Ethics of blockchain in insurance sector (Essay Sample)

BLOCKCHAIN IN THE INSURANCE SECTOR By Student’s Name Code + Course Name Professor’s Name University Name City, State Date Blockchain in the insurance sector Introduction Blockchain is described as a category of digitally disseminated ledger technologies that are designed to simultaneously facilitate the sharing of well-structured information records and transactions through a network in a secure and unassailable manner. Arguably, the blockchain eliminates the need for a central trust authority for the verification of transactions and information. There exist terms and regulations including pre-defined code that dictates the code of conduct of Blockchain users. Verification of transactions and information is done by computer algorithms that match their adherence to the Blockchain’s governance rules and regulations (Lapointe and Fishbane, 2020). Notably, transactions in Blockchain majorly involve digital asset transfers, for instance, in the form of cryptocurrency. In addition, transactions involve the relay of information to a certain profile. Recently, the trust, transparency, and immutability of transactions on Blockchain have contributed to the surging application of the technology in the monetary sector. Since Blockchain is linked with diverse designs and provides a platform for interaction between people and technology, it is important to evaluate ethics associated with its application in the financial sector. Similarly, following the trend of the current application of blockchain in the financial sector, a need arises to evaluate the extent to which this technology could rebuild the insurance sector. Could Blockchain restructure trust in the insurance sector? According to statistics, approximately 5% to 10% of claims in the insurance sector are said to be fraudulent (Nissen, 2020). Fraudulent insurance claims are continuously affecting the global insurance market with a considerably high level of breach of ethics and legal guidelines in the sector. Specialists in this sector, however, propose that the integration of blockchain into the insurance sector could significantly alleviate fraud. Markedly, the processing of an insurance claim, concerning well-structured business workflows, entails complete and intricate coordination among the accomplices. However, these participants often possess opposing fiscal incentives that affect their trust among them. This leads to intervention by insurers that provide services to the counterparties based on a trusted intermediary. Inappropriately, this kind of intermediary results in inefficiency and high costs during the insurance claiming process. The rise of blockchain technology, involving the use of decentralized digital ledgers could rebuild trust in this sector. To support the argument that blockchain technology can restructure trust in the insurance sector, several of its aspects require thorough evaluation. Foremost, the blockchain can deliver a transparent, safe, and certifiable mechanism that is crucial in enhancing trust in insurance dealings (Gatteschi, 2018). Insurance is gradually losing trust among customers while it still holds a critical role in the economic growth and creation of wealth around the world. The decline in trust in insurance activities is currently resulting in significant levels of underinsurance. Fortunately, the emergence of the blockchain which has a framework suitable for providing a secure environment for insurance transactions could reshape the insurance sector. Ideally, blockchain is capable of improving the trustworthiness among insurance counterparties through the verifiable mechanisms included in the framework which provides attestable moral faith in the transactions. Similarly, by replacing the existing conventional trust concept in insurance, blockchain could reshape the sector through the integration of smart contracts. Compared to the traditional, redundant data entry and extensive verification processes, blockchain’s smart contracts offer ease of accessibility and swift sharing of secured data (Gatteschi 2018). This could lower the costs associated with traditional data entry and verification processes in the insurance sector. Smart contracts also contribute to the efficiency of sharing information. Markedly, blockchain is associated with reliable security in the storage and retrieval of data. It could provide storage for insurance policy pamphlets in digital ledgers and enable their availability for amendments. These policy documents are immutable and can only change following a verifiable agreement by the participants. Also, blockchain is capable of rationalizing the legal and votive procedures related to the insurance sector. Implementation of this technology by the insurance sector and the financial sector, in general, could help revive the declining trust in the processes involved. The recent surge in fraudulent claims in the insurance sector, and the problems facing the management of claims has been contributing factor to the decline in trust in the industry. Providentially, blockchain could help resolve these challenges. By providing insurance firms with a platform for creating a civic, immutable database, blockchain could enhance asset transfer and ownership monitoring. It is also capable of substantiating purchases and police reports necessary in insurance claims. Notably, the smart contract feature of blockchain is capable of verifying lawful claims immediately after the feeding of the claim particulars and distinguishing malevolent activity, for instance, several claims regarding a single accident. It is also proficient in covering verified insurable occurrences without the manual processing of claims. As a result, it can be inferred that enhanced customer experience and constant product innovation associated with blockchain could restructure trust policyholders and insurance firms. Notably, blockchain portrays a decentralized kind of trust in practical application in the insurance sector. For instance, Bitcoin, which is one of the cryptocurrencies that have propagated the adoption of blockchain technology, has existed for over 9 years with a surging number of customers and is worth in terms of billions of dollars. Bitcoin involves the use of protected blockchain applications by participants to trust data. Digital ledgers are used to record transactions and with the help of cryptographic procedures, the blockchain ledger is made available to each party in an immutable form. The rapid growth in the number of customers in Bitcoin can be attributed to the transparency and immutability of transactions that rely on decentralized trust. The idea of decentralized trust, as opposed to the current structure of trust in the insurance sector, could be a milestone in the restructuring process of trust in the industry. The management of identity in the insurance sector is also an issue affecting trust, that blockchain could resolve. Conventionally, centralized authorities including popular online service providers and governments have been charged with the responsibility of managing identity. This strategy is associated with a bitty representation of customer identity. Fragmentation of identity often encourages fraudulent insurance claims and identity theft. However, blockchain technology provides insurance firms and customers with a chance to resume control over their identities and profile data. This kind of identity management that is included in the blockchain framework could reduce the obligation for insurance firms and simultaneously alleviate identity theft and fraud problems in the holistic financial sector. This is also a clear indication of the ability of blockchain to restructure trust in the insurance industry. Why blockchain? The current trend indicates that blockchain has more untapped potential in pushing for a positive revolution in the financial sector and enhancing insurance services around the world. However, to maximize the merits of this technology, it is important to evaluate its ethical application in the financial sector. Remarkably, ethical theories such as deontology and rights are evident in the integration of blockchain into the financial sector (Geirsson and Holmgren, 2018). To understand these theories better, an evaluation of the ethical considerations during the application of blockchain to the monetary sector. Foremost, blockchain’s framework gives priority to the capability of customers to own their data in terms of access, review, and amendment. Besides, there is a provision of reports that indicate both authorized and unauthorized attempts to access a customer’s data. Members of a blockchain also have the freedom to request exit from the platform and the deletion of their information. The ability of individuals to possess and control the use of their data has been a long-term challenge in the financial sector. Societal rights dictate that an individual is entitled to full control of personal and confidential data (Dierksmeier and Seele, 2018). However, with the centralized structure of databases such as governments and prominent online service providers, and the constituent sensitive confidential data, most individuals have been denied the right to take full control of their data. Thus, regarding the right to own and control personal data, blockchain has shown promising results in addressing the issue. Second, the loss of jobs and high efficiency associated with blockchain raises a need for ethical evaluation and decision-making. Currently, most types of data in the financial sector are managed in redundant databas...