By: Olivia Nnorom
The insurance industry can benefit from blockchain technology, which has a proven ability to solve the problem of mistrust, delays, cost of employing middle men, through smart contracts, a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract without third parties.
Smart contracts provide security that is superior to traditional contract laws and support transactions that are partially or fully self-executing, self-enforcing, or both. It ensures premiums and claims are executed based on the exact conditions of the underwritten contract without prejudice or sentiment.
The good thing is, Insurers are increasingly adopting this technology, in the bid to eliminate ambiguity and leave no room for future interpretation or misinterpretation of contracts.
A popular adoption of the blockchain is in the innovation of the B3i insurance blockchain consortium, where insurers including Allianz, Aegon, and Swiss Re teamed up with technology firm Blockchain to develop B3i, whose goal was to create a more efficient and secure way of sharing information and settling claims.
Traditionally, the insurance industry has relied on a complex web of intermediaries, including brokers, underwriters, and reinsurers, to process claims and settle disputes. This process can be slow, costly, and prone to errors.
With B3i, insurers could use blockchain technology to create a shared ledger that tracks policies, claims, and payments in real-time, such that, if a customer makes a claim, the claim can be automatically processed and settled using smart contracts, which are self-executing contracts that automatically trigger payments when certain conditions are met. This reduces the need for human intervention and speeds up the claims process.
In addition to improving the efficiency of claims processing, blockchain technology can also help insurers better manage risk.
By creating a shared database of information, insurers can more accurately assess risk and price policies accordingly. This can help reduce premiums for customers and increase profitability for insurers.
Although the consortium has ceased activities and filed for insolvency following unsuccessful funding rounds, the firm was successful with simplifying insurance processes and increasing transparency.
Well, B3i did not expand its operations into Nigeria.
However, Nigeria’s insurance industry has been exploring blockchain technology to improve efficiency and enhance customer experience.
One example of this is the partnership between the Nigerian Insurers Association (NIA) and ChainThat, a UK-based blockchain technology provider. NIA, in 2019 announced that it would be working with ChainThat to develop a blockchain-based platform, insureChain, for the Nigerian insurance industry.
The platform is designed to streamline the insurance value chain by providing a secure and transparent way for insurers, brokers, and customers to share information and settle claims. InsureChain uses smart contracts to automate claims processing and reduce the risk of fraud or errors.
In addition to InsureChain, several Nigerian startups have also been exploring the use of blockchain technology in the insurance industry. For example, Aella Credit, a Nigerian fintech startup, has developed a blockchain-based platform for microinsurance that allows customers to purchase insurance policies using their mobile phones.
Another startup, SureRemit, has created a blockchain-based platform that allows users to purchase and send vouchers for insurance products and other services. The platform uses blockchain technology to ensure that transactions are secure and transparent.
Overall, as blockchain technology continues to develop and mature, we can expect to see further innovation and disruption in the insurance industry in Nigeria and around the world.
