Page 20 - Insurance Times December 2021

communication space between these databases was where Blockchain has two basic functional components:
the inefficiencies lay. Blockchain technology allowed parties I. Validation of transactions
to get linked with a shared, secured, and permissioned II. Writing to the Blockchain
network, collaborating in ways that reduced inefficiency and
streamlined the entire process. Writing operations consume much more energy as compared
to reading operations which create stress on the peer network
Blockchain is a shared ledger technology where everyone in and as a result, the volume of transactions that can be stored
the network (broker, insurer, and banks) can see the status per block reduces. The network can handle a certain amount
and history of the transactions. It helps businesses work of simple transactions per second (lesser in the case of
together more efficiently. complex transactions). This means if a network that is
operating at close to its maximum capacity, it will be unable
It is about transparency. All the bodies can see the status of to process excess transactions.
the quotes, confirmation, and payments in real-time. In times
of calamities, the Blockchain can process transactions rapidly Key Highlights of the technology
with community governance.
Decentralized validation: New data is encapsulated in a block
that only gets appended to the main Blockchain once
Some of the major use cases of Blockchainin the insurance
consensus has been received upon the action's validity. This
industry are: fraud prevention, policy creation, claims helps in providing trust among the peers involved in the
processing, streamlining routine interactions, risk prevention, transaction that is occurring even when there is no central
on-demand insurance, P2P insurance, reinsurance, and smart administrator. The process of validation requires high power
contracts.
of computation, which is transmitted by the processors in
the systems of the peers that are part of the Blockchain.
Emergence of Blockchain Consequently, it becomes difficult for hackers and lessens
Insurance industry started giving attention to Blockchain from chances of fraud done to alter the transactions and related
the beginning of this decade in 2011. It is a breakthrough processes.
technology that is now largely being adopted in almost all
the sectors in India, Insurance companies are now under Redundancy: The unique part about Blockchain is that as
pressure to make the hard decision of adopting the Blockchain soon as any transaction occurs, it is continuously replicated
model while letting go of the already established traditional on all the required peers in the network that are a part of the
models. network. Due to this, at one single point of time, data is
registered on several nodes with no chance of failure and
A study published by Tata Communications in 2018 showed delay.
that 44% of organizations are adopting Blockchain but at the
same time face several universal problems that arise in Immutable storage: Each block that has data is in sync with
deploying such new technologies. the previous block in the line. Since the data is altered in all
the required nodes, it is next to impossible for any hacker to
alter the data in all the nodes that were replicated with data
regarding the transaction plus the succeeding node too.

Encryption: Digital signatures put the peer nodes that are
participating in a transaction in a position to authorize which
participant initiated the transaction or got themselves
registered in the process. With this, Blockchain can be cast
as a record keeper of static and dynamic data.

Blockchain Transaction Methodology

Transaction definition
It follows an S-T-R concept where S is Sender, T is Transaction
and R is Receiver. In this step, the sender initiates a
transaction which is then transmitted to the network.

20 The Insurance Times, December 2021