Blockchain technology can make quite a big impact in the world of insurance. Particularly the auto insurance sector can benefit a lot from transparent and immutable solutions. The blockchain has a big role to play in auto insurance moving forward, and we have identified a few different use cases which will start to gain traction over the next few years. Exciting things are on the horizon, that much is certain.
In the world of auto insurance, there is a growing need for more simplistic solutions. To be more precise, the vast majority if the insurance administration is subject to paperwork, human error, and files getting lost. It is due time this situation changes, a need the technology to make this possible is at our disposal right now. Blockchain technology, primarily known for powering the Bitcoin network, provides immutability, transparency, and a cost-effective solution in this regard.
Whereas some people see the blockchain as nothing more than a distributed database of transactions, its potential is much bigger than that. Sending, receiving, and storing information is one of its primary use cases, and it will disrupt the way business process digital transactions. The auto insurance sector will be no different in this regard, as part of these complex insurance process have been digitized over the past few years.
Implementing blockchain technology in the auto insurance sector would have a few significant benefits. Establishing digital trust between the client and auto insurance provider will be made possible through distributed ledgers. Additionally, it will become possible to simplify the auto insurance claims process, alleviate high premiums, and help insurers create niche coverage products.
When blockchain technology disrupts the auto insurance sector, there will be some repercussions. Peer-to-peer insurance will become a distinct possibility moving forward, which entitles the policyholder to a greater portion of the premium rates. Moreover, parametric insurance becomes a potential niche market for auto insurance companies. Rather than reimbursing the pure net loss, insurers could agree to pay a specified amount based on an action triggered by smart contracts.
Putting parametric insurance into perspective is not overly difficult. Once an insured and registered vehicle is involved in a car accident, the insurer could pay a specific percentage of the insurance claim to policyholders. Although this smaller percentage does not cover all costs immediately, it will help most auto insurance clients get back up and running until the matter is resolved. Doing so would save a lot of time and hassle, which benefits both the client and the auto insurance provider.
Combining blockchain technology with smart contracts can spell big things for the future of auto insurance, that much is evident. With smart contracts being capable of self-execution, claims will be processed a lot faster. No longer having to deal with extensive document submissions and third-party verification processes would be a significant step forward. Auto insurance will never be the same once blockchain technology starts to make inroads.
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