By: Saurabh Ambwani, Sr. Consultant, Digital Consulting and Advisory team
Insurance is one of those industries that have processes spanning across multiple trust boundaries. The information flows between several disparate entities hindering end-to-end visibility around a given transaction. Compounding the lack of transparency further is the fact that these entities use different legacy systems, and don’t often process information in a standardized format. This makes it difficult to verify information received from claimants and service providers, as it flows in through this complex network of disparate systems and email servers. The cost of verifying and auditing this information is also quite significant.
For the parties involved, it would be of interest to be part of a singular platform, where valid transactions are recorded in real-time and updated across ledgers of all participating entities. It would also be a huge advantage if the data is tamper-proof, and new information is added only when all parties agree. On such a network, it would be easier to manage conflicts since all participants would have the same version of the truth. Fraudulent information would immediately be highlighted since participants would not be able to reach a consensus on the state of transactions. Also embedded encryption algorithms could ensure that information is only available to the rightful owners, and is meaningfully restricted from other participants.
Blockchain technology provides these exact features.
Let’s explore a use case in the insurance industry that can greatly benefit from Blockchain Technology while being supported by IoT (Internet of Things).
Data has always played a crucial role in the risk-assessments and the pricing models used by Insurance underwriters. Specific to the area of Motor Insurance, value can be derived if we can capture dynamic data around the car and the driver and identify meaningful patterns, thereafter. IoT-powered technologies such as Telematics enable us to obtain such granular data using sensory devices. The ability to capture key elements such as distance-driven, vehicle location, rapid acceleration and braking, instances of airbags being deployed and durations of the drives, can provide valuable insights into the driving patterns of a given individual. This information can then be used to price the motor risk accordingly. In essence, this would mean that drivers with recognized patterns of safe driving would see a reduction in their Insurance premiums, whereas those that exhibit unsafe driving behaviour may see an increase in their premiums.
While Insurers are expected to increasingly leverage IoT for data gathering, a Blockchain-based implementation could increase the efficiency of the overall process to a great extent. It would enable insurers to capture sensory information in a secure and tamper-proof method. Furthermore, smart contracts can be coded to accept feeds from the telematics devices; and in the event of an accident, automatically raise insurance claims & trigger pay-outs. They can also recommend trusted service stations in the vicinity and call for medical assistance should that be deemed necessary. Smart contracts possess capabilities to automate several processes that otherwise require manual intervention. In addition to this, immutability of data increases reliability, and helps make faster and correct decisions.