent data. 

• This blockchain technology firstly introduced for transactions purpose as it connects all nodes in a network who can makes transactions directly without middleman and transactions are stored in storage system of all involved nodes exist in a network. This storage of transaction solve  the double spending issue with same amount shown in blockchain.

What are types of Blockchain Technology?

        There are three main types of blockchain technology as per need like public blockchian where all can join. Private blockchain for making data confidential, and hybrid  blockchain for taking benefits of both private and public blockchain features.

What are applications of Blockchain Technology in different sectors?

• After getting popularity in financial transactions, it is now being adopted in other sectors like health sector, manufacturing plants, administration and so on. 
• Blockchain having many applications for different sectors has also essential role in insurance sector. 
• Insurance industry is facing bogus claims issue and bribery cases due to malpractices in management  and has lengthy claim registration process. Blockchain technology solve this issue as it saves all KYC of registered policyholders and saves record of claim registration. 
• If any suspicious claims appears it detect by highlighting all past history with identity. 
• Policyholder need not to enter his identity every time while claim registration or claim reimbursement amount as blockchain saves identity information which can be used for many purposes.

What are benefits of Blockchain Technology in Insurance Sector?

    Blockchain technology has reduced the paperwork and make the administration cost cut. Blockchain technology can  be adopted for payment of premium amount by policyholder which saves the record of premium amount payment which can not be altered so bribery or corruption become zero.

    Blockchain helpful in making the smart contract between policyholder or insuree and insurer or insurance company. Smart contract comprises on conditions which if meets then contract automatically execute so there is no need to wait to policyholder if he fulfils all conditions. 

    Consider a smart contract for automobile insurance, in which Blockchains and sensors mounted on the vehicle are combined to activate or deactivate coverage.

What insurance products are offered based on Blockchain Technology?

    Blockchian has announced a slew of new insurance products, including peer-to-peer insurance and pay-as-you-go insurance. The peer-to-peer insurance approach is useful for reaching out to low-income people who cannot pay insurance premiums.

    In a peer-to-peer insurance model enabled by blockchain technology, poor people with comparable insurance needs, such as flood insurance, can form a pool and deposit a certain sum into an account. If any member of the group suffers as a result of the flood, this money will be distributed with the permission or vote of all members affected. The remaining funds are divided or kept in an account, and everything is overseen by all parties involved. All transactions are kept in the open.

Final Thought

    Blockchian fintechnology has great future due to its transparency feature which is necessary in all sector either financial or else. This technology minimize fraudulent activities or transactions.

    Many more advantages of this technology will be discussed in the following blog.

Author

Maryam Saeed