Thought Leadership
Businessman with network security technology.
June 09, 2017
Blockchain for Insurance
Preeti Mahawar
Tags: blockchain

Insurance is one domain that presents a lot of challenges like fraudulent claims, tricky investigations, nominee disputes, manipulated proofs, and a lot of claimants for a policy. There are multiple entities that are responsible for making an insurance industry work.

Issuance of a typical life insurance may involve middleman selling multiple policies from various brands, employer/club in case of group insurance, individual in case of single insurance, and health and diagnostic centers for health checkups. The number of such entities increase when it comes to insurance settlement or in the event of a claim. In a case of an unnatural death, there are several others like third party inspection agencies, police department, court, deponents etc.

All the entities involved are discrete and exist independent of each other. The various entities involved in insurance cannot track proceeds of one another that leads to a number of co-ordination issues. For instance

1. Fraudulent claims: Since insurers do not share their databases, a policy holder can claim from multiple insurers for a single case of accident. A patient can manipulate the invoice and present to insurer for the claim. Faking identity and claiming insurance is a common challenge.

2. No transparency: An insured person or nominees face harassments like unreasonable delays, no visibility on where a claim file has moved, irresponsible behavior by various departments’ involved, constant follow-ups for more and more documents which are not required. Some officials try to take undue favors in exchange of processing claims faster.

3. No Accountability: Whenever a claim is filed, the file keeps on rotating between various departments and entities. There is no clear picture on what is being done, what is pending, who is in possession of the file, what is causing delay. Due to this, the nominees or policyholders have to visit/call the insurer office multiple times. The entities involved in the process keep blaming each other for the delay, which adds more to the suffering of claimant

A blockchain-enabled insurance value chain will solve, if not all, at least 90% of the challenges faced by insurance industry, by bringing together all the stakeholders on a single platform to exchange relevant information and save millions of dollars per year on fraudulent claims.

1. Identity Management: An insurer can check KYC details of an incoming customer/nominee with another insurer, and also verify his/her identity using connected government databases.

2. Accelerated Claims process: Claim processing can be accelerated by bringing all the parties involved in an event on the same platform. All associated documents, proofs, transactions, comments from customer, nominee, hospitals, third parties, police department, court etc. should follow a single trail that can be referred to by all the relevant nodes. This enables real-time access/validation of the documentation and   all entities which result in faster claim processing. Multiple mail trails, exchange of paper documents and chances of missing information are eliminated.

3. Transparent proceedings: The proceedings can be seen by all the relevant nodes since nothing is hidden anymore. Each transaction is time stamped and contains details of entity who has posted the transaction

4. Better Accountability: Since each event is time stamped, it promotes accountability to process claims on time  among participating nodes, specifically government departments. Delay or carelessness from any node is registered and can be contested in the court of law.

5. Automated Claims: Claims can be automated using smart contracts. For instance, in case of travel insurance, a claim is automatically triggered for a traveler in case his/her flight gets delayed by more than 3 hours. There is no need for manual intervention.