Blockchain and Billing
Published on June 15, 2018
It’s hard to avoid the word blockchain in any current reading these days. In many ways, this new technology is incredibly important and incredibly relevant. However, it doesn’t apply to everything, and yet I've heard it tied to every imaginable industry and in countless articles. I kept asking myself, “Why are they writing about this?" and "How does blockchain apply to that?” I started to see people call themselves “Blocksmiths” and give themselves titles like “Chief Blockchain Officer.” I threw my hands in the air because it all seems so overblown...people were using the phrase just because it generated excitement but not because it had meaningful impact or a specific use.
I promised myself not to write about it unless I could see a clear path as to how it could make the billing process better. I couldn’t see it…then it hit me...and it was obvious!
The billing process starts after a policy management system issues the policy. Information needs to be exchanged between the policy system and the billing system. If a policyholder happens to buy two separate insurance products from different carriers, consolidating the billing information can be challenging. Each carrier issues its own bill. There are no practical means for the billing to be combined and centralized - even if the policyholder buys multiple policies from the same agent! That’s kind of ridiculous when you think about it. What if every time you went shopping, you had to use a different payment system for each vendor?
When speaking about blockchain in the context of insurance (and other industries) the term “smart contract” or “crypto-contract” is used. A smart contract is a piece of code that defines the conditions to which all parties to the contract can agree. An insurance policy can be codified as a smart contract – discussions about this subject are pervasive on the internet. At some point, it is probably going to be the norm.
Now enter the billing component. A billing system accessing the blockchain could identify all policies held by a given policyholder. With the authorization of the policyholder, a centralized billing system could aggregate the payment information and provide a single payment portal for all policies purchased regardless of how many policies and how many insurance carriers were involved. Moreover, the billing system could track when payments have been missed and advise carriers when cancellations occur. Using the information in the smart contract, a centralized billing system would know which parties (i.e. mortgagees, lienholders, agents, etc…) need to be advised of cancellations, reinstatements, and other policy endorsements. Agent commissions can also be centralized providing predictable commission payments and consolidated reporting. The efficiencies are endless.
Turning a policy into a smart contract and building the rules about who can access what portions of the policy information is not something that is going to happen tomorrow. But as blockchain technology evolves and matures, it will happen.
Are you going to be there when it does?