By LOVETH AZODO, Lagos
The challenge of large, proprietary and static databases which require separate, complex legacy applications to be processed in insurance companies can be done using Block Chain or Distributed Ledger Technologies, the National Insurance Commission has said.
Block Chain or Distributed Ledger Technologies engenders trust and transparency as transactions are visible to all parties.
According to the commission, the Insurance Industry needs to catch up quickly with new technology, innovations, changing environment (from traditional to digital), developments and changing customer expectation.
These complex legacy applications are highly costly to build, maintain and connect to.
“Many of the business processes that support these systems remain heavily paper-based, requiring a lot of trained staff hence making them expensive and inefficient too, but also difficult for others to emulate”
NAICOM opined that these applications can be replaced by distributed ledger technologies that offer great benefits in terms of cost, connectivity and transparency.
Block Chain or Distributed Ledger Technologies can help Insurance companies with Claims Registration, Fraud Detection and Faster verification of transactions.
Insurance Penetration is an indicator of Insurance sector development within a country and how much it contributes to the National Economy.
However, Head, IT, NAICOM , Abiodun Aribike said it does not indicate how many people have insurance coverage, the quality of the coverage and the value it provides for insurance consumer.
He called for the need for operators to adopt technologies to provide digital solutions.
According to him, The adoption of these technologies will Providing Digital channels of distribution, Enhance Easier access to Insurance products and coverage, Provide Cost efficiency for Policy holders and insurers, Speedy issuance of coverage and claims payment and providing Innovative products.
He said that the Insurance Industry is currently lagging behind and needs to reassess its business model, re-evaluate their strategy and make the digital agenda a high priority.
“If this is not done it will be difficult to deliver on customers’ expectations. It is time for Insurers to evolve and respond. This will require a different set of skills, culture and operating model,” he warned.
Speaking on Blockchain or distributed ledger technology (DLT) , he explained that it is a protocol for the exchange of values or data over the internet which does not require an intermediary.
“The protocol of blockchain technology is to create a shared, encrypted database of transactions and other information.”
“It is a Distributed server to store static records and/or dynamic transaction without a central coordination by using a consensus based mechanism to check the validity of transaction.”
Futhermore, he said that Block Chain tech can enable Event-triggered smart contracts by automating claims, self executing contracts, reduce fraud and improved customer experience; can Increase back end efficiency by reducing human error, avoid data duplication, less processing delays and transaction costs.
It can solve many Micro insurance challenges, enable automatic construction of distributed databases and better prices through simplicity and efficiency.
He added that Processes like KYC verification, Customer Onboarding, Underwriting, Claims Processing and Policy Administration and Regulatory Compliance should be automated.
“For example, AI-powered underwriting solutions are already saving up to 97% of the time and resources that were traditionally required, enabling the corporate underwriter to specialize in cases that require deeper thought and analysis.”
“RPA (Robotic Process Automation) which reproduces human actions as closely as possible can be used to automate recurring IT tasks in the back office, front office and support levels and frees up to 30% of the user’s time. Staff can therefore focus on actions with higher added value,” he said.
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