Insurance industry has already been impacted by AI and ML. What novelty can be brought in by blockchain technology? Let’s indulge into the buzz of blockchain in insurance and its adoption challenges.
What is blockchain in insurance?
Blockchain helps insurance sector in providing privacy, borderless reach to make smarter decisions and also deliver insurance with quality. This is due to the features of blockchain that make it possible with the decentralized network. Though blockchain in insurance sector helps the industry to provide a much better service, there are many challenges faced while adopting to blockchain.
There are many blockchain insurance start-ups, some of them are Etherisc, Safeshare, etc.
Some of the insurance companies using blockchain are Rootstock, Tierion, etc.
Challenges faced by insurance companies for adoption of blockchain in insurance
With new technology being invented daily, usage of digital platform to complete any operation has become easier and comfortable. The digital ledger technology by itself is still evolving and has many fields that are unexplored yet to identify the consequences. The demands of the customers are always high and supply always falls behind. The same way in technological field, the software keeps changing at a faster rate, whereas the hardware is yet to meet the same rate of change in order to provide a uninterrupted service.
Because of this inequality in the rate of changes between software and hardware, blockchain is affected by being subjective to poor performance. This is due to the high capability of software and the inability of the hardware to meet the load or transaction time. The transactions per second in blockchain is pretty low and this is because of the reduced number of blocks available to provide a faster cycle transactional speed and manage high storage load.
There has to be a understandable validity of working between the network and the transaction so that the system does not lose any transaction in the process.
There are numerous amount of technological applications and platforms in the current market that compete with each other to provide a better financial transactional service. It may be a mobile application or a third party banking service. Blockchain aims at eliminating the involvement of any third party services which influence the transactional process. But, as the blockchain technology is getting famous at one end, banking services are trying to breakdown the digital platform on the other hand. By spreading rumours on loss of privacy or inculcating feat of risks that come along with the adoption of blockchain is one of the prominent challenges faced.
Insurance companies by themselves are a business focused on providing safety backup for their clients. With competition grabbing for opportunities to hunt, these insurance companies also have to put more efforts in rectifying the rumours spread and making customers trust. This involves more expenditure which increase the cost of adoption.
Exchange of information
With changing technology, every software and hardware system changes. Thus, the network also has to adopt to these changes in order to ensure safety but the rate of change is faster than the other. Due to this problem, a challenge of having a fixed standardized system arises.
Many features are developed to ensure viability and it makes it even harder for the insurance companies to have a standardised system to store, transfer and facilitate data for all requirements.
The developers as well as the users tend to get confused with the communication that takes place between different features. Thus the transactions made are inefficient and making an effective decision is challenging.
Rules and regulations
In order to have a secured network and avoid breaching of the system, blockchain either has to completely overthrow the old system of rules or adopt with the existing system. Adopting with existing system is almost impossible because the existing regulations were made without the digital world in picture and it cannot satisfy the issues of a current digital platform.
In order to overcome this challenge, the insurance companies have to explore its options in terms of where, what, how, when, etc. and come up with their own rules and regulations. This will take a very long time and reaching a consensus with all networks is the next visible hurdle in line.
Scalability of the digital ledger platform
Users want all technologies to be easier to understand and comfortable to handle. They want the processing time to be slower and still want the size of the software to be lower too. They want everything to be perfect. This might be theoretically possible but not practically possible. Still developers burn the midnight oil to achieve that dream of perfection.
Smart contract is exploring its vulnerabilities
Smart contract is new to the new trend of using cryptocurrency and blockchain. When smart contracts are used by new markets, new threats and vulnerabilities are identified too. Developers cannot expect to squash all bugs while developing because some of those bugs might arise based on the users experience and usage. Due to this limitation, fixing bugs in smart contracts is also constantly needed.
Closing thoughts on blockchain in insurance: there is no victory without a challenge
Every battle has a challenge and every run has a hurdle to overcome. All business fields and sectors face challenges of different sorts resulting in risks or opportunities. What matters is are you willing to change the challenge into an opportunity and do you have what it takes to stand for what you believe in.
Not every business developing application is effective and no technological company provides a service without some faults. There is always more to learn, more to adapt. The question is how far is your insurance company would go to break down these challenges and survive in the market and how well do use these challenges to your advantage. What are the other challenges do you think will influence the entire sector while adopting to blockchain in insurance?
Sonal Mehta is a Content Lead at SoluLab, a leading Blockchain development company in USA and Canada, started by ex-vice president of Goldman Sachs and ex-principal software architect of Citrix. SoluLab Inc provides full spectrum, 360-degree services to enterprises, startups and entrepreneurs helping turn their dreams into awesome software products.