Blockchain technology can significantly change the way insurance company collects or records, peoples data and processes claims. Being a disruptive technology carrying the potential to revolutionize the insurance industry – the amalgamation of blockchain and insurance is in the nascent stage of exploration and implementation, but the opportunities are limitless.
Blockchain: A Transformative Catalyst for the Insurance Industry and Easy Fraud Detection
Blockchain technology acts as a catalyst for the insurance industry, which requires coordination and cooperation of different intermediaries for processing of large sets of data. On a broader scale, Blockchain technology empowers insurance companies to reduce and streamline paperwork, improve data security and save costs by eliminating time-consuming processes from the lifecycle. Let’s take a look at how blockchain and insurance can benefit each other.
Frauds while claiming for insurance are becoming common because of the gap in visibility. Insurance claim papers are rotated from insuree to the insurer desk as well as reinsurer. There are a lot of dependencies from different departments, which results in several moving dependable parts, eventually creating a vacuum for frauds. The vacuum in the insurance claim process is the opportunities for looters to make multiple claims from different insurers for the same loss. Here’s how Blockchain technology can help to address the issue of frauds in insurance:
- Blockchain, a decentralized and distributed public ledger records all the data of insuree along with details of each and every transaction processed by individuals.
- This decentralized digital repository has the capacity to cross check the authenticity of customers as well as claim initiated by them.
- Blockchain network provides complete details and history of claims processed for a particular individual.
- With all these details available at a single place, insurers can easily identify duplicate entries. Blockchain also eliminates the risks associated with payments involving multiple currencies.
It becomes possible for insurers to collaborate through the shared ledger and identify any unusual or suspicious behavior regarding the processing of a claim.
Health insurance industry is faced with the dilemma of integrating all the medical information together from different sources before processing the claim. There are multiple stakeholders involved in the medical consultation and this makes it difficult to share sensitive information between all of them.
The risk of duplicate and erroneous records arises because of the inefficiency to smooth share and coordinate medical records of patients with insurance companies. It is also a major overhead for administrative staff to collect the minutest details and verification from all the doctors that patient had consulted. This is how health insurance is simplified with the help of Blockchain technology:
- Blockchain technology solves this issue by storing all the information cryptographically to maintain a high level of data privacy.
- It also provides complete transparency to insurance companies on how many claims has the person made in the past.
- With Blockchain, medical records are reconciled across all pharmacies, insurance companies, hospitals, and clinics.
- Such synchronized repository of healthcare data reduces false denials of claims, which arises as a result of the failure of authorization or incorrect data.
Property and Casualty Insurance
Blockchain Technology is being reimagined for property and casualty insurance by gathering all the required data, evaluating and processing claims automatically, with minimal to zero manual work. In the current scenario, property and casualty insurance is an erroneous process involving a lot of paperwork and coordination between different parties.
Let’s understand the influence and impact of Blockchain technology on property and claim insurance:
- Using Blockchain technology, insurers want to empower policyholders to manage their assets digitally.
- On the other hand, even insurance companies can use smart contracts to process the claims.
- Thinking of insurance as a contract, the policyholder pays a fixed amount of premium against which the insurer is liable to provide cover for damages.
- In case of a smart contract, the damages covered under the insurance need to be specified in detail such that it does not contradict during the verification for processing of claims.
- Blockchain helps in transforming paper-based insurance contracts into smart ones where everything is automated, including claim processing and calculating the liabilities of policyholders.
Blockchain establishes transparency and enhanced visibility into the reinsurance contracts. It helps the insurance company to offload the risk and associated amount among separate reinsurers. The decentralized distributed ledger of Blockchain also provides insight if the reinsurer attempted to offload some part to another subsidiary. Insurers can be confident on paying of claims as they know about rebalancing all capital exposures against specific risks. With the data getting updated at the same place, insurers can experience accurate reserve calculations considering all the involved reinsurers. The coordination between different stakeholders becomes smoother and audit trails are quite simple to follow.
Experience the Disruptive Shift in Insurance Industry
People who have changed their insurance company or healthcare provider are aware of the tedious data-entry process. The fear of loosing data or misinterpreting also persists in this paper-based insurance process. Blockchain is the sure shot solution to this problem of the insurance industry. It drives in efficiency and security to allow individuals to control their personal data and get it verified through the Blockchain network. Insurance companies are testing new models to identify high impact areas for Blockchain technology. Moving ahead slowly but steadily seems to be a fair option while shifting from paperwork to Blockchain network model. To begin with, insurance companies can implement low-risk model, which could later be upgraded to involve third-party networks and partners for large-scale adoption. Blockchain technology has immense potential to improve trust between all stakeholders and inculcate transparency across the insurance ecosystem. These capabilities of Blockchain are being explored by insurance companies to step towards low risk, process-oriented, less complex and friction-free insurance, and claim process.