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Understanding the blooming relationship between blockchain and insurance

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By Animesh Das

Animesh Das

Modern insurance is all about making things simple, easy, and convenient. As technology enables insurers to achieve major goals – customer-centricity, better underwriting, and smooth claims; the emergence of InsurTech feels organic. Both traditional and new-age insurance companies are formulating growth strategies based on technologies such as Artificial Intelligence (AI), Robotic Processing & Automation (RPA), and Blockchain.

While AI and RPA sound glamorous, Blockchain is equally – if not more – effective. It is a behind-the-scenes enabler that can be perceived as a foundation for a lot of productive systems than can benefit the entire insurance ecosystem. Read ahead to know more about Blockchain and how it is changing the face of insurance by ensuring a seamless and secure back-end infrastructure.

Origin and terminology
Blockchain has its roots in the cryptocurrency story. The world’s first Blockchain database was made by Satoshi Nakamoto for creating Bitcoin. That database was a result of an algorithm, which eventually revamped the functioning of financial institutions.

Blockchain was conceptualized to form a peer-to-peer infrastructure and negate transaction-based mistakes. In 2019, various industries and organizations have transformed their work using this rewarding technology.

Blockchain is a Distributed Ledger Technology (DLT) where transactions are recorded as time-stamped Blocks forming a Chain, which are governed by Smart Contracts.


  • Distributed Ledger Technology – Digital recording of transactions in multiple places at once in a decentralized manner.
  • Blocks – A block is created with a timestamp when any change is made to the generated event. Multiple blocks form a chain.
  • Smart Contracts – Codes on the chain of blocks, which have contracts with agreed terms and conditions between transacting parties.

Association with insurance
Insurance is a promise. And it takes a combined effort to deliver this promise. For example, in case of a health insurance policy, it takes a lot of coordination between a customer (prospect/policyholder), diagnostic centre (if applicable), underwriting team and other internal insurance departments, hospital, third-party administrators, etc. to offer a policy, service the customer, and settle a claim.

From offering a policy quote to claim settlement, a lot of data is captured and processed by an insurance company. Blockchain, along with other technologies, helps with respect to Know Your Customer (KYC) process, fraud evasion, smooth back-end processing of claims, and other instances where there is reliance on multiple data points.

Insurance is a highly regulated industry in India. Therefore, security is sacred. Blockchain is known for its impregnable security infrastructure as data is decentralized in a Blockchain, and thus the chances of corruption are negligible. Due to such advantages, Blockchain fits well in the insurance domain.

Top benefits of Blockchain in insurance
The insurance industry is yet to discover Blockchain’s full potential. It is an evolutionary process and the industry is poised to witness growth in this regard. However, here are some benefits of Blockchain in its current form.

  • Minimizing the cost of transactions by removing reliance on intermediaries
  • Making the transactions transparent and ensuring accountability
  • Reducing the turnaround time with respect to policy purchase or claim settlement
  • Reducing the overall operational expenses
  • Enabling swift data verification
  • Ensuring secure transactions.

Blockchain challenges
Blockchain is still finding its way in the Indian insurance market. Apart from unrealized potential, its major challenges are expenses and regulation. Blockchain saves operational cost, but setting up the infrastructure for it can be costly. And as this revolutionary technology is at its nascent stage, stakeholders are still discovering the benefits and hurdles associated with it.

Also, the Insurance Regulatory and Development Authority of India (IRDAI) has strict rules and regulations to keep the Indian insurance sector in check. The industry will have to navigate their way through these checkpoints smoothly to implement Blockchain on a large scale. However, IRDAI is not just about regulation, it is also about development. And Blockchain is certainly pro-development as far as insurance is concerned.

Insurance consortium
In 2018, a bunch of top insurers in the life insurance sector along with Cognizant started a Distributed Ledger Initiative (Blockchain solution). This was designed to help insurance providers to reduce their dependence on intermediaries, minimize duplication of data, and mitigate fraud.
If this initiative is taken as an inspiration to create a collaborative future, insurers can reap great rewards thanks to Blockchain and ensure customer satisfaction. This blooming relationship between Blockchain and insurance can help agile insurers to gain a competitive edge in the market.

(The author is Head of Product Strategy – ACKO General Insurance)

If you have an interesting article / experience / case study to share, please get in touch with us at [email protected]


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