What’s blockchain? According to Haden Kirkpatrick at IoT Agenda, it's just a "relatively new concept making waves across the tech scene," which "could revolutionize the way we buy and pay for insurance."
We tend to agree. Let's explore the possibilities.
How does blockchain work?
Blockchain is powered by something called distributed ledger technology. Ledgers are (quite literally) as old as history. The earliest written records known to humankind were invented to track goods in, goods out. They were written on clay. They recorded transactions and inventories. They were ledgers.
Fast-forward several thousands of years, and you've got distributed ledgers, which use digital technology to record transactions "in multiple places at the same time," with "no central data store or administration functionality," according to Sue Troy and Mary K. Pratt at TechTarget. Every node of a digital ledger processes every datum, building a decentralized consensus on its veracity.
This is a major shift from how ledgers have historically worked. They've always required some central authority to review and validate the data they contain. Distributed ledger technology tosses that model to the curb, using "cryptography, advanced algorithms ... and near-ubiquitous computational power" to store, process, and validate records in a decentralized way.
Which brings us to blockchain, "probably the best-known type of distributed ledger technology," Troy and Pratt said. It got its name for bundling transactions into blocks, chaining those together, and broadcasting them to the ledger’s nodes, where they can be processed and verified.
Why does it matter?
Blockchain holds a ton of potential for the insurance industry.
By removing the need for centralized data storage and verification, it speeds up transactions and reduces their cost. It also improves security: in order to manipulate it, cybercriminals would have to hack every node of a vast network. "Most importantly, these ledgers are changing the way we communicate and gather information," Kirkpatrick said.
It’s doing so by replacing traditional contracts with smart ones. "A smart contract ... is a computer program that directly controls the transfer of digital currencies or assets between parties under certain conditions," said Francesca Sales at TechTarget.
Just as a traditional contract does, a smart contract defines all the terms and penalties of an agreement between the insurer and the insured. The difference is that a smart contract can actually detect when those rules are met (or not) and automate the actions that follow. Late payment? Late fee. Great driving score? Premium discount. No administration necessary.
The benefits follow from there.
Transparency, efficiency. Blockchain houses smart contracts on many ledgers, where any authorized party can access, evaluate, and make changes to an agreement on the fly.
Claims speed & automation. A smart contract can be configured to verify a valid claim automatically, speeding up the process.
Fraud prevention. It can also detect fraudulent activity. For example, if multiple claims are filed for one incident, it can catch that. It can also authenticate police reports and purchases, Kirkpatrick said.
Usage-based insurance (UBI). Because smart contracts are designed to perform automated actions in response to defined events, it's a great fit for UBI. Connect the contract to a policyholder's telematics device, and their behavior will directly impact their perks according to the terms you've created – no delay, no hands-on.
The FedNat Insured Web is a great tool for our insureds!
They like having a centralized location to view policy info, make payments, upload policy documents, and elect to become paperless to receive a discount.
The insureds also can file a First Notice of Loss for a claim and access exiting claim info. Silvervine recently enhanced the site which allows insureds to upload policy documents directly to their policy. The uploaded docs go directly into our workflows and save a lot of manual effort on our part.
From my visits with agents, the agents appreciate the app for the amount of time saved on having to download and attach photos directly to the policy.
The app can also reduce the amount of staff required for a busy office to fulfill underwriting requests for photos.
When training agents they are amazed at how quickly the photos attach directly to the policy. After taking photos using the app and before they make it back to their desk, the photo is already attached to the policy. They also like the ability to attach additional photos for pre-existing damage.
Customer Service is seeing an improvement with retention as the text message definitely triggers phone calls from insureds to make payments.
The insureds love the fact that we notify them on their phones because they state that sometimes they don’t receive their mail for various reasons.
The insureds are paying more attention to the texts then to their actual mail. We try to set all of our customers up on that option if we notice that they are not currently enrolled, as it builds great customer relations as well as retention.
As a company we have adopted the use of Policy Scan for all our policies, and our agents have adopted the use of the app as well.
Not only is it easy to use, there is also no more worrying about losing photos, having to store photos or photos being attached to the wrong policy.
With Policy Scan we have increased efficiency in our workflow and reduced our exposure on the risk.
Silvervine’s core administration solutions easily handles multiple carriers within multiple states, including accounting, payment processing, immediate policy issuance and endorsements.
What started out writing one product, one line in one state has now grown into mulitple products, multiple lines and writing in multiple states. We have over $95 million in annualized premium in-force and we expect to grow by 20% during the next year all serviced by Silvervine.
Silvervine was our insurance software system of choice when we started the company in 2006. Silvervine enabled us to begin business within a few months of licensing the company. Today, we are one of the top 20 homeowner’s writers in Texas and SIlvervine’s solutions have been an integral part of our success.