Fraud has long been a persistent challenge for the insurance sector. However, the rise of artificial intelligence has generated optimism among insurers regarding the potential to significantly diminish fraudulent claims. Yet, there is another cutting-edge technology, underpinned by clean data, that could offer even greater benefits: blockchain, particularly through smart contracts. Envision blockchain as an advanced version of the familiar State Farm slogan, “Like a Good Neighbor.” With a foundation built on trust, blockchain can enhance the relationship between policyholders and insurers.
Utilizing Blockchain to Combat Fraud
In the context of smart contracts, each insurance transaction serves as an individual block in the chain. If a customer attempts to commit fraud, the insurer can implement a series of automated checks detailed within the smart contracts. These checks are programmed based on insights derived from AI and business intelligence tools that analyze fraud trends within publicly available insurance data.
The effectiveness of these automated checks hinges on the quality of transactional data insights. Enhanced automation can expedite the processing of legitimate claims while preventing fraudulent ones, potentially even faster than existing AI-driven methods. If a client decides to engage in fraudulent behavior, the insurer could swiftly respond by imposing fines or terminating coverage, thereby preserving the integrity of their blockchain network with minimal human oversight.
Innovating the Insurance Landscape with Trust Scores
This innovative framework for insurance could render specific insurers more appealing to clients. Imagine the establishment of a universal “trust” score within the industry that automatically evaluates the reliability of an insurer’s blockchain network. A higher trust score could translate into business advantages for those insurers. Moreover, this trust score could extend to policyholders. If an individual submits a fraudulent claim, rather than losing their insurance, their personal trust score would diminish, which, in turn, would influence their insurance premiums. This concept is akin to a FICO score, applicable to both insurers and insured parties, leveraging open-source data and blockchain technology.
A pertinent example of how blockchain can facilitate trust scoring is found in the food industry. A partnership between Walmart and IBM led to the creation of the Food Trust Solution, a blockchain initiative designed to track the origin and processing stages of food products. This blockchain maintains a comprehensive ledger of each step taken by food items throughout the supply chain, fostering transparency that encourages suppliers to provide fresher, safer, and higher-quality products.
The Advantages of Macro-Blockchain Frameworks
The transparent nature of blockchain could empower insurers to experiment with innovative coverage options for higher-risk scenarios involving trustworthy customers, such as those engaging in adventurous vacations. This automation might also enable insurers to focus on nurturing offline relationships with clients. Instead of abruptly severing ties with a customer who may have unknowingly submitted fraudulent information, insurers could take a more personal approach by contacting the individual to discuss the circumstances and offer them an opportunity to rectify the situation.
Additionally, insurers could introduce advisory services fueled by blockchain data insights. This proactive engagement would enable insurers to advise customers on how to avoid claim-triggering situations, fostering more intelligent and personalized dialogues backed by blockchain insights. This new approach could differentiate insurers by prioritizing strong interpersonal relationships over merely relying on advanced AI applications, thereby emphasizing the need for exceptional personnel alongside cutting-edge technology.
By adopting such an open-source blockchain framework, insurers can confidently navigate an environment where unpredictable natural disasters or man-made events seem increasingly frequent. Instead of retreating from specific regions or markets, insurers can develop specialized open-source blockchains tailored to particular areas, featuring enhanced oversight of third-party risk data, information regarding available resources for disaster recovery, and indicators of potential fraud. Such insights could facilitate the creation of custom parametric insurance policies, which could be activated during periods when specific risks are heightened.
Challenges to Overcome
Despite these promising advancements, significant challenges remain, particularly concerning how insurers perceive their relationships with employees and customers, along with their approach to implementing new technologies. While technology has undoubtedly streamlined many industries, it paradoxically seems to render the insurance sector more expansive and impersonal.
By leveraging blockchain technology and instituting trust scores for both insurers and insured individuals, the industry could reaffirm its commitment to maintaining personal relationships rather than simply competing with the latest technological trends. Contrary to the prevailing notion that automation eliminates intermediaries in the insurance field, this approach suggests that such automation could enhance and revitalize traditional roles that should persist instead of being rendered obsolete.
The essential elements for this transformation—data, advanced analytics, blockchain, and AI—are already in place. The real challenge lies in the insurance industry’s capacity to create not only a more efficient system but genuinely trustworthy and personalized interactions. Embracing these concepts could mark a significant step towards a more human-centric insurance landscape, fostering relationships built on integrity and reliability while effectively combating the challenges that lie ahead.
