Many enterprises realize the strategic business value of blockchain after applying this technology in their business. So what are the actual strategic business value of blockchain that we can use to apply in our business field? Let's find out.
Core features of blockchain
Blockchain technology asserts its value based on its features: decentralization, immutability, security, transparency and traceability.
- Decentralization: not controlled by a central authority; contributed, validated and controlled by multiple entities; individual fully controls and decides which data and to whom they want to share.
- Immutability: the linear feature: new block is validated and added to the "end" of the previous block, building "chain" of data.
- Security: using cryptography to achieve data security, essentially the hash function to validate transactions; to one specific input data, there is only one fixed output (hash). It means that it's nearly impossible to change input data without leaving the trace.
- Transparency: the blockchain database is open to every network users. They can access, view, read, and write their contents and relevant details (access ability based on which type of blockchain platform are being used).
The strategic business value of blockchain to insurance
Blockchain technology is potentially useful in various industries; however, it might not be that practical in some other fields. Whether you should apply blockchain technology to your business depends significantly on your industry and business model. In the insurance industry, blockchain, along with other emerging technologies, has profoundly transformed how the insurers, insurees, and agents work together. As recorded by a Deloitte's survey, 23% of business leaders when being asked about blockchain technology said that they expected it to help strengthen their system's security, reduce risks, and contemporarily increase their customer experience.
Here's how they can make this urgency come true:
1. Reducing fraud and abuse
The Insurance Information Institute estimates that approximately 1-3% of claims are investigated for fraud or denied. The total cost for insurance reaches $40 - $80 billion for all business lines each year. When using private blockchain in the insurance ecosystem, all user information is stored authentically and permanently on the blockchain database. Data can be used to analyze and predict user's fraud behaviours from their transaction history faster and more conveniently.
2. Speeding up process
We all know that the operating system for insurance companies requires a lot of paperwork. Using decentralized and distributed databases, insurance companies will accelerate the progress of updating user information. With a blockchain database, records of agreements, transactions and other necessary documents are automatically stored. As soon as these conditions are met, the terms of insurance agreement are implemented immediately.
3. Increasing customer engagement and trust
Participating in a blockchain network, not only enterprises but their customers can control their data and make use of them. Insurance companies can use this data to analyze customer behaviours. Understanding customer habits and health histories will be a great advantage for companies to bring new ideas, provide better services and get more customer engagement and loyalty. (Read more: Analytics to drive sustainability in Competitive Advantages). To the customer side, if they know what's happening to their information and required procedure, they'll proactively know what to do and give more trust.
4. Saving cost and increasing revenue
Blockchain helps insurance companies to cut off the costs of each claim denial, costs of security issues and unnecessary human labour cost. Besides, due to faster processing and gaining more trust and satisfaction from customers, there's an increase in winning rate, thereby increasing more revenue to the industry.
Read more on how FPT Software customer take advantages of blockchain: