There is a growing enthusiasm and rising trust for blockchain technology today. The 2016 World Economic Forum’s report dubs blockchain, a potential ‘beating heart’ of the global financial system, predicting that it will account for 10% of global GDP by 2027. The essence of this overwhelming positivity on blockchain comes from its trustworthy, impenetrably secure peer-to-peer network, which fits numerous industries of the world, including financial institutions such as insurance.
Blockchain can be used across the insurance value chain because of its ability to offer long-term strategic benefits, such as lower operational costs in the form of reduced duplication of processes, reduced counterparty risks and increased automation through secure and decentralized transactions. The distributed ledgers of blockchain help streamline activities such as business processing, policy administration, customer payments, new investments management and the distribution of proceeds. Given these far-reaching advantages, blockchain can be used in several types of insurance, such as health insurance, travel insurance, crop insurance and other property and casualty insurance.
Hassle-free death claims enabled by blockchain
Let us take the example of how blockchain can help simplify existing death registration and claims process. The process of death claims in the insurance sector has not changed much in decades, despite multiple technological interventions and automations. For many insurers, this remains a manually intensive, inefficient process that is subject to fraud, resulting in mounting paperwork. As customer centricity takes center stage for insurers, the claims process is also expected to evolve to ensure minimum hassles to beneficiaries. The focus is, therefore, to improve the beneficiary experience by minimizing manual touchpoints, reducing fraud and delivering accurate and faster disbursements.
The current death registration and claims process is elaborate. First comes the process of securing country-specific doctor reports, followed by the government body issuing a death certificate and the permit for burial or cremation. Upon receiving the death certificate, the beneficiary submits it to the insurance company to initiate claims process. The company in turn verifies the details to process the claim, which takes weeks or months to deliver. These step-by-step processes are a pain for the bereaved, which is the primary challenge for insurers worldwide to reduce to a minimum. A blockchain-based solution can condense the current death registration and death claims processes into a single, simplified procedure that requires minimum intervention from multiple stakeholders.
With a private, permissioned blockchain with smart contracts, insurers can eliminate fraud and automate death registration and claims to benefit everyone involved in the chain of events. In this scenario, the hospital’s IT systems would be integrated with the blockchain network. As soon as a death occurs, it is recorded and transmitted safely to both the government’s registry and also the insurer. The death certificate, the burial or cremation permits (varies across countries), and the insurance claims all follow in a hassle-free, secure sequence with minimum, or no human touchpoints.
Blockchain helps streamline all Insurance processes
The entire life insurance process can be governed by a multi-party smart contract that executes within the blockchain network. No more tedious paperwork or cumbersome workflows and processes. Blockchain reduces the entire chain of events to a smooth, simple, scalable and efficient workflow.
Among the various applications of blockchain technology, the smart insurance contract seems to deserve the most attention now. The idea of automating an insurance policy by writing it into a smart contract yields compelling results. The very notion of automatically paying out a claim after an insurable event, without even the policyholder filing for a claim or the insurer administrating it has drawn the interest of insurers worldwide.
To succeed with blockchain, insurance companies have to pick, analyze and determine the right areas for this technology to add value by careful evaluation of their IT strategy. Joining large industry consortiums to keep abreast of latest developments will help insurers in this transformative process. With over $1.4 billion of investments that poured into blockchain globally in 2016 alone, the technology holds huge potential to transform insurance companies, and give them considerable competitive edge.
- Arun Baid is Global Delivery Head, Insurance Practice, Cognizant