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How Blockchain Contributes to Reinsurance

By Insurance CIO Outlook | Thursday, August 13, 2020

Reinsurers look to boost operational transparency with blockchain's aid.

FREMONT, CA: Blockchain is increasingly finding its way into various industrial ecosystems. While most of the conventional processes were centrally administered, disruptive technology offers an alternative for transparency and decentralization. Blockchain is now making strides in the reinsurance landscape.  

 As we know, reinsurance covers the cost of other insurance firms. Thus, like any other insurance firms, reinsurance firms are also faced with a similar set of risks and vulnerabilities. Blockchain can result in significant cost savings, better transparency, and low settlement times. Here are the major advantages of using blockchain in reinsurance.

 Cost Cutting

Blockchain can propel automation in reinsurance. Reinsurers will be able to leverage smart contracts and replace much of the paperwork involved in reinsurance processes. According to a report, blockchain can eliminate 15-20 percent of the expenses of the reinsurers. The automated data processing will lead to a reduction in frauds, thereby offsetting the expenses of the reinsurers. 

Increased Transparency

Reinsurers can opt for a consortium blockchain that will enable them to manage information using a set of permissions. Further, reinsurers would be able to ensure that legitimate stakeholders could gain complete transparency over the executions of transactions and smart contracts.

Immutability

The inherent structure of blockchain makes it immutable, thereby implying that data stored on the blockchain can’t be altered. Thus, blockchain offers a high level of security for reinsurers. Thus, a blockchain-laced system will reduce fraud internally as well as externally among the reinsurance companies.

Blockchain can significantly benefit the reinsurance sector in the long run. The enhancements in transparency due to blockchain adoption will immediately start reflecting in the form of reduced expenses for the reinsurers. 

see also: Top Fraud and Breach Protection Solution Companies

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