As far as the insurance claims process goes, the song remains the same. Submit a claim, wait, renegotiate, validate … and wait. You think, “With all this technology, there has to be a better way.” And you’d be right.
The idea came to me during a conversation with my friend and colleague Joe Rahaim as we were working with one of our insurance clients, discussing Blockchain technology and its impact on business. Joe said, rather a matter-of-factly, “Blockchain is rocket fuel for business. Companies will see the greatest success when they rethink new business models instead of trying to apply Blockchain to the status quo.” It reminded me of a recent stop at Penn Station. Waiting between trains, I came across a payphone, tagged with graffiti, banged up, beaten and unused. Smart phone in hand, I thought about how quickly old models can change (while keeping some change in my pocket).
Blockchain is the one digital technology that removes the need for a 3rd party to perform and approve a transaction. Today, when I purchase something on Amazon, I know that I can trust Visa to send my money to the merchant. If there’s any issue, I can call Visa. Conversely, the merchant knows they can trust Visa to pay them on my behalf. The seller and I may not trust each other, we both trust Visa.
With Blockchain, a 3rd party protection like Visa becomes more or less superfluous. When I buy a product from a merchant using a Blockchain platform like OpenBazaar1 the validity of the transaction is determined by a network of computers that adhere to a trusted chain protocol. The transaction is securely approved and processed without a third-party provider, which is usually a bank. In the process, a tamperproof record of the transaction in made on multiple computers.
Think about how this could revolutionize insurance (and banking) across multiple claim types between individuals, corporations and business partners. With Blockchain you can create a Smart Contract2. This reliable digital contract has rules governing policy payouts that are agreed upon and “hard coded” into the process. With an insurance policy stored as a Smart Contract on a distributed ledger technology a payout can be automatically triggered to a customer if a flight or cruise line automatically interfaces delays to the Blockchain. Typical paperwork submission and adjudication processes are eliminated.
Policyholders wouldn’t need to submit a claim in the traditional sense, the transaction is faster and more efficient—and far less expensive to administer. How many more customers would buy a travel insurance policy if they knew that they would see funds automatically deposited into their account immediately after their flight or cruise was delayed or cancelled?
Blockchain is poised to improve all types of applications and business transactions. It’s just like the explosive opportunities smartphones have created because they offer a potential that payphones never could. Soon, we may think of the traditional insurance claim process as just as obsolete as the payphone—and we'll all be better off for it.
Chad Hahn is a partner at Optimity Advisors leading the Digital & Technology Practice. He has 20 years of experience managing a large portfolio of clients in the finance, entertainment, healthcare and retail spaces. Chad consults with large corporations as well as startups in Silicon Beach. Read more.
Joe Rahaim is the Head of Optimity Advisors Financial Services in New York City. As a solutions and implementation expert with 20 years of experience in the IT space, he has become a thought leader in emerging digital enablement technologies. Over that time has helped many Fortune 100 companies stay ahead the digitalization curve and thrive. Read more.