Insuranceciooutlook

How Smart Contracts are Revitalizing Insurance Processes

By Insurance CIO Outlook | Wednesday, November 06, 2019

The future insurance industry is expected to be full of innovative technological applications, and smart contracts might prove to be a major differentiator.

FREMONT, CA: Blockchain technology has come a long way since it was introduced with the bitcoin initiative. The insurance industry has been considering blockchain adoption over the past few years, and with support coming in from innovative fintech firms and consultancies, insurance companies have been able to apply the technology to some business processes. One of the several notable applications of blockchain in the insurance industry is that of smart contracts. Smart contracts become feasible when backed with blockchain capabilities. Smart contracts are valuable in the insurance industry because of several reasons, some of which are listed below.

• Reduced Frauds for Insurers

Insurance companies have always faced the risk of fraud. Fake claims have often resulted in huge losses. Safeguarding insurance firms becomes challenging because of a lack of ways that can guarantee fraud mitigation while ensuring hassle-free, high-quality services to honest customers. Smart contracts provide insurers with a lot of security by making agreements non-modifiable. The chances of customers cheating companies are almost eliminated when smart contracts are used.

• Enhanced Customer Experience

Insurance policies are completely based on legal agreements between the insured and the insurer. To prevent fraud, insurance companies often create extensive contracts. Reading and understanding these agreements becomes inconvenient for policy-buyers, thus affecting customer experience. With smart contracts in place, customers can trust on the transparent, self-enforcing agreements.

• Faster Claim Resolution

Claims processing and management can be complicated. Blockchain-backed smart contracts have the potential to reduce the complexity and rule out errors in claims processing by eliminating multiple, duplicate claims. Besides, smart contracts can trigger automated disbursal of claims when certain criteria are met. Thus, the claims can be resolved in a fair and faster way.

Blockchain can support the future insurance industry in several ways, and insurers can leverage smart contracts to boost efficiency and automation. From mitigating frauds to resolving claims, smart contracts can regulate operations significantly. 

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