As customer expectations and operational challenges increase rapidly in the digital age, life insurance companies are embracing advanced technologies to improve claims management and offer speedy yet secure settlements.
The dual challenge of combating fraud and reducing turnaround times
As insurers increase the pace of digitalisation and shift to cloud-based processing, the biggest challenge facing them is the rising intensity and number of insurance frauds, often leading to debilitating financial losses and loss of trust amongst policyholders. Insurance frauds are also getting more elaborate, with insurance agents and healthcare service providers also prone to indulging in malpractices like diverting collected premiums and overcharging policyholders. This is in addition to false or inflated claims and application fraud, like medical nondisclosures or fraudulent disclosures at the time of issuance of policies and intimation of claims, both being perpetrated by policyholders and insurance agents and distributors to recover more money than what is applicable from insurance companies. Moreover, cases of identity fraud are on the rise, pushing insurers to implement AML/CFT policies to thwart fraud attempts. Still, manual fraud detection methods are not only cumbersome but are also time and resource-intensive, thereby adding a significant amount of delay during claims processing. To make matters worse, there are increased chances of human error in traditional fraud detection methods, with most efforts being reactive in nature and coming into play only after a fraud has been detected.
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Combating fraud and eliminating process inefficiencies with AI & Blockchain
In order to reduce manual effort spent in repetitive tasks and improve accuracy, insurers are increasingly implementing automation technologies in functions such as claims processing. These include Optical Character Recognition (OCR), Machine Learning (ML), and Artificial Intelligence (AI), with the latter helping insurers identify patterns and process large volumes of unstructured data with speed and precision. While OCR and ML technologies are used to identify and extract information from documents such as medical and accident reports, AI algorithms validate them and point out any issues or inaccuracies in real-time. As a result, potentially fraudulent claims can be detected early on during the claims processing stage and handled by a specialised team for a quick resolution.
However, despite these technological upgrades, insurers can still be susceptible to attacks and failures, warranting a move away from centralised systems to decentralized networks powered by blockchain technology. Promising utmost transparency and data immutability, blockchain networks are used to maintain a distributed database across several computers or nodes, relying on cryptographic techniques to link and protect each data block from external attacks. These blocks are nothing but ordered data records that contain a cryptographic hash and timestamp, making them tamper-proof and ideal for storing policy details and claim records permanently. What’s more, by virtue of the smart contract feature, tasks such as policy issuance and claims processing can be triggered based on the fulfilment of predefined criteria, helping insurers to reduce human involvement and slash turnaround times. That said, all stakeholders in the insurance process can audit the information trail at any time without altering them, making blockchain networks ideal for sharing information securely.
Enhancing risk management and exceeding customer expectations
By reimagining insurance processes through smart contracts, insurers are ushering in a new era of automated and seamless claims processing. When combined with AI and other automation technologies, insurers can verify claim information instantly by accessing blocks on a blockchain and provide instant claims processing for event-based scenarios with the help of smart contracts. Thus, AI and Blockchain are supporting insurers in doing away with non-productive manual procedures and replacing them with automated, inherently faster and more secure solutions, thereby leading to ever-improving customer service standards. While technological barriers may hamper efforts to realize the full potential of AI & Blockchain in insurance, increasing awareness and adoption levels are paving the way for a future of seamless insurance claims processing.
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Views expressed by Aditya Mall, Appointed Actuary, Future Generali India Life Insurance Company Ltd
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