Blockchain and Insurance in UAE

Insurance is a popular concept in the United Arab Emirates (UAE). Numerous insurance companies offer different insurance products around the Middle Eastern country. Given how far UAE has come in digitization, it is worth exploring the role blockchain technology plays in its budding insurance market. 

UAE’s Insurance Market

The UAE’s insurance penetration levels are relatively modest globally. According to Swiss Re Sigma, it ranked consistently between 40th and 50th. Nevertheless, it ranks higher than other Middle Eastern countries. The UAE’s insurance space has different insurance policies in different sectors, including healthcare. Nonetheless, life insurance is larger than other insurance policies. In the last few years, the UAE insurance market has undergone different changes. The space incorporated technologies and advanced operational solutions.

Benefits of Blockchain in UAE’s Insurance Market

Fraud Detection And Risk Prevention

In UAE’s insurance industry, complexity often results in visibility gaps that can be exploited for fraudulent activities. Insurance comes with somewhat complex processes, multiple steps and paperwork that can create opportunities for criminals to submit multiple claims to different insurers for a single loss or for agents to sell coverage policies and pocket the premiums. Blockchain technology can ensure the coordination of these processes among insurers in combating fraud. 

Also, the blockchain’s immutable ledger records all transactions and policy details on a transparent and tamper-proof blockchain. Hence, insurers in the UAE can easily verify the authenticity of claims and identify any suspicious patterns indicative of fraudulent activity.

Data Storage and Accessibility 

With a distributed ledger, insurers can record transactions permanently. Storing claims information on a shared ledger could facilitate collaboration among insurers and enable the identification of suspicious behavior across the ecosystem.

Smart Contracts

In the UAE, insurance companies can use smart contracts to automate policy issuance, claims processing, and settlements. This increases efficiency by reducing paperwork and minimizing the need for intermediaries.

Easy Reinsurance Process

Reinsurance involves insurers transferring a portion of their risk to other parties. Blockchain technology can make reinsurance easier and safer. Blockchain’s shared, decentralized ledger can streamline reinsurance contracts and transactions. Thus, reinsurers and insurers in the UAE can improve transparency, reduce disputes, and expedite settlements.

Parametric Insurance

Parametric insurance pays out based on already set parameters rather than actual losses. This insurance can benefit from blockchain technology. Smart contracts can automatically trigger payouts when specified conditions are met, such as a certain level of rainfall or temperature. This allows insurers in the UAE to offer innovative parametric insurance products with faster claims processing and reduced administrative overhead.

Identity Verification

Blockchain can enhance identity verification processes in the insurance industry. With the technology, UAE insurance companies can securely store and validate customer identities on a blockchain. Also, blockchain can make onboarding procedures easy. Additionally, the technology can reduce identity theft risk and ensure compliance with regulatory requirements.

Final Words

Insurance is a popular sector in the UAE. Many UAE residents are insuring their lives, properties, etc. Blockchain technology can make the country’s insurance market an efficient space.