Blockchain Application In Insurance

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Policies are often processed on paper contracts, which means claims and payments are error prone and often require human supervision. The insurance business often includes consumers,brokers,insurers and reinsurers as well as risk. Using blockchain technology, a cryptographically secured form of shared record keeping.

Most of the major applications include:

Fraud detection and risk prevention

By moving insurance claims into an immutable ledger, blockchain technology can help eliminate common sources of fraud in the insurance industry.

Property and casualty insurance(P&C)

A shared ledger and insurance policies executed through smart contracts can bring an order of magnitude improvement in efficiency to property and casualty insurance.

Reinsurance

By securing reinsurance contracts on the blockchain through smart contracts, blockchain technology can simplify the flow of information and payments between insurers and reinsurers.

Health insurance

Medical records can be cryptographically secured and shared between health providers, increasing interoperability in the health insurance ecosystem.

Fraud detection using blockchain technology

On a distributed ledger, insurers could record permanent transactions with granular access controls to data security. Information on shared ledger could help insurers collaborate and identify behaviour across the ecosystem. Introducing blockchain technology to stop fraud would take an enormous level of coordination among insurers but will be hugely beneficial in the long run. A blockchain based effort to counter fraud could begin with the sharing of fraudulent claims to help identify patterns of bad behaviour. That would give insurers three key benefits:

  1. Eliminate double booking or processing multiple claims from the same accident
  2. Establishing ownership through digital certificates and reducing counterfeiting.
  3. Reducing premium diversion for example in the case of unlicensed brokers selling insurance and pocketing premiums.

Less fraud in insurance translates directly to higher margins for insurance companies which can lead to cheaper premiums for consumers.

Property and casualty insurance

Data is scattered across multiple locations controlled by different parties, making claims resolution a challenge. Blockchain technology enables automated real time data collection. Automated smart contracts can greatly speed up claims processing and payouts, saving insurers a lot of money. One of the industry’s greatest challenges and gathering the necessary data to evaluate and process claims. This is because processing P&C claims can be an error prone procedure that requires significant manual data entry and coordination between different parties. By allowing policy holders and insurers to track manage physical assets digitally, blockchain technology can codify business rules and automate claim processing through smart contracts, while providing a permanent  audit trail. Blockchain technology could make the process of settling a motor claim much faster and less costly. Blockchain technology can turn paper contracts into programmable code that helps automate claims processing and calculates liabilities in insurance for all players involved. For example; when a claim is submitted with an insurer, a smart contract could automatically confirm coverage and trigger a request for manual review for losses that meet a specific criteria. For auto insurance, a smart contract could be linked to sensors on a vehicle that automatically alerts insurers when a crash occurs. The smart contract can then summon medical teams and towing services, launch the claims process and inform the insured that help is on the way.

As more information such as police reports and crash photos come in, the smart contract can append them to the claim facilitating a much faster payout process with minimal human intervention

Reinsurance

Reinsurers protect insurers when large numbers of claims come in at once such as during natural disasters. Blockchain technology can reduce the risk by facilitating information sharing and cut costs by automating processes. The current reinsurance process is extremely complex and mostly inefficient. Each risk in a contract needs to be individually underwritten and contacts take up to three months of wrangling between parties before they are signed. Data has to be exchanged between various parties to process claims.

Different data standards between institutions often lead to different interpretations of how a contract should be implemented.

Blockchain technology has the potential to upend current reinsurance processes by streamlining the flow of information between insurers and reinsurers on a shared ledger. Detailed transactions around premiums and losses can exist on an insurer and reinsurer computer systems at the same time using the blockchain technology.

This therefore eliminates the need to reconcile books between institutions for each individual claim. With data shared on an immutable ledger, reinsurers can be better equipped to allocate capital for claims nearly in real-time allowing them both to process and settle claims more quickly without relying on primary insurers for data around each claim.

Health insurance

The need for patient confidentiality means that providers don’t have access to patient’s full medical history. Lack of data can lead to insurance claim denials, which costs hospitals a lot of money hence a factor in raising healthcare costs.

Blockchain technology can encrypt patient information facilitating the transfer of information while protecting patient privacy.

A patient for example may see multiple doctors and specialists over the course of his life. The involvement of so many different parties in healthcare makes it difficult to share and coordinate sensitive medical data between them.

The cryptographically secured blockchain can maintain patient privacy while creating an industry-wide synchronized repository of healthcare data saving the industry billions every year.

Blockchain technology can return control of medical data to patients and let them share access to data on a case by case basis. 

Rather than forcing insurers and providers to reconcile patient data across separate databases, a blockchain system for medical records could store a cryptographic signature for each record on a distributed ledger.

The signature indexes the content of each document cryptographically and timestamps it without storing any sensitive information on the blockchain.

Any time a change is made to the document, it’s recorded on a shared ledger, allowing insurers and providers to audit medical information across organizations.