Juniper Research says blockchain-based insurance will transform claims administration saving $10 billion in costs globally by 2024.
Insurance providers will increasingly leverage the benefits of increased process transparency and real-time data sharing. Data on blockchain networks is accessible to all parties, eliminating duplication of effort and minimising fraud.
The new report, Blockchain in Financial Services: Key Opportunities, Vendor Strategies & Market Forecasts 2021-2030, found that the insurance sector will see cost savings from blockchain use across all processes, particularly in insurance-heavy markets such as the US.
This market will see sharp rises in total cost savings through blockchain use for premium issuance and management between 2021 and 2024. This rise represents more than half of all cost savings globally by 2024.
Insurance is a complex, data-siloed, often inefficient area of business, and blockchain offers critical advantages by enabling equitable data access and minimising fraud through increased data transparency.
Where blockchain is being used today
Juniper Research claims there has been a significant increase in investment and patent filing activity for blockchain-related technologies from stakeholders in the financial services space; Deutsche Bank, UBS, Bank of NY Mellon, USAA and Infosys have been exploring blockchain technology for a number of years. In 2020, more than 8,000 blockchain patents were filed. Table 1 shows some of the companies involved.
Common process in financial services
A key advantage of blockchain is its ability to reduce or eliminate the number of intermediaries required to complete a transaction or event; helping simplify processes, increase speed and security, as well as reduce costs.
For now, many financial service processes share common pain points:
- High level of trust required for transactions and high cost for fraud prevention
- High requirement for data security
- Involvement of multiple entities in a process or transaction
- Lack of transparency/auditability
US health insurance will be a key area for savings
As a significant market for health insurance, the US will see the number of claims processed via blockchain climb from 2 million in 2021 to 24 million by 2024. Health insurance is a resource-intense area and the capacity for blockchain to replace inefficient processes and increase system interoperability will prove key to its success.
Must overcome barriers
The report identified that because of the clear benefits for insurance, barriers to implementation will begin to be overcome; enabling blockchain networks to proliferate. Insurers have previously been reluctant to modernise existing processes, and there are currently no global standards around blockchain networks.
Research author Susannah Hampton added: "Insurers must address barriers to implementing blockchain technology through investment and partnerships. Any blockchain solutions deployed must integrate into existing underwriting and claims management platforms and offer an increased value proposition beyond what is already possible."