The insurance industry will still have obstacles to overcome, but blockchain’s ability to provide complete accountability, transparency and superior security will help insurers save time and money, as well as improve customer satisfaction. Let us understand how Blockchain application in Insurance will be robust.
Problem with Current Insurance system
Fraud is estimated to cost the insurance industry more than $80 billion annually.
Health insurance fraud ranges from providers submitting claims for services never rendered to up-coding services to receive higher payments. Plan members can commit fraud by failing to report other types of health insurance coverage that would cover the billed services or filing claims on behalf of ineligible members/dependents (e.g., keeping an ex-wife on an insurance plan after a divorce).
Life insurance fraud typically occurs during the application process—applicants withhold key medical information such as a history of diabetes or a heart condition, for example. To decrease costs, life and health insurers both look to protect themselves, their shareholders and their policyholders from fraud.
Information is an insurance company’s lifeblood. Properly acquiring, processing, sharing, securing and using that information to make decisions in a timely manner is crucial—but some of today’s transactions may take days (or weeks) to locate and process. Many insurers are using claims systems that were originally built more than 30 years ago.
Maintaining these outdated technologies increases costs for insurers and may hamper their efforts to adopt new value-based payment strategies that will change the way insurers approach network development, provider contracting and payments.
How Blockchain helps?
When fraudulent information is submitted to a life or health insurer via false claims, falsified applications, or other channels, blockchain’s smart contracts can help determine if the submission is indeed valid.
Blockchain cannot verify all types of data (e.g., whether the claim was up-coded), but it can validate the submitter and the completeness of the information (e.g., billing code and date are included in the claim). For example, a health insurer could link a claim submission to a patient’s interoperable health record on the blockchain to verify that the patient was actually seen for the appropriate condition.
A life insurer could compare elements of an applicant’s health record—whether the person had been treated for cancer, or whether the person is a smoker—to public or employment records to verify that the information the applicant provided is correct. Once confirmed, the claim would be paid. If not confirmed, the claim either would not be paid or at least trigger further investigation.
The many millions of transactions and data exchanges between an insurance company and its customers, providers, vendors, employers, auditors, and regulators should become much easier to access and view securely with blockchain, saving time and resources.
Blockchain could automatically collect records of agreements, transactions and other valuable information sets, then link together the information and act on the data using smart contracts.
Blockchain-based provider directories could leverage the technology’s decentralized consensus protocols to allow providers and insurers to update listings more quickly and easily. If a provider changes networks or someone finds a mistake, they can initiate a correction, which can be automatically accepted or rejected by smart contracts based on other information in the blockchain (e.g., a recently rejected claim).
Health plans will be able to keep track of all provider updates and will know which information is most current. Providers, who currently have to maintain multiple directories, would only have to update their information in one place (e.g., a government-sponsored blockchain applications in insurance).
Blockchain has the potential to introduce new models, reinvent existing insurance processes and increase the capacity of insurance providers. Health and life insurers should be positive when it comes to blockchain. The greatest opportunities may extend beyond making incremental improvements in current business models to harnessing blockchain’s unique attributes to create entirely new types of interactive policies and launch innovative services that add value and grow the business.
Sahil Gupta
With roll up the sleeves, dive in and get the job done approach, it was year in the year 2010 when Sahil started Parangat Technologies. Emphasizing on a healthy work culture and technology driven company, he has successfully created a workplace where people love to work and live. He is a software engineer and a passionate blockchain enthusiast.