Insuranceciooutlook

3 Blockchain's Limitations That Every Insurer Must Overcome

By Insurance CIO Outlook | Monday, November 18, 2019

Shortcomings of blockchain have to be addressed as insurance companies rev up the adoption of this technology.   

FREMONT, CA: Whether blockchain is unstoppable or unstable is the big question which the insurance sector is looking to answer. Many industry leaders consider that blockchain is highly beneficial to insurance companies because of the technology's relevance to insurance business operations. Insurance companies have figured out ways of incorporating blockchain into claims processing, fraud prevention, and reinsurance. However, there are some limitations associated with blockchain technology, against which insurance companies have to guard. Recent instances of blockchain-backed solutions backfiring have created some concern and confusion among insurers. The following is a list of issues that come with blockchain and how insurance firms can avoid them.blockchain tech

 

• Ambiguous Regulations

Given that blockchain technology is still in the early stages of development and adoption, there are several issues with regard to regulations. Regulatory authorities are working on the norms that will go on to standardize blockchain for the insurance sector someday. However, that will take time, and until then, early adopters will have to deal with volatile legislations. The best way to mitigate regulatory troubles is through a well-planned approach and turnkey regulatory solutions from vendors.

• Limited Capacities

Currently, blockchain technology can only handle a specific amount of operations. Insurance companies are bound to face the issue of slowdown and lag as the number of blockchain-based transactions rises, and the volume of records increases. To overcome this issue, insurers need to have a proper plan for scalability. As demands grow, insurers need to enhance capabilities to prevent transactions or processes from slowing down.

• Fraud and Privacy Concerns

Although blockchain is proposed as a means of enhancing security, there are many privacy concerns associated with the technology. Entries into the blockchain cannot be altered. Thus, bad input can result in inaccuracies. Besides, insurance firms also have to decide regarding the accessibility of the transaction records. Open access invites the attention of cyber attackers and results in fraud. To mitigate security concerns, insurance providers should enhance strategies and attain new capabilities.

Once insurers are able to iron out these issues, blockchain can become an unstoppable disruptor in the insurance industry.

 

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