Zimbabwe medical insurance players lament the high levels of fraudulent claims besetting the industry and there are fears this scourge will ultimately result in its collapse. In 2018 alone, it was revealed that a total of $160 million, which was paid out by medical insurance companies in the previous year, might have been based on fraudulent claims.
Similarly, the sensational story of three individuals who stole and burnt a corpse, which they then used to defraud Old Mutual, a life assurer highlight the extent of the problem. Such an act of desperation hurts insurance companies because they are forced to pay out more than they should.
No one really knows the exact figure of funds lost to fraud but it seems the $160 million is a conservative figure. The figure could higher now as the biting economic situation worsens.
At the same time, insurance clients gripe about the slow pace of processing claims and subsequent delays in releasing funds, something that inconveniences them.
This has been the reality for the country’s insurance community for many years now.
Genesis of the blockchain
However, a solution to this may have arrived from an unlikely source, the blockchain technology, which brought the much talked about Bitcoin to life.
When Bitcoin launched in 2009, few would have predicted that this privately issued currency would survive to this day. Bitcoin has remained resilient in the face of on-going attacks and sabotage by those confused or angered by its potential and growing popularity.
The Bitcoin cryptocurrency is seen by some as an answer to the problem of hyperinflation and currency debasement, a common occurrence for countries that use fiat currency.
When central banks print excess money or currency, the final effect is often seen in rising prices and/or currency depreciation. Bitcoin was created with a predetermined number of coins that will circulate, about 21 million to be precise.
As such, there can be no debate or confusion about the number of coins in circulation and this definitively makes Bitcoin a better alternative to fiat money. Nevertheless, that may not be enough assurance in a world where hackers roam about freely looking for new victims to attack.
Now part of the reason why Bitcoin has survived to this day could be traced back to the underlying technology which supports it—the Blockchain technology to be precise.
The Blockchain—or distributed ledger technology (DLT) as it is known—is a growing list of records, called blocks, which are linked using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. By design, a blockchain is resistant to modification of the data.
The Blockchain is sustained by tens of thousands of computers acting as verifiers of all data or new blocks that are added to the chain.
Indeed all computer networks are vulnerable to hacking or virus attacks. However, with the Blockchain it is not feasible for a hacker to attack thousands of decentralized nodes all at the same time. This means any change to data can only be validated if all nodes agree to the change. This is one of the features that make Bitcoin—the first product to utilize the Blockchain—remain the same eleven years on!
Governments adopting the technology
This feature also makes the blockchain a trusted platform that banks, governments, insurance and large corporations can adopt in order to enhance transparency and efficiency in their operations.
It is true that governments initially showed disdain towards crypto-currencies and the associated Blockchain because they felt threatened. However, there is now a growing realization that this technology is beneficial and has more use cases than previously thought.
Governments now realize that the blockchain can enhance transparency and accountability across its various different departments. For instance, it was announced that Ghana will be putting its land registry on the blockchain to end cases where the same piece of land is sold twice or to stop the circulation of counterfeit title documents.
Similarly, when a country’s budgetary process is put on a publicly distributed ledger, confidence in the government improves because people understand that this digital ledger will deny corruption opportunities to those accustomed to this practice.
Why insurance companies need the Blockchain
The Blockchain eliminates unnecessary costs as well as processes and as such it enhances operational efficiencies. This improved efficiency is of particular interest to insurance companies battling cases of insurance fraud, leakages and errors. Blockchain can be the solution to these problems.
Since the insurance business is based mostly on paper, it is inevitable that some of such important documents will be will be misplaced or get destroyed. When that happens, potential beneficiaries of insurance products will fail to claim what is due to them.
In the United States alone, it is estimated that there is some $7.4 billion in unclaimed life insurance money just lying there as a result of lost insurance documents. With blockchain-based smart contracts, this problem can now be addressed without hiring extra manpower to do the monotonous paperwork of tracing documents.
Funds can automatically and proactively be paid out based on news of a death of an insured person. In other words, the insurance company does not have to wait for the bereaving family to come forward with a claim.
When an insured person passes on, the need for the often cumbersome and unnecessary visits to different government offices to ‘verify’ the death will be eliminated. The blockchain will take care of everything!
The Blockchain defeats insurance fraud
The potential benefits of the blockchain extend to the medical insurance industry as well, which—as highlighted at the onset of this article—is reeling from fraudulent claims as well as accusations of negligence.
The storage of patient records on the blockchain, which is digitally accessible, and transparent means the chances of medical errors are reduced, medical professionals will not be forced to guess as information is readily available.
This means there will be fewer negligence lawsuits against medical institutions or professionals. This undoubtedly results in reduced user fees and ultimately lower monthly medical insurance premiums charged by insurance companies.
Just like what the technology would do with a life assurance business, blockchain smart contracts will enable claims to paid out quickly and automatically. When an insured patient is admitted into a hospital, treatment records will be added to the blockchain and the insurance company will pay out without the need to wait for the usual back and forth by the patient.
In fact, doctors and insurers alike will all see a massive efficiency boost as well as reduced costs if they all decide to employ the blockchain. Patients will only have to be concerned with getting treated.
The Blockchain pre-empts collusion
Motor vehicle insurance is another form of insurance that can benefit from the deployment of blockchain technology. It happens quite often, that some individuals will try to defraud insurance companies by making excessive claims, making claims over uninsured vehicles or falsifying documents just so they get paid.
With blockchain, this practice becomes much more difficult. For example, if a vehicle’s repair record is linked to the blockchain, new claims will be cross-referenced to previous claims, repairs, and even accident photos, making verification automatic and near-instantaneous. Suspicious claims will be flagged at this point.
On the other hand, panel beaters will be less inclined to connive with would be fraudsters by agreeing to inflate the cost of repair materials