Blockchain: A game changer for the insurance industry and people’s wellbeing
Fig­ure 1. Vehi­cle insur­ance frame­work with­out blockchain. Cred­it: Expert Sys­tems with Appli­ca­tions (2023). DOI: 10.1016/j.eswa.2023.120651

Blockchain, a dis­rup­tive tech­nol­o­gy of our time, holds the poten­tial to change our lives for the bet­ter. The insur­ance sec­tor is a prime illus­tra­tion.

Ever won­dered how vehi­cle insur­ance claims could become a seam­less, user-con­trolled process? Tra­di­tion­al­ly, man­ag­ing insur­ance claims has been a com­plex process (Fig­ure 1). It is akin to a com­plex puz­zle with many pieces. It involves numer­ous par­ties and relies heav­i­ly on human com­mu­ni­ca­tion, mak­ing it sus­cep­ti­ble to delays and errors. The cen­tral sys­tems cur­rent­ly in place strug­gle with trust, trans­paren­cy, and acces­si­bil­i­ty issues, among oth­ers, which inevitably lead to prob­lems for insur­ance providers and pol­i­cy­hold­ers alike.

Blockchain tech­nol­o­gy pro­vides a promis­ing solu­tion to these chal­lenges. At its core, blockchain is a high­ly secure and trans­par­ent dig­i­tal ledger that records trans­ac­tions between par­ties. It oper­ates in a decen­tral­ized, peer-to-peer net­work, ensur­ing data integri­ty through con­sen­sus. This tech­nol­o­gy has the poten­tial to rev­o­lu­tion­ize the insur­ance indus­try.

The power of smart contracts

As the insur­ance sec­tor under­goes a dig­i­tal trans­for­ma­tion, blockchain plays a piv­otal role in mak­ing insur­ance process­es, from health and busi­ness to car insur­ance, more effi­cient and secure.

Smart con­tracts are one of the jew­els in blockchain’s crown. These are self-exe­cut­ing agree­ments with terms and con­di­tions encod­ed direct­ly into the dig­i­tal fab­ric. They elim­i­nate any room for ambi­gu­i­ty and fraud, offer­ing a clear path to under­stand­ing the legal intri­ca­cies.

The result is few­er gray areas, reduced depen­den­cy on trust, and min­i­mal finan­cial risks with­in agree­ments. Imple­ment­ing blockchain and smart con­tracts can pave the way for more trans­par­ent, effi­cient, and fraud-resis­tant insur­ance poli­cies.

Vehicle Accident Register Blockchain (VARB)

In a recent paper pub­lished in Expert Sys­tems with Appli­ca­tions, we intro­duced a Vehi­cle Acci­dent Reg­is­ter Blockchain (VARB), an inno­v­a­tive solu­tion pow­ered by blockchain tech­nol­o­gy. Par­tic­i­pants in the pro­posed blockchain net­work include indi­vid­ual drivers/owners, region­al legal author­i­ties, insur­ance com­pa­nies, ser­vice tech­ni­cians, auto man­u­fac­tur­ing com­pa­nies, and the gov­ern­ment region­al trans­port office (Fig­ure 2).

Blockchain: A game changer for the insurance industry and people’s wellbeing
Fig­ure 2. Vehi­cle insur­ance frame­work based on blockchain. Cred­it: Expert Sys­tems with Appli­ca­tions (2023). DOI: 10.1016/j.eswa.2023.120651

Peo­ple fac­ing acci­dents may no longer be over­whelmed by the process. With VARB, it’s all about mak­ing life eas­i­er and becom­ing has­sle-free. In this sense, VARB not only stream­lines acci­dent report­ing and claims pro­cess­ing but also empow­ers users like nev­er before.

By lever­ag­ing Hyper­ledger Fab­ric, this sys­tem secures cru­cial infor­ma­tion about vehi­cles, their own­ers, and insur­ance poli­cies. It accel­er­ates claims pro­cess­ing and grants users greater con­trol over trans­ac­tions, inspec­tions, and pol­i­cy man­age­ment. An intel­li­gent con­sen­sus algo­rithm even spots and pre­vents invalid claims, rein­forc­ing trust and secu­ri­ty with­in the insur­ance domain.

Policymaking for blockchain in insurance

As the insur­ance land­scape evolves at a rapid pace, blockchain offers a myr­i­ad of advan­tages. It sim­pli­fies rein­sur­ance claims through smart con­tracts, makes per­son­al acci­dent insur­ance more user-friend­ly, enhances record-keep­ing, and dig­i­tizes1 records.

