In this modern, technologically progressed world, fraud is insurance companies' most significant financial threat. Insurers should therefore leave no stone unturned in developing fraud prevention methods. Furthermore, insurance companies must unquestionably take the initiative if they haven't executed cutting-edge fraud detection solutions.
While artificial intelligence and predictive analysis are the most favored technologies assisting the insurance sector in fraud management with machine learning algorithms to predict future occurrences, the industry is now moving toward exploring the possibilities of permissioned blockchain in fraud detection. But how can blockchain help the insurance sector?
Advanced blockchain technology is not confined to just Bitcoin, Ethereum, or any other crypto-currency. It includes diverse applications in different business domains such as healthcare, banking, and insurance.
In addition, an enterprise blockchain holds different characteristics that can assist the insurance sector in enhancing client assistance, improving the bottom line, and reducing costs while also helping them in fraud detection and management.
Let's explore how blockchain assists in fraud management in insurance.
Understanding the Application of Blockchain Technology in Insurance Fraud Management
During its initial days, blockchain technology was primarily employed for safe data repositories and transferring funds in crypto-currencies. Nevertheless, with the advancement of this technology, blockchain applications have now moved towards adopting highly advanced technologies like smart contracts.
A blockchain is a progressive structure of distributed ledger technology that can save records of every significant transaction in the interface accessible on different networks by different owners.
Given these highly-advanced features, blockchain has become a go-to technology in the insurance sector for fraud management. In addition, when insurance companies shift to blockchain technology, they get access to a highly-secured Hyperledger platform that cannot be changed due to blockchain's immutability, ultimately decreasing the chances of fraud.
Moreover, blockchain technology makes coordination much more effortless among insurance service providers. When administrators in the insurance company access the shared blockchain Hyperledger, they can instantly comprehend if a particular claim has been settled. They can quickly pinpoint distrustful conduct using the exact historical claims data.
Insurance companies currently employ publicly available information and data from private businesses to detect fraud. However, the issue with such information sets is that they are insufficient due to statutory regulations around sharing people's privately identifiable data.
This is where the adoption of blockchain can help overcome this problem and provide for better fraud management.
What are Some Benefits of Blockchain in Insurance Fraud Management?
There are two distinct benefits that blockchain offers to control fraud.
A blockchain's decentralized verification principally allows it to work in discredited circumstances. For example, it serves best when there is no agreement on who the insurance administrators should count on to handle the centralized database.
Next, data reproduction on the distributed ledger in the blockchain makes fraudulent activities immensely complex than in a centralized database.
Hence, it might not be wrong to say that the biggest benefit of modern blockchain technology is that with smart contract implementation, insurance companies can strive for transparent and trustless information exchange with other agencies if implemented correctly.
It will enormously improve the insurance industry's capability to battle private and commercial insurance fraud. Below are the key benefits of blockchain in fraud management:
Identity Management Assistance
Modern blockchain platforms allow insurance corporations to build and control identities and confidential data effectively.
For example, if any bad actor claims insurance benefits for a deceased individual, the insurance company can instantly access the list of death certificates held on the blockchain network to discredit such a claim.
Improved Decentralized Verification
Blockchain technologies can employ various agreements and blockchain algorithms to verify and validate insurance-related transactions and occurrences.
For instance, a smart contract will activate a suit if all nodes in the blockchain ledger verify a particular occurrence using the agreement mechanism.
Less Manual Involvement
Another effective implementation of blockchain technology is reducing human involvement in insurance claims settlement procedures.
In addition, insurance corporations cannot refuse payments if the claim submitted is genuine, as blockchain technology can automatically trigger payments if the submitted details match the required prerequisites.
Incorporating blockchain and smart contracts can considerably automate diverse necessary functions and procedures.
Better Asset and Property Management
Fraudulent jewelry claims are yet another major threat to insurance companies. However, with the adoption and implementation of blockchain technology, insurance companies can track properties and assets like diamonds directly from the mine to end customers.
Furthermore, it can reveal the (end-to-end encrypted) individuality and establishment of each commodity in the jewelry and property supply to all participants and reduce fraud.
Besides this, blockchain technology can also act as a medium to digitally publish, handle, and track information encrypted on the blockchain without any potential fraud risks.
Modern blockchain technology works wonders in ultimately reducing insurance-related fraud and helping insurance companies save considerable money.
Moreover, when incorporated with other technologies like IoT, smart contracts, artificial intelligence, and machine learning, blockchain can better control fraud. It is high time for the insurance industry to start leveraging its benefits.
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