Insurance claims processing remains slow and paper-heavy, frustrating both policyholders and insurers. Traditional workflows involve multiple intermediaries, redundant documentation, and manual verification — leading to delays, disputes, and operational friction. However, blockchain in claims processing in insurance offers a transformative alternative. By leveraging decentralized ledgers and automated smart contracts, insurers can streamline claims from submission to payout, improve trust among stakeholders, and reduce fraud.
With its decentralized ledger and immutable recordkeeping, blockchain offers the foundation for increased transparency, faster claims, stronger data security, and seamless collaboration. In this blog, we explore how this technology can benefit the entire health insurance lifecycle — from patient onboarding to claims settlement.
While most people are interested in getting themselves insured in both the life and general insurance domains, the extensive delays in the settlement of claims due to lapses on the part of the insurer and the claimant discourage them from getting insurance cover.
Blockchain is a decentralized digital ledger that records transactions chronologically and securely across multiple computers. These records — once written — cannot be altered or deleted, making them inherently tamper-proof.
Key features of the technology that make blockchain in health insurance so impactful:
This makes blockchain ideal for health insurance, where transparency, speed, and trust among stakeholders are essential.
According to reports, only 38% of insurers settled claims in 5 business days in 2019. The Insurance Regulatory and Development Authority has reported that claims related to COVID-19 amounting to ₹117 crores remain unsettled in India.
Currently, if a policyholder wants to make a claim, they either have to go through third-party administrators or directly approach the insurer's in-house claims department.
Third-party administrators or TPAs are only involved in health insurance claims, not life or other forms of general insurance, including car or home insurance.
Insurers outsource the claim processing of health-insurance policies to third-party administrators.
The policyholder or the primary insured has to contact the TPA if a claim has to be made. All claim-related documents like hospital bills and medical reports need to be submitted to the TPA.
These companies only accept documents on behalf of the insurers and are not responsible for accepting or rejecting claims.
Some insurers have their in-house claims settlement department (that policyholders need to approach or a HAT (Health Administration Team).
The processing time for insurers with their claim processing department is faster than those outsourcing the claims process to TPAs since the customer is directly dealing with the company.
However, TPAs are specialists, and they can provide better guidance to customers.
There are pre-defined time limits that need to be followed to ensure claim settlement within a specified duration. For example:
Here are some reasons why claim settlements get delayed:
If the claim is not filed within the given timeline, the claim settlement gets delayed.
Therefore, policyholders need to ensure that all claim documents are submitted either to the TPA or the in-house claims department on time.
While a hard copy of policy details should be preserved, there should be a soft copy of the policy with the policyholder to ensure seamless settlement of insurance claims.
The policyholder should keep copies of the policy with family members or insurance advisors so that the claim settlement is not delayed.
Some claims like cashless treatment require pre-authorization from the insurer. The policyholder should provide all the details of the primary insured along with the policy details.
The estimated hospitalization costs should be forwarded by the doctor to the insurer for approval.
Multiple documents are exchanged between the hospital and the insurance company, and either of them could delay sending or processing a document.
This leads to longer processing times for claim settlements.
To streamline the insurance claims process, enterprise blockchain is being used to automate the claims settlement process. The enterprise application connects blockchain accounts through smart contracts for higher security and faster transactions.
Blockchain applications need certain standards and infrastructure that are provided by Hyperledger, an open-source project. These permissioned blockchain ledgers help in improving the security, efficiency, and transparency of the insurance industry.
Since these ledgers are examples of permissioned blockchains, only users who have permission can access the distributed ledger. Users can only perform functions specified by the ledger administrator after providing the required identification through digital certification.
Decentralized and distributed permissioned ledgers in blockchain technology are used for keeping crypto-currency records. Since blockchain uses an open-source project, the transactions are free for the user.
Digital information is stored in three parts through blockchain:
Ethereum, a software platform using blockchain, has made the insurance claims process more efficient. Insurers can also utilize Hyperledger Fabric to automate and speed up the Know Your Customer (KYC) processes.
Normally, customers make claims either through a toll-free customer support number or a mobile app. Blockchain brings the insurer, claimant, and third parties together through a direct link.
There is direct uploading of all data, and an audit trail is created.
Double dipping or duplicate claims are a major challenge for the insurance industry. Blockchain ensures all players in the insurance industry share claim data.
Around 1% of claims are double-dipping frauds. Thanks to Blockchain's distributed ledger technology, duplicate transactions can be prevented. With the elimination of such frauds, claims can be processed faster.
Blockchain technology leads to higher transparency, and any deviation from the insurance contract protects the interest of the affected party.
The middleman in the traditional insurance process is eliminated. Both parties are accountable, and all insurance claims are tracked by smart contracts.
If the policyholder makes a false claim, the contract is dissolved, and all premiums are returned to the subscriber.
Q1. What does “blockchain in claims processing in insurance” mean?
A: It refers to using decentralized ledger technology to record, verify, and automate insurance claim workflows across all stakeholders.
Q2. How do smart contracts work in claims processing?
A: Smart contracts automatically validate claim conditions coded into the blockchain and trigger payouts when criteria are met.
Q3. Can blockchain really reduce insurance fraud?
A: Yes — shared immutable records make duplicate or false claims easy to detect and prevent.
Q4. Is blockchain secure for sensitive claims data?
A: Blockchain uses cryptographic encryption, making it highly resilient against tampering and unauthorized access.
Q5. What challenges exist for blockchain in claims processing?
A: Integration with legacy systems, regulatory acceptance of smart contracts, and scalability are common adoption hurdles.
Blockchain in claims processing in insurance is not just a buzzword — it’s a practical solution to longstanding industry inefficiencies. By enhancing transparency, automating manual tasks, reducing fraud, and improving customer experience, blockchain has the potential to reshape the future of insurance claims management. While adoption challenges remain, strategic implementation paired with regulatory engagement can unlock significant value for insurers and policyholders alike.
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