Why blockchain for Insurance is expected to increase 22X in the coming years | The Fork News
Insurance is a game of calculating risks and minimizing fraud. This used to be a very labor intensive exercise, involving lots of paper work and administration.
However, new technologies, like blockchain and A.I. now allow full automation of this process, thereby drastically minimizing cost and fraud.
Its should therefore come as no surprise that MarketsandMarkets projected in 2018 that the value of blockchain components in the insurance market will see a compound annual growth rate of 84.9%, reaching $1.4 billion by the end of 2023.
This month’s forked news will cover the latest news on blockchain for insurance and other “Insurtech” trends, these are the topics that will be discussed:
- Automated agricultural insurance for smallholder farmers
- A.I. and Blockchain powered automated car insurance claims
- Blockchain powered life insurance and automated pension deals.
- Automated Agricultural Insurance for smallholder farmers
As one of the Co-authors of a recent scoping study into the potential of blockchain technology for agri-food chains in low and middle income countries by Fairfood and Wageningen University & Research, I know all about the applicability of blockchain for smallholder farmers. The report explains how the 1.7B people without bank accounts struggle to get access to financial services like insurances and access to finance. Blockchain and A.I. can help smallholders get access to such services by easing the insurance process through automation. This is exactly what Aon, Oxfam Novib and Etherisc are now piloting in Sri Lanka as announced in their recent press release in which they explain:
“Historically, there were major barriers preventing farmers from utilizing insurance, including the lack of affordable and reliable insurance products, a lack of understanding about how insurance would help a farmer survive, and when and how a claim would be paid. This new blockchain technology directly addresses those issues as the insurance products are automated. This automation transforms and simplifies the claims process so that a farmer does not need to submit a claim, and, at the same time, the insurer does not need to send a claims adjuster into the field. In addition, this process results in reduced administration costs and, subsequently, a higher percent of premiums being used for claims payment and immediate, fully trusted pay-out.”
Insight 1 from this read:
In our traditional system we always use paper work and third party validation to establish trust. This trust is needed to get access to finance and insurances in order to prevent fraud and other counter party risks. Due to their remoteness, lack of formal identification and lack of administration, Smallholder farmers often don’t have the means to proof themselves trustworthy. This makes it very hard for them to get access to financial services. Blockchain technology can help circumvent this problem by embedding the trust in the design of the system itself and thereby circumventing the need for formal registrations. The claim is based on measurable events and will be automatically paid out, meaning there is no need to know the identity of the person or even receive any form of documented proof for the claim.
2. A.I. and Blockchain powered automated car insurance claims
A UK based Insurtech startup, called BlockClaim, reccntly closed their first seed funding round of £500,000 ($627,000). According to their website, their blockchain and A.I. enabled auto claiming tool can reduce claim costs by 20% and result in faster settlements. The blockchain/AI system as a whole reportedly includes features such as intelligent claims-routing and self-learning fraud detection.
On their website they state that their platform allows insurers to simultaneously detect fraudulent claims and process claims in record time thanks to capabilities such as intelligent claims-routing and self-learning fraud detection. Features such as an image recognition AI module can be used to automatically detect damage to vehicles in the event of an accident claim and validate whether it’s genuine or fraudulent. The system can also scan phone and email conversations for inconsistencies and irregularities, helping insurers automatically weed out fraudsters, resolve claims faster and offer a better standard of customer service.
Insight 2 from this read:
With upcoming InsurTech, it will become increasingly more difficult to fraud insurances. This will likely have a positive effect on the cost of insuring as currently the larger majority of the people have to pay to cover up for all the fraudsters. It is also likely we will start seeing more and more personalized insurance offerings. The more data gathered on claims and accidents, the more a system can know about the risk profile of specific people, locations, scenario’s etc. This will allow insurances to offer discounts to people who have been more careful in the past and charge a higher fee to more reckless people. This can be seen as both a good thing as a bad thing. What is your opinion on this matter? Do you think reckless people should pay more for their insurance based on their gathered previous claim data? Let us know in the comments!
3. Blockchain powered life insurance and automated pension deals.
Metlife, subsidiary LumenLab also recently announced it will be using blockchain technology to automate life insurances. Known as “Lifechain,” the collaboration with Singapore Press Holdings and NTUC Income will enable bereaved families who place obituaries in a local newspaper to instantly trigger searches to see whether their loved one had a life insurance policy. ‘Lifechain’ will begin piloting this month targeting 1,000 randomly selected Income life insurance policyholders.
During the pilot, family members of the deceased who place obituaries in The Straits Times will be informed about ‘Lifechain’. Upon their consent, the deceased’s National Registration Identity Card (NRIC) number will be submitted into ‘Lifechain’ as hashed data to trigger a search for a matching life insurance policy. When a match is found, SPH will inform family members within one working day, while ‘Lifechain’ will send an automatic notification to Income via email to initiate the claims process.
Insight 3 From this read
This is another example of how different publicly available data sources can be connected to smart systems to automate processes that normally takes more time and involves third parties and lots of paper work due to the need for trust and verification. When working with information in a newspaper, you know for sure that it is public and therefore to some extend kind of verified by the public, meaning there mostly has to be some form of truth in there (of course not all news is true as we also see a lot of fake news, hence the “mostly”).
a funny side note: Putting something on a newspaper can almost be compared to putting something on a blockchain as it gets replicated and verified many times, and it becomes immutable. Once it has been published it can never be “unpublished”.
With all the recent press releases regarding new tech solutions for insurances, Cointelegraph recently posted a long blog post explaining the potential of new technologies for the insurance industry. In their blog post they explain how blockchain can help to automate the process, prevent fraud, and add value to the health care industry, life insurances, property titles and re-insurances. If you would like to learn more about this I would definitely recommend this article.
And last but not least KPMG recently shared a report on the 10 InsurTech trends for 2019. A definite must read if you are into this topic!
Incorporate these insights:
Are you into insurance and would like to modernize your business? Or are you in any other business that currently relies on trust and verification which you would like to automate or make transparent? To automate and verify claims, first take a look whether the information needed to proof your claim is publicly available or not. Weather data, public obituaries, etc are great examples of such publicly verifiable data. For non publicly available data, you have to ask yourself who or what (which sensor) is in a position to (un)validate the claim and connect him/her/it to a smart contract that governs the claim. Confused already? Check out the Chain of possibilities report for more information on verification of claim.
This was the 9th issue of the Forks Monthly blockchain for supply chains newsletter. Every month we choose a hot topic and curate and select the most relevant article’s, report and news surrounding this topic to bring you up to date! It is our mission to make sure you get all the info you need to stay ahead of this new technology in one single mail per month.
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