- Insurance is a contract represented by a policy in which the policyholder receives financial protection or reimbursement against loss from an insurance company.
- Blockchain application in Africa has grown over the past decade. However, most financial systems, especially the insurance industry, are still paper-based.
- With the help of smart contracts, insurance companies can automate almost every single process within the coverage steps.
Blockchain technology has proven time and time again its absolute revolutionary prospects in the financial sector around the globe. The various blockchain applications in Africa alone are enough to demonstrate its vast array of applications. DeFi in Africa is just one but the most dominant factor within Africa’s ecosystem. Other applications include blockchain in education and the healthcare industry. In recent news, blockchain in insurance is finally seeing some recognition. In truth, only a few, especially within the continent, advocate for insurance coverage due to stereotypical thinking.
More often than not, the struggles of insurance companies are numerous, but blockchain’s decentralized and immutable nature has provided a solution. Although how does blockchain integrate itself to solve insurance coverage in Africa? Look no further, for here are all the intricate details you’ll require to awe at blockchain’s interoperability truly.
Blockchain in Africa’s ecosystem
Blockchain technology is a decentralized and immutable digital ledger that provides a single sharing point for all its users. The various blockchain applications in Africa result from developers isolating the critical components of blockchain; immutability and decentralization.
Using both aspects, blockchain developers have created several ingenuities that have stunned Africa’s ecosystem.
Blockchain in education has been an alternatively popular concept as developers utilized its functionalities to develop a proper learning environment. It also provides various better administration for educational centres ensuring efficient management. The sheer development of Africa in terms of blockchain technology is merely astounding.
Its immutable nature is applicable in various voting systems across Africa. Defi in Africa is also a by-product of developers trying to integrate blockchain technology into currencies other than cryptocurrency. As a result, the unbanked citizens of different African countries can now benefit from different financial services. All these are but a few blockchain applications in Africa. As time progresses, blockchain developers continue integrating its diverse nature into the insurance industry.
How is blockchain in insurance possible
What are Insurance companies
Most of the time, you will eventually run into specific terms such as insurance coverage in Africa, and individuals need to understand its meaning and importance. This ignorance has led many within Africa’s ecosystem to think that insurance is mainly a form of the government demanding money.
In layman’s language, insurance is a contract represented by a policy in which the policyholder receives financial protection or reimbursement against loss from an insurance company.
Insurance companies are a form of financial protection when a loss occurs. The critical benefit of insurance coverage in Africa is that it acts as a safety net in case of any damage to products or even oneself. There are multiple types of insurance. It solely depends on what you are trying to protect. There are:
- Auto Insurance
- Home iNSURANCE
- Renters Insurance
- Umbrella Insurance
- Life Insurance
- Health Insurance
- Disability insurance.
To acquire insurance coverage in Africa and around the globe, one must make some form of payment in instalments after a set period. Unfortunately, this is where all the hurdles of blockchain in insurance are trying to solve.
Also, Read Blockchain and Agriculture bear a fruitful union.
Which issues are blockchain in insurance trying to solve
Blockchain technology is known for its adept advantages within the financial industry. DeFi in Africa was possible through the application of blockchain in traditional systems.
One of the main issues insurance coverage in Africa faces is frictional costs.
Blockchain application in Africa has grown over the past decade. However, most financial systems, especially the insurance industry, are still paper-based. Establishing any insurance contract will involve a series of negotiations and ultimately lead to the signing of a contract. Unfortunately, this final process often requires signing a physical document since digital signatures still need to be widespread in Africa’s ecosystem.
The risk often appears when dealing with numerous stakeholders, especially within a company. As such, the issuance o insurance coverage in Africa becomes a tedious venture prone to plenty of errors along the way.
The second hurdle insurance coverage n Africa faces is operational inefficiencies. Verifying and accounting for a client has proven tedious and led to the severe decline of insured Africans. Insurances involve individuals giving money to a company to use at a later date. Any inconsistency with the balances and statements between the sender and receiver brings many issues. The second hurdle is often so severe it trickles down into the third and most cumbersome of them all; moral hazards.
Unfortunately, corruption and theft run rampant in some African countries. The worst part is that this plague has climbed up the ladder of the corporate world. Today it is common to hear a well-known company embezzle millions in funding in Africa. Due to the deep seeded corrupt nature of various figureheads, even insurance companies are well known for their tendencies to embezzle customer funds. A lack of transparency has led to the bad reputation of insurance companies.
As a result, blockchain insurance will curb these issues to restore the excellent name of insurance coverage in Africa.
How will blockchain in insurance help
Blockchain applications in Africa have proven that having a transparent system will significantly aid its overall progress. Blockchain in insurance is no exception. Three key things stand out when utilizing blockchain in any application: reachability, transparency and accountability.
All these three aspects are responsible for the wide usage of DeFi in Africa, and insurance companies can significantly benefit from it.
With the help of smart contracts, insurance companies can automate almost every single process within the coverage steps. Blockchain technology is able t create a decentralized environment allowing the company to distribute their application to the users simply. This is an added advantage since the mobile industry within Africa is higher than it has ever been. From their sues can sign in the contract through various processes, and due t the immutable nature of blockchain applications, each user can easily be identified based on their contract.
In addition, blockchain in insurance can automate the policy issuance to reimburse any funds to the users.
This concept exists in Nairobi, Kenya, as ACRE collaborated with Etherisc to develop a crop insurance platform that utilizes blockchain technology. Through their efforts, they proved that blockchain in insurance is far more accessible and more efficient than traditional means.
The transparent nature of blockchain can be incorporated within each transaction, allowing users to see if their respective insurance company can cover their losses.
In addition, the smart contract can automate policy issuance promptly. In most cases, individuals tie insurance coverage in Africa to slow response rates and as such most individuals opt not to acquire one.
Blockchain in insurance is an added advantage to the user and the company. Having an automated system that assures integrity and efficiency s one of the reason why DeFi in Africa thrives so much. The insurance industry will improve drastically by showing users that a company can deliver promptly without tedious processes.