Car insurance has been around for a while now. Even thousands of years ago, Chinese merchant seafarers used to form a collective fund to pay for the damages of any capsized ship among the group.
While technology has grown by leaps and bounds over the past decade, the multi-trillion global vehicle insurance is still stuck to their traditional methods in many of their operations. For example, brokers call potential customers through the phone to narrate their sales pitch and payments, and claims are processed manually via paper contracts. All these old methodologies inherent the complexity of insurance and bring a lot of risk factor. Information can be lost and misinterpreted at any point.
Imagine a scenario in which all insurance information was cryptographically secured in a safe and fool-proof platform of record keeping. Well, thanks to blockchain technology, this is no longer a fragment of our imagination but a solid reality. Blochain is the underlying platform of cryptocurrency and many vehicle vendors such as We Buy Cars Today, are readily accepting cryptocurrency over traditional money.
What is the blockchain technology?
The blockchain is a lot more than an ongoing technological trend. It is a distributed, peer-to-peer ledger that contains records, known as ‘blocks.’ These blocks are virtually incorruptible. Each block is linked with the previous block and has a time and date stamp. What’s more, this whole platform is self-managed and doesn’t require human intervention.
Blockchain has many wide-reaching implications that will impact almost every business sector in the world. Today we are are going to discuss how the transparent nature of blockchain will disrupt the insurance sector:
1- Fraud detection
When planning to buy a used car, you always look for certain things such as mileage, accident history, rust and other factors that can influence your decision.
An insurance company also approaches a car in almost the same way before calculating premiums and offering coverage. Unfortunately, dealers and users try their best to present the car in the best way possible. No once except scrap companies wants to make a car appear worthless. This results in a lot of fraud and false claims and insurance calculation are often based on wild guesses, rather than a hardcore history of the vehicle.
Establishing a reliant vehicle valuation system based on blockchain can take out the guesswork from the equation, and each repair work regarding the vehicle will be properly documented and shared with all active users.
The AutoBlock offers a state-of-the-art vehicle valuation platform that extends well beyond car buyers and sellers.
2- Quick processing and payments
We can’t deny the fact that making an insurance claim is a very difficult task and many different individuals are involved. It takes months and sometimes even years to process claims and get results.
Implementing blockchain in the insurance industry can help resolve this issue. The flow of information will be transparent and uniform, making sure that everyone involved is on the same page. Imagine a doctor writing a prescription and the insurance company is aware of it instantly.
Not only will it drastically reduce process time but will also simplify payments. This is when smart contracts will step in to make life even easier. Let us discuss more smart contracts and their benefits in the next point.
3- Smart contracts
Blockchain technology primarily aims to provide a decentralized platform and minimizes mistrust between individuals. Eliminating the requirement of a third party like banks, registers, notaries, etc. and opening doors for direct dealing helps enhance trust between two parties.
When a transaction is based through a blockchain platform, it is done through a smart contract. A smart contract is not like a traditional contract. It is a digital set of promises that allow computers to regulate the ownership, management, and operation of the contract. It is a safe and transparent way to ensure transparency in a contract and guarantees payment.
By using smart contracts in vehicle insurance, there will be countless benefits like automatic claims, self-executing contracts and reduced instances of fraud.
4- New possibilities
Adopting blockchain technology in vehicle insurance will open up avenues for many new types of insurance such as spot insurance, hybrid options, and shared economies. The possibilities are endless.
The internet of things can help make insurance affordable for everyone. Simply submit your vehicle’s real-time information to an insurance company, and they will deliver the various options they can offer based on empirical evidence rather than vague guesses.
One of the most important reasons why insurance companies should harness the power of blockchain technology is its potential to detect fraudulent activity. According to a recent statistic, around 35% of insurance claims are related to the motor insurance fraud.
Insurance often deals with the unexpected. Hence, pioneers of motor insurance should brace themselves for the biggest disrupter of the decade- blockchain technology.
Blockchain has the potential to streamline a lot of operations in the car insurance sector. From transparent insurance evaluation to quick claims processing- the list is endless.
Do you think pen and paper processes will be a thing of the past in the vehicle insurance industry within a few years? Share your opinions about how you think blockchain has the power to revolutionize business processes in the motor insurance industry in the comment section below.
About the Author:
Evie Harrison is a blogger by choice. She loves to discover the world around her. She likes to share her discoveries, experiences and express herself through her blogs. Find her on Twitter.
Get your copy of What is Bitcoin
This e-book on Amazon explains what Bitcoin is, it explains that Bitcoin (BTC) is a virtual currency, digital, not physical, and independent of banks. Useful links and resources for the newbie and advanced Bitcoiner or cryptocurrency enthusiast.