Disrupting underwriting with blockchain

Risks

The security and compliance risks to traditional insurance models

Despite the surge of online brokerage platforms in recent years, insurance policies are still processed verbally over the telephone, where the terms are laid out on paper contracts. This immediately triggers a security concern as claims, verification, and transactions are error-prone and require human supervision. Adding to the complexity are compounding risks since the process involves brokers, insurers, and consumers. Each step in this consensual process adds up to a potential failure – accounting for everything from lost documents to misinterpretation to delays.

Compliance

Establishing robust insurance policies

The limitation with the current technology won't be a roadblock; instead, insurance firms working with blockchain will have to overcome compliance challenges on regulatory and legal grounds. However, we're not so far from witnessing blockchain and its cryptographic features with the potential to help insurers and their stakeholders hold and use historical pricing data of customers easily when needed. Once compliance challenges are overcome, insurance firms will crank their throttle at full swing, with Web3 startups also joining the insurance industry.

Three major applications that will see a huge revamp are:

1.  Fraud prevention and risk mitigation: By hoisting insurance terms from an immutable DLT, blockchain can help mitigate common sources of risks surrounding fraudulent paperwork and evidence/event tampering.

2.  Property and Casualty (P&C) insurance: Insurance terms laid out on a shared ledger can be executed through smart contracts, enabling insurance firms to decide on event-based triggers with marginally better accuracy.

3.  Healthcare and life insurance: With EHRs, medical reports can be securely shared between healthcare firms, thanks to cryptographic features built into blockchain. Similarly, life insurance claims can also be automated.