Why Smart Contracts Lead in the Insurance World?

Why Smart Contracts Lead in the Insurance World? 

Why Smart Contracts Lead in the Insurance World? 

What Are Smart Contracts? 

Smart Contracts, also known as "Acuerdos Inteligentes" in Spanish, are code bits that are 100% created, stored, automated, and digitally signed. They follow simple if this then that logic, which makes some people equate them to the most traditional logic of the legal system processes. Thus, they can be used to complement a legal contract between people.

Unlike analog contracts, which rely solely on paper, Smart Contracts are encoded in computer language -use our app to try them with your pdf contract!-, and their terms are stored and transferred using blockchain technology. This data structure ensures the authenticity of the information because both parties were aware of the agreement throughout the process, making transactions between them secure and reliable thanks to the technology involved in this process. The automation of legal agreements enables the notification of acquired responsibilities to the involved parties, the execution of agreement terms, as well as the optimization of significant financial resources and time. Their implementation and benefits for commerce are virtually limitless due to their versatility and ease of application. One of the sectors that has harnessed these benefits in the region is the insurance sector, which has found an ally in Smart Contracts to streamline processes, reduce costs, and enhance the user experience.

Smart Contracts in the Insurance Sector 

Brokers and insurers around the world have started using these digital tools to provide better service and, in turn, reap benefits for their companies in various areas. This is possible because, in addition to contracts, legally valid agreements such as forms, consents, authorizations, and more can be created digitally. Many have even made legally valid documents accessible on their platforms so that users can simply fill in the templates with their data and initiate processes according to their needs with a single click. 

Since Smart Contracts are a combination of conditions and actions, known as "if-then" logic, automation becomes much simpler. For example, if a customer requests the annual renewal of their contract, the platform automatically renews the document for another year. 

These actions greatly contribute to improving the services provided by insurers and brokers. They have found significant benefits for their businesses and clients, which are detailed below. 

Benefits of Smart Contracts for Insurers and Brokers Speed in Claims Management

  • One of the major complaints of insurance users is the speed of response from companies. To process a claim with an analog contract, users must go through several tedious steps, such as physically delivering their claim, evidence, and other documents to the insurance company, often during inconvenient hours due to work schedules. Insurance companies must manually review each file, process it, and execute it, a process that can take weeks or even months. 

Smart Contracts automate this entire process. Users can submit the necessary documentation 24/7. Insurance companies can verify the documentation and calculate refunds or discounts in real-time. 

  • Optimization of Financial Resources: Imagine all the processes and investments required to acquire a new customer, only to lose them due to inefficient administrative responses. Smart Contracts can read all information related to an individual and automatically calculate premiums. They can also conduct risk assessments based on physical health, driving behavior, vehicle data, and more, significantly reducing response times. 

This allows for greater efficiency in both service and resource utilization. By providing their employees with automation tools, insurers and brokers have increased their responsiveness in contracting new clients and in the execution of coverages, claims, and other processes. 

Smart Contracts have become an ally in managing a larger volume of clients without the need to increase staff, financial resources, office space, or supplies. 

  • Improved Customer Experience and Loyalty: Technology contributes to the user experience in various ways, from robots that can respond to customer requests to predictive analysis of their behavior that can make recommendations. Products and services can be more tailored to customer profiles, as their information allows for the offering of better services. To illustrate this in the context of health insurance, consider a pregnant woman who undergoes medical check-ups. The platform can determine her expected delivery date based on these check-ups, enabling the offering of different options for where to give birth and new medical packages for her and her newborn. 

Smart Contracts shorten response times, resulting in trust, customer loyalty, and automatic contract renewals. Customers can easily renew their contracts in a few steps, creating a win-win situation. 

Benefits of Smart Contracts for Insurance Users Security

  1. Thanks to blockchain technology, the information in digital contracts and agreements is protected against alterations or data loss. Blockchain is a technology that protects both the contracting parties and service providers through various encryption algorithms, ensuring distribution, transparency, and fraud prevention. 
  2. Privacy: Through blockchain, clients can rest assured that their data is protected and will only be used by the parties involved unless they have consented to its disclosure. This is due to the blockchain's data structure, where only those involved can access the data contained in the smart agreement. 
  3. Traceability: Blockchain ensures that any adjustments to conditions are made with the full knowledge and consent of the parties involved, a level of transparency that was impossible to achieve with analog contracts. Changes can be made using a private key known only to the user, and it is possible to track who made the changes and grant or deny permission for them.