Why is Reinsurance Industry Interested in Blockchain?

By CIO Applications| Tuesday, March 10, 2020

The enhancements in transparency due to blockchain can significantly benefit the reinsurance sector in its long run.

FREMONT, CA: Insurance and reinsurance companies are increasingly focusing on enhancing operational efficiency to increase profitability in today’s market, and they believe that multiple distributed ledger technology or blockchain technology can greatly help in this. Blockchain technology has the potential of reducing administrative workload, eliminating frictional costs, eliminating inconsistency, and enhancing audit-ability. In other words, leveraging blockchain technology may make insurance and reinsurance transactions faster, convenient, and secure. Here is more to it.

Offsetting the Expenses  Blockchain can initiate automation in reinsurance. Reinsurers can leverage smart contracts and replace much of the paperwork involved in reinsurance processes with the help of blockchain. According to a report, blockchain can eliminate 15 to 20 percent of the expenses of the reinsurers. The automated data processing will reduce fraud, thereby offsetting the expenses of the reinsurers.

Complete Transparency  Reinsurers choose a consortium blockchain that will allow them to manage information using a set of permissions. Further, reinsurers can ensure that legitimate stakeholders could gain complete transparency over the executions of transactions and smart contracts.

Security  The structure of blockchain makes it immutable, thereby ensuring that data stored on the blockchain can’t be altered or manipulated. Thus, blockchain offers high security for reinsurance. Thus, a blockchain-powered system will reduce fraud internally and externally among reinsurance firms.

Blockchain technology is just the latest technology used by the reinsurance industry to innovate its way of doing business. The disruptive nature of blockchain has the ability to radically change the way insurance and reinsurance are used in the future.

See Also: Top Blockchain Technology Companies In APAC