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.
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.
What is the Current Claims Processing Method?
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.
In-House Claims Processing
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.
Reasons for Long Timelines for Dues Settlement
There are pre-defined time limits that need to be followed to ensure claim settlement within a specified duration. For example:
Policyholders need to inform the insurer 3 days before planned hospitalization.
For emergency hospitalization, the insurer needs to be notified within 24 hours of admission.
Reimbursement claims must be registered within 15 days of discharge from the hospital. Post-hospitalization claims need to be made within 2 months of discharge.
Here are some reasons why claim settlements get delayed:
Missing the Deadline
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.
Losing Policy Details
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.
Errors in the Claims Process
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.
Delays in Processing of Documents
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.
Blockchain Technology in Claims Processing
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:
The first part has transaction details like the value, time, and date of the transaction.
Details of participants involved in the transaction are recorded in the second part.
The third part helps create a unique identity for each block.
How Does Blockchain Improve Claims Processing?
Faster Claims Processing
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.
Elimination of Duplicate Payouts
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.
Enterprise blockchain reduces the incidence of fraud in insurance claims processing and ensures the faster settlement of claims. There is no middleman as in physical contracts, and both the insurer and the policyholder are accountable for following all regulations.
Blockchain is thus being adopted by insurance industries extensively.
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