We have viewed how Blockchain has made a significant impact on businesses and industries. Select one industry and highlight the advancements Blockchain has had on that single industry.
Your paper should meet the following requirements:
- Be approximately 3-5 pages in length, not including the required cover page and reference page.
- Follow APA guidelines. Your paper should include an introduction, a body with fully developed content, and a conclusion.
- Support your response with the readings from the course and at least five peer-reviewed articles or scholarly journals to support your positions, claims, and observations. The UC Library is a great place to find resources.
- Be clear with well-written, concise, using excellent grammar and style techniques. You are being graded in part on the quality of your writing.
Blockchain Advancements in the Insurance Industry
Blockchain is the newest and most adaptable innovation taking over the current business world as it is fast, light, cheap, and smart. One of its most successful integration is crypto-currencies. After this success, Blockchain technology became a hotcake for most industries, mostly for its commercialization value. Blockchain technology’s potentiality to resolve logistical and financial complications garners its advancements in the insurance industry.
The Meaning of Blockchain
The blockchain serves the sole purpose of handling the primary business activities such as record keeping efficiently and effectively over a shorter time frame. The popularity of blockchain began through Bitcoin (Swan, 2015), and it carries on to recent times. Most notably, blockchain is a form of decentralized technology, applying the peer to peer network to handle a given business (Davison, De Filippi, & Potts, 2016). It operates as a distribution bridge between the business owners, employees, and consumers. Blockchain technology offers transparency and a work mode for both private and public settings. These advantages are what attributes to its advancements in the insurance world.
The Operations of Blockchain
The workings of blockchain are simply the movement of data stored into any database. Hence, transactional data blocks undergo distribution into various databases (Nofer et al., 2017). Blockchain operations work on a foundation of four simple steps. These steps comprise transactions occurring, verification of said transactions, storage in blocks, and provision of a unique code to the blocks titled hash (Swan, 2015). Afterward, every block that completes these steps gets an addition to the blockchain and can be viewed publicly by anyone. However, for organizations that value privacy, users connect to the blockchain’s private network known as nodes (Swan, 2015). These vital features of blockchain operations attribute to its success in both public and private insurance organizations.
Blockchain Technology in Insurance
In the insurance industry, blockchain functions as a transparent ledger depicting all of the company’s transactions. Although insurance companies are trying their best to ease the aftermath of risks such as accidents, they still face operational hurdles that burden their work to operate effectively. With insurance covers slowly being a necessity, these challenges like a fraud (Tasca, 2019) have to be rid of or minimized to the bare minimum. Therefore, the transparency that blockchain has to offer is of great value to the insurance companies. More so, transparency is not the only feature of blockchain that attributes to its impact in the insurance sector; others include accuracy and efficiency (Mainelli & Manson, 2016). It is through all these that blockchain is redefining the insurance industry.
How Blockchain has made Advancements in Insurance
Settlement of Claims
Blockchain technology introduces smart contracts that address the challenge of unclaimed insurance money. The challenge of unclaimed insurance money is faced by all countries worldwide. In the USA, it has become a problem within the insurance sector, especially when tracing the appropriate beneficiaries of a claim from an insurance cover (Tasca, 2019). Nonetheless, blockchain’s smart contracts feature solves the problem through automatic disbursements of funds on occasion such as death, before claims from the beneficiary (Nofer et al., 2017). Besides, the smart contracts initiative is incorporated into the medical insurance, and thus, medical bills are proactively catered to without a need of to-and-from claim visits.
Advancements in Insurance Record Keeping
The decentralizing aspect of blockchain enables electronic record-keeping, which ensures easy access for users. Blockchain technology gathers the necessary data and distributes it into its database for easy accessibility (Swan, 2015). Thus, via these features, users of the insurance database can update or share any relevant information effortlessly. The insurance industry is a better choice than manual filing, which is susceptible to malice and fraud from intermediaries.
Underwriting Blockchain Technology Impacts on the Sector
Assessment of risks and their monetary value based on occurrence potentiality is a primary activity for insurers. The process of measuring an organization’s risk and its potential currency cost is known as underwriting (Mainelli & Manson, 2016). Blockchain technology reduces the burden of the process by getting all the necessary information online. Information from policyholders and catalogs gathers into useful conclusions on the risk value costs. By doing so, underwriting is done efficiently, accurately, and effectively.
Blockchain Advancements enabling Fraud Control in Insurance
One of the primary challenges facing the insurance industry is fraudulence, but blockchain technology vividly addresses it. The majority of causality claims result from fraud, and it is the number one source of the financial drain in an insurance organization. However, there are various ways that blockchain technology aids in the reduction of fraud. First is the validation of documents, specifically those on ownership by the clients (Tasca, 2019). If insurers detect any fraud indicators, they can quickly address the issue on the blockchain applications. Additionally, clients get to choose locations, dates, and times to issue policies from the companies. These methods aid in curbing fraud occurrences in the insurance industries globally.
Blockchain continues to be the number one fundamental technological advancements in business, more so, in insurance. The upgrades that blockchain brings into the insurance industry are numerous, and some include accurate claim settlements, record keeping, fraud prevention, and underwriting. All these are initial advancements of blockchain technology in insurance. As blockchain advances technologically, so will its improvements in insurance.
Davidson, S., De Filippi, P., & Potts, J. (2016). Economics of blockchain. Available at SSRN: https://ssrn.com/abstract=2744751
Mainelli, M., & Manson, B. (2016). Chain reaction: How blockchain technology might transform wholesale insurance. Long finance.
Nofer, M., Gomber, P., Hinz, O., & Schiereck, D. (2017). Blockchain. Business & Information Systems Engineering, 59(3), 183-187.
Tasca, P. (2019). Insurance under the blockchain paradigm. In Business Transformation through Blockchain (pp. 273-285). Palgrave Macmillan, Cham.
Swan, M. (2015). Blockchain: Blueprint for a new economy. “O’Reilly Media, Inc..”