How blockchain is finding its way into complex insurance claims
Imagine the worry in the mind of a person who is viewing the damaged windshield of the car, due to an accident he/she met with. The person can be relieved that the car is insured but, will now have to go ahead and start with the claims process. What makes the claims process experience an unpleasant one; let us look into some of those pain points
- For a layman, the insurance contracts are difficult to understand due to the complex legal language used.
- The timeframe right from claim submission to claim approval could be a longer one.
- Verification process of the claims proofs.
Usually the claims process would start with the customer/user making a claim, the insurance company verifying the claim, and if all goes the right way, then finally the claim would be approved; even though it sounds simple it can be a long and complicated process. Technological advancement such as Blockchain can be used to simplify the bottlenecks in such processes. First things first, what is blockchain? Blockchain is a distributed database existing on multiple computers at the same time. Now the question arises how can blockchain help the claims process?
- Collecting insurance claims information
Any claims process would start with recording the claim on documents. Consider life insurance, a death claim requires certain documents such as, death certificate, original policy document, ID proof of the beneficiary, etc. Most of the times, people who make the claims have to make frequent visits to the insurance office, submit the documents, this could also delay the claims process.
How does blockchain help here?
To put in simpler words, Blockchain is a distributed network. The insurer and insuree can access the information in this network. Once the insurance claims documents are uploaded on the blockchain, then they can be confirmed by the insurer, thereby reducing the time and effort behind document submission.
- Verifying insurance claims information
After the submission of the necessary claim related documents, the claims process would reach to verification steps. Now this process can take longer time as we don’t have an idea as to when will the authorities verify the document and notify about the verification status. Another problem – what if a person submits fake claim documents?
How does blockchain help here?
Now there is something called as blockchain based smart contracts. Smart contracts help you exchange money, property, shares, or anything of value in a transparent, conflict-free way. One can code the terms of a contract on Smart contracts and based on an event the contract executes itself according to the code. Let’s continue with the life insurance example, so if the death registration of a person is done on a blockchain, based on the death event of the person the smart contract would execute itself that is, it will start with verifying coverage and other claims documents of the person, identify the beneficiaries, and initiate the claim settlement. The verification of the documents is done on blockchain which is on a shared access; any alterations on the document will notify everyone on the shared access. Hence it makes it difficult to submit a fake document or modify a document.
Organization working in the similar direction: Tradle (It helps with verifying Know your customer or KYC documents on blockchain)
So far so good, so where do we encounter the hurdles and challenges?
- Banks also play certain roles in the insurance domain. Such type of technical advancement would require the banks to adapt to such innovative changes. Most of the times, banks lack such an approach.
- People are still finding it tough to make the blockchain based applications work in sync with compliance and regulations. So it is essential to understand blockchain and its impact on the regulations and compliance of the related industry ( in this case the insurance and claims processing industry)
- Ethereum based Smart Contracts tend to be slower when too many transactions are processed on it.
So should the hurdles and challenges deter one from applying blockchain into the applications? Certainly not, blockchain has found its way into the complex world of insurance claims, by simplifying sharing, verifying claims data and eliminating the middleman. With all the improvements done towards blockchain technology and the blockchain startups working in this direction, looks like blockchain is here to stay, isn’t it?