But to ful­ly real­ize the poten­tial of blockchain in the insur­ance sec­tor and enhance peo­ple’s well-being, effec­tive pol­i­cy­mak­ing is poised to play a crit­i­cal role. Poli­cies could be designed to encour­age insur­ance com­pa­nies to adopt blockchain solu­tions. Some of the strate­gies that pol­i­cy­mak­ers may con­sid­er are:

  1. Enact poli­cies that estab­lish clear and favor­able stan­dards for inte­grat­ing blockchain with­in the insur­ance indus­try. Sin­gle record main­te­nance and inter­op­er­abil­i­ty should be at the fore­front of these poli­cies.
  2. Devel­op poli­cies that are built based on the coop­er­a­tion of var­i­ous stake­hold­ers, such as legal author­i­ties, cus­tomers, insur­ance providers, tech­nol­o­gy providers, and more. The result would be the cre­ation of indus­try-wide stan­dards and best prac­tices for blockchain adop­tion. Addi­tion­al­ly, it would encour­age “coope­ti­tion” among insur­ance providers—the coop­er­a­tive com­pe­ti­tion among these par­ties to cre­ate poli­cies that ensure a smoother, more effi­cient insur­ance ecosys­tem.
  3. Estab­lish sand­box envi­ron­ments where insur­ance com­pa­nies can exper­i­ment with blockchain solu­tions in a con­trolled set­ting. This will enable them to test and refine their imple­men­ta­tions with­out imme­di­ate reg­u­la­to­ry con­straints.

Over­all, blockchain is more than just a buzz­word; it’s a trans­for­ma­tive tech­nol­o­gy that can sig­nif­i­cant­ly enhance the well-being of indi­vid­u­als through improved insur­ance process­es. By embrac­ing blockchain’s robust secu­ri­ty and trans­paren­cy, we’re on the cusp of a more effi­cient, trust­wor­thy, and fraud-immune insur­ance indus­try.

The adop­tion of blockchain-based insur­ance frame­works will undoubt­ed­ly lead to faster and fair­er claims set­tle­ments, high­er cus­tomer sat­is­fac­tion and well-being, improved com­pet­i­tive­ness, and cost sav­ings result­ing from enhanced effi­cien­cy and reduced fraud­u­lence.

As we con­tin­ue to inno­vate and adopt blockchain solu­tions, we move clos­er to a world where indi­vid­u­als can trust in insur­ance providers and pol­i­cy­mak­ers more than ever before.

This sto­ry is part of Sci­ence X Dia­log, where researchers can report find­ings from their pub­lished research arti­cles. Vis­it this page for infor­ma­tion about Sci­enceX Dia­log and how to par­tic­i­pate.

More infor­ma­tion:
Amren­dra Singh Yadav et al, Blockchain-based secure pri­va­cy-pre­serv­ing vehi­cle acci­dent and insur­ance reg­is­tra­tion, Expert Sys­tems with Appli­ca­tions (2023). DOI: 10.1016/j.eswa.2023.120651

Vin­cent Charles, PhD, PDRF, FRSS, FBCS, FHEA, MIScT, CMBE, is a Read­er at Queen’s Busi­ness School, Queen’s Uni­ver­si­ty Belfast, and he holds mul­ti­ple vis­it­ing pro­fes­sor­ship posi­tions across the Globe. His area of exper­tise lies in the fields of Arti­fi­cial Intel­li­gence and Man­age­ment Sci­ence, with a par­tic­u­lar focus on boost­ing busi­ness pro­duc­tiv­i­ty, fos­ter­ing region­al com­pet­i­tive­ness, and enhanc­ing soci­etal wel­fare, and a well-round­ed com­mit­ment to dri­ving pos­i­tive mul­ti-dimen­sion­al impact. He has proven aca­d­e­m­ic expe­ri­ence in the HE sec­tor, with more than a decade of full pro­fes­sor­ship, and sup­ports com­pa­nies to enhance pro­duc­tiv­i­ty via Pre­dic­tive, Pre­scrip­tive, & Cog­ni­tive Ana­lyt­ics.

Blockchain: A game chang­er for the insur­ance indus­try and peo­ple’s well-being (2023, Novem­ber 10)
retrieved 2 April 2024

  1. cus­tomer []