February 26, 2018
According to Association of British Insurers (ABI), every hour of everyday, 15 fraudulent insurance claims are exposed in the UK. The ABI also estimates that every UK policyholder has to spend, on average, an extra £50 to the annual insurance bill due to fraud. Only in 2014, insurers uncovered 130,000 fraudulent claims worth £1.32 billion across all insurance products. In addition, it is estimated that at least £200 million each year is invested to identify fraud (1). Those staggering figures lead to the urgency of the insurance industry – mitigating and preventing fraud.
Blockchain appears as a “miracle therapy” for this “disease”. Thanks to its superior features, the technology owns the capability of creating a public, tamper-proof database to track ownership and transfer of assets. But how can the insurers embrace blockchain development to combat this problem?
Dynamis is one of the blockchain start-ups innovating in the area of smart contracts for insurance products. The company is developing a P2P supplemental unemployment insurance and uses social network profile data for verification of the employers’ status. In this case, the smart contracts are automating the underwriting of policies and claims handling – combined with approvals/verifications from other policyholders, who serve as the role of evaluators (2).
Apart from capability of automating underwriting and claims handling, blockchain would have potentials in making fraud detection easier. For instance, one start-up in the fraud detection area is Blockverify for goods such as electronics, pharmaceuticals, and luxury items. Its solution allows users to check for counterfeit products, diverted or stolen goods, and fraudulent transactions. It works by labeling products and then storing the history and supply chain in the blockchain. A similar, well-known application is Everledger, which is used for the verification of diamonds and related transactions.
In addition, customer onboarding is crucial to prevent fraudulent claims at the very first stage but usually time-consuming. This time, blockchain can benefit the insurance industry by providing blockchain solutions for know-your-customer (KYC) data. One of the representative products of this implication is Blockpass3, a product from Infinity Blockchain Labs (IBL). Using Blockpass, a customer will grant a company access to identity data when necessary for a contract closure. Once the KYC profile is verified, the customer can forward the verified identity data to other companies for different contracts with the same tool, avoiding the need to repeat the full identification and verification process, thus speeding up and increasing efficiency in the onboarding of new customers.
Smart contracts powered by blockchain could give customers and insurers a tool to manage claims in a transparent, responsive and irrefutable manner and would allow policyholders to self-administer their own insurance products. Contracts and claims could be recorded onto a blockchain and automatically validated by the network, ensuring only valid claims are paid. To be more specific, a blockchain node would reject numerous claims for one accident as it would know that a claim had been made. Smart contracts would also help to self-execute a claims, for example, triggering payments when certain conditions are met4. On using the technology to streamline the payment process, the cost of paperwork becomes almost removed, together with the risk of fraud.
Blockchain development is just in its infant stage, but the power behind is inconceivable. Dynamis, Blockverify and Blockpass are just some examples among multiple uses that such technology may bring to benefit insurance industry.
Infinity Blockchain Labs is a visionary R&D company engaged in intermediary and RegTech services employing blockchain technology. We focus on forming alliances with established businesses and regulatory institutions across various industries, as well as providing collaborative incubation for early stage blockchain projects.
IBL aspires to empower Vietnam to become a global leader in blockchain development and therefore are committed to sharing information to nurture a passionate, educated blockchain community. One of the ways we maintain our role as ecosystem pioneer is by helping create educated blockchain enthusiasts. We are committed to sharing information and resources to help Vietnam become a blockchain hub through conferences, courses, contests, alliances, workshops, speaking engagements and incubations. Information regarding topics like hard forks helps people become more familiar with key blockchain concepts and thus able to adopt the technology.
Keep up with our activities in blockchain development through our website and social media channels:
LinkedIn: Infinity Blockchain Labs
Contact: Nicole Nguyen PR@blockchainlabs.asia
Association of British Insurers, September 2012, No Hiding Place – Insurance Fraud Exposed;
McKinsey & Company, July 2016, Blockchain in insurance – opportunity or threat?;
Deloitte, 2016, Blockchain applications in insurance.