Need for Optimized Performance and Cybersecurity to Drive Blockchain in Insurance Market Growth
Pervasiveness of technology across multiple industries has transformed business processes, and insurance sector is no exception. Insurance industry ecosystem includes billions of insurers. This is followed by a heavy form work, poor communication and human errors. However, digital ledger systems such as blockchain can facilitate automation of processes saving huge volume of paper work every year, increase efficiency and improve communication between parties. Moreover, ledgers in blockchain being decentralized, they cannot be manipulated or corrupted by one authority. In addition, the data is timestamped chronologically, and is transparent to nodes (members) on that chain. This ability of blockchain to safeguard information and shun unusual behaviour is likely to fuel its adoption in the insurance sector.
Fraudulent Insurance Claims to Trigger Demand for Blockchain in Insurance
Rising incidences of insurance fraud has been a matter of concern for authorities. Increasing fraudulent claims have made it imperative for companies to replace their legacy systems with advanced systems such as the blockchain in insurance sector. For instance, according to ABI (Association of British Insurers), the insurance industry in UK has been witnessing 350 fraud cases every day worth EUR 3.6 million. Similarly, analysis of South African Insurance Association shows that fraudulent claims are amounting to around 32% of total yearly claims in South Africa. Given its capability of decentralizing and encrypting data that is transparent to all members in the chain, fraud insurance cases can be reduced significantly. This factor continues to influence use of blockchain in insurance, in turn paving huge growth avenues for blockchain in insurance market.
Regulatory Factor and Blockchain’s Double Edged Advantage Can Pose Challenges to the Blockchain in Insurance Market
While blockchain in insurance is a promising solution, it has its own set of hurdles. It is necessary for insurance companies to overcome legal and regulatory obstacles before adopting blockchain in insurance. There are several features of blockchain that might be inconsistent with insurance laws. For instance, customer’s personal data and policy information present in blockchain needs to comply with current data protection and privacy regulations. Likewise, decentralization being the most important feature of blockchain in insurance, it also reduces advantages offered by information asymmetry. This can create challenges in product development, pricing, and claims services. This aspect is likely to impact the growth of the blockchain in insurance market significantly.
Smart Contracts to Provide New Opportunities for Blockchain in Insurance
Blockchain driven smart contracts can offer insurers and customers efficient claim management in a more responsive, transparent, irrefutable manner. This can facilitate streamlined claim management resulting in enhanced customer experience. Smart contracts can also facilitate triggering of payments when certain set of conditions are fulfilled. For instance, smart contracts could be coded to allow feeds from telematics devices and in case of an accident raise claims and initiate pay-outs automatically. In addition, immutability of data enhances reliability, in turn facilitating faster and correct decisions.
Dominance of North America Likely to Continue in the Blockchain in Insurance Market; APAC to Showcase High Potential
North America is likely to retain its position as a key growth market in the blockchain in insurance sector. This is majorly influenced by increasing number of insurance frauds in North American countries. For instance, According to FBI, insurance fraud in US amounts to over US$40 billion per year. This has triggered the adoption of novel technologies such as blockchain in the US insurance industry. In addition, according to Accenture’s survey, out of 10 banks, 9 are deploying blockchain for payment applications and major financial institutions in this region, such as Royal Bank of Canada, JPMorgan and Bank of America are largely investing in blockchain.
Open regulatory framework in the insurance sector has presented potential growth avenues for blockchain in insurance in APAC. Insurers in developing countries of APAC are leveraging on adopting IoT. Blockchain based implementation can enhance the efficiency of all processes significantly reducing errors and facilitating security. For instance, ICICI Lombard adopted AI in claims related to healthcare insurance to identify fraud. In this backdrop, the blockchain in insurance market in APAC is likely to witness an upsurge in the years to follow.
Overall, the blockchain in insurance market reflects optimistic growth and companies can expect potential growth opportunities in the years to follow. Applied Blockchain, Microsoft Corporation, Auxesis Group, Algorythmix, Bitfury, IBM, SAP SE, Oracle Corporation and AWS are few of the companies operating in the blockchain in insurance market.
Key Elements Included In The Study: Global Blockchain in Insurance Market
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