AI and machine learning have already had an impact on the insurance industry. What kind of novelty can blockchain technology bring? Let’s take a look at the hype surrounding blockchain in the insurance industry and the challenges it faces in terms of adoption.
What is blockchain, and how does it apply to insurance?
Blockchain aids the insurance industry by providing privacy, a global reach, and the ability to make better decisions while delivering high-quality insurance. This is due to the characteristics of blockchain that allow for a decentralized network.
Though blockchain in the insurance industry helps the industry provide better service, there are numerous challenges to overcome when implementing blockchain.
- Numerous blockchain insurance start-ups, including Etherisc, Safe share, and others.
- Rootstock, Tierion, and other insurance companies are using blockchain.
- Insurance companies’ obstacles to blockchain adoption in the insurance industry
Using blockchain to solve insurance problems
The use of blockchain should only be considered under certain circumstances. Blockchain offers a disintermediation solution if transactions involve multiple parties and require not only the assurance of an intermediary but also a precise and immutable record of the date and time.
In situations where parties involved in transactions have competing incentives, retroactive data manipulation is a risk, multiple uses of the same asset are very likely, and no central trusted authority is available or desired, blockchain can be helpful.
On the other hand, there are some circumstances where blockchain is unlikely to be an appropriate solution. If transactions involve a small number of parties and do not necessitate using an intermediary, or if a well-established, trusted intermediary already exists, insurance companies may be well advised to stick with their current transaction models.
Challenges Blockchain Technology Is Facing in the Insurance Sector
Companies must first learn about the technology’s limitations regarding scalability, security, and standardization before taking action.
The scalability of a blockchain system is a challenge due to the consensus-based validation mechanisms, continuous replications, and the ever-growing amount of stored data (set to be immutable).
Even if newer blockchain implementations have fewer performance constraints, high-speed/high-volume transactions, real-time data capture, and large-scale data storage are not blockchain’s intended domains.
Recent incidents have demonstrated that new attacks are emerging in the blockchain ecosystem. These are far less well understood and thus mitigated than those that occur in traditional database architectures.
Standards are essential for realizing long-term benefits from an open, at least to some extent, shared and distributed system. The lack of standards and successful reference implementations indicate that the technology is still in its early stages.
As a result, there is a high risk of implementing inefficient solutions and the need for pre-implementation efforts to define and establish industry standards, and investment decisions must be made carefully.
Smart contracts are a new addition to the cryptocurrency and blockchain craze. When new markets implement smart contracts, new threats and vulnerabilities emerge. Developers cannot expect to squash all bugs while developing. Because of this limitation, smart contract bugs must be fixed regularly.
Final thoughts on blockchain in insurance
Without a challenge, there is no victory.
Every battle has a difficulty, and every run has a stumbling block to overcome. Challenges of various kinds confront all business fields and sectors, resulting in risks or opportunities.
What matters is whether or not you are willing to turn a challenge into an opportunity and whether or not you have the courage to stand up for what you believe in.
Not every Enterprise Blockchain App Development Company developing applications is booming, and no technological firm provides a service without flaws. How far will your insurance company go to overcome these obstacles and remain competitive, and how well will you use these obstacles to your advantage? What about blockchain in insurance?