Most people who work in the insurance industry would attest that the space is marked by aging legacy systems and archaic processes riddled with time-sucking manual transactions. If insurance was a cooking appliance, it would be like grandma’s vintage crockpot. Sure, it works, but it’s ancient and often slow to get the process going. The world we live in demands real-time, efficient ways of doing business, and the insurance industry just isn’t cutting it.
We think blockchain-based solutions could hold the key to revamping the archaic processes that populate the auto insurance industry. In the same way the internet revolutionized how we interact and share information, blockchain technology is poised to revolutionize how we conduct everyday transactions. Insurance offerings built upon a blockchain ecosystem could deliver a truly digitized format that’s lightning-fast and secure. In this blog, we will explore how this tech will disrupt auto insurance as we know it by transforming the market with products that are more affordable and accessible for consumers.
Good Things Comin’ From the Chain
Here’s what you can expect when traditional insurance meets the GOAT of tech and three ways the chain’s making it all happen:
1. Using Time Wisely With Smart Contracts
Here’s a simplified example of an if-then statement within a smart contract:
If I pay my premium every month, then my policy will start at the end of the current billing cycle. If I don’t pay my premium, then it will lapse.
Take a look at another example of a smart contract in action:
Let’s say Driver A gets in an accident with Driver B. Driver A’s car is damaged because of the fender bender and contacts insurance. If the insurance carriers were utilizing smart contract technology, Driver A’s insurer would execute a smart contract to check for coverage and the process of handling the claim begins within minutes, not days or weeks. The two insurers and other parties could instantly input data on the blockchain and communicate in real-time instead of emailing back and forth for weeks.
And because smart contracts are automatically executed, they can easily replace manual-based paper processes, saving billions of hours of paperwork each year.
2. Expediting Claims Processing
Ever been in a car accident, filed a claim, and then wondered why it took the insurance company so long to payout? With millions of forms traversing through outdated legacy systems and multiple players involved in the process, it’s no wonder the insurance industry gets bogged down by inefficiency.
Using blockchain technology, claims processing might be three times faster and five times cheaper. By storing information about claims and payments on a blockchain, it can eliminate paper forms and help people communicate more efficiently. Once data is recorded in real-time within the blockchain ecosystem, it provides a secure and transparent way to share information. This can help reduce human errors often made through manual transactions and save billions of dollars per year (which trickles down to cost savings for the consumer).
Also, as shown in the above fictional example, smart contracts easily convert paper versions into programmable code, allowing claims handling between insurers and other parties to be automatic. This releases payments seamlessly for an all-around favorable experience. For an already overwhelmed consumer, this means shorter wait times for that insurance payout or for their car to be repaired.
3. Lowering insurance premiums
Remember we mentioned the trickle-down savings of smart contracts? The use of smart contracts in the industry could result in a $21 billion annual cost savings through automation and reduced processing overheads in claims handling. Smart contracts would drastically cut the expenses associated with areas such as compliance, record keeping, and manual involvement by automating elements of business processes. Insurers could (and should) pass on a portion of their annual savings to consumers through this innovative savings hack. Car owners everywhere will rejoice when they notice lowered insurance premiums thanks to blockchain tech.
Auto insurance companies wanting to rev up outdated processes should consider shifting to blockchain-based solutions since the benefits are colossal in terms of speed, cost-savings and overall efficient communication. Blockchain technology will make life easier for people who want to buy and manage their insurance policies because of its one-click simplicity.