Time For Insurers To Hop Aboard Blockchain For Fast, Easy Claims
From crop to health insurance, blockchain technology could help insurers automate claims, eliminate delays, and restore trust.
The Gist
Blockchain is positioned as a transformative solution for the insurance industry, promising to eliminate common pain points associated with claims.
- Insurers face challenges like fraud and inefficiencies that erode consumer trust.
- Smart contracts enable automatic payouts based on predefined conditions, enhancing customer experience.
- Examples from India and globally illustrate blockchain's potential in improving insurance processes across different sectors.
When it comes to money, trust is essential. You trust your bank to keep your savings safe. The bank trusts that you will repay your loan. Insurers trust that you won’t make a fraudulent claim. Investors trust that companies will make truthful disclosures on time.
Yet, trust is invariably under pressure, especially due to instances of fraud, hidden fees, claim payout delays, data breaches, and fine print that confuses more than clarifies.
The insurance industry, despite being around for decades, is no exception. It is plagued by inefficiency, human error, and disputes around claims and payouts.
Take travel insurance, for example.
You buy flight insurance that covers delays. Normally, when the flight is late you’re required to submit a claim. Ideally, you should get paid instantly. But it doesn’t happen. You have to wait for weeks, and sometimes get into email fights before getting paid.
Founder of Growth Rocket, a social‑media content and promotion agency, recounted in a LinkedIn post just last week that his travel insurance payout of a mere Rs 3,000 had not been processed even three weeks after he made the claim. He wrote that he had “spoken to 6 different people, visited 5+ portals, and the process still isn’t done”.
This is a common experience for people who buy travel insurance. But with blockchain technology...
When it comes to money, trust is essential. You trust your bank to keep your savings safe. The bank trusts that you will repay your loan. Insurers trust that you won’t make a fraudulent claim. Investors trust that companies will make truthful disclosures on time.
Yet, trust is invariably under pressure, especially due to instances of fraud, hidden fees, claim payout delays, data breaches, and fine print that confuses more than clarifies.
The insurance industry, despite being around for decades, is no exception. It is plagued by inefficiency, human error, and disputes around claims and payouts.
Take travel insurance, for example.
You buy flight insurance that covers delays. Normally, when the flight is late you’re required to submit a claim. Ideally, you should get paid instantly. But it doesn’t happen. You have to wait for weeks, and sometimes get into email fights before getting paid.
Founder of Growth Rocket, a social‑media content and promotion agency, recounted in a LinkedIn post just last week that his travel insurance payout of a mere Rs 3,000 had not been processed even three weeks after he made the claim. He wrote that he had “spoken to 6 different people, visited 5+ portals, and the process still isn’t done”.
This is a common experience for people who buy travel insurance. But with blockchain technology and smart contracts, these situations can be avoided because the rules for insurance payout are predefined like this: ‘If flight A is delayed by more than three hours, pay an X% for the total fare.’
Once an airline or weather department confirms the delay, the payment goes through. No phone calls, no paperwork.
Infrastructure You Can Trust
Blockchain enables this kind of automation by building trust through design. It acts like a shared electronic notebook that records activities such as a payment, a contract, or an insurance policy.
But unlike a spreadsheet that you can modify at will, this notebook is tamper-proof. You can’t erase entries or fake new ones. If anyone tries, the chain breaks, instantly alerting all parties that something is wrong.
Another benefit: the data isn’t stored in one place. It’s distributed across many computers, reducing the risk of fraud or manipulation.
Blockchain can improve multiple segments of the insurance industry:
- In workers’ compensation, insurers can access health and employment records from various sources, cutting down on fraud and speeding up claims.
- In group life insurance, all updates and claims could be processed in real time using smart contracts, eliminating needless back-and-forth between employers and insurers.
Crop Insurance
Blockchain technology in the agriculture insurance sector has been piloted in India, mostly through government-led initiatives.
For example, the Maharashtra government, in association with some private entities, is piloting a blockchain-based crop insurance platform designed to automate the verification and processing of insurance claims.
Globally, blockchain adoption in farm insurance is growing steadily.
The Lemonade Foundation, a New York-based organisation by AI-driven insurer Lemonade Inc., launched the Lemonade Crypto Climate Coalition, a blockchain-based crop insurance scheme for farmers in Africa.
The technology assesses weather risks and uses smart contracts to process claims automatically. According to estimates, by 2023, at least 7,000 farmers in Kenya had already received compensation for crop damage.
Health Policies
Blockchain technology is also being explored by Indian health insurers, though large-scale deployment remains limited.
Globally, however, the momentum is stronger.
For instance, LumenLab, MetLife Asia’s Singapore-based innovation centre, has created a blockchain-based insurance solution that offers pregnant women financial protection for gestational diabetes.
The product, Vitana, connects securely to customers’ electronic medical records via their mobile device, issues a policy within minutes, and triggers an automatic payout upon diagnosis. No claims required.
Final Words
However, here is a caveat: before you start believing you could introduce your business to blockchain as early as tomorrow, you need to know that bringing blockchain into big financial systems could be complex, costly, and time-consuming.
Complex, because there are multiple stakeholders that need to come onboard, and data privacy rules will need to be revisited.
Costly, because this shift would lead to higher power consumption. And time-consuming, because you’d need to ensure that the new technology dovetails into the existing system.
These changes may seem like a lot in the beginning, but with the right support and an efficient transition partner, this could be a piece of cake.
This series is brought to you in partnership with Algorand.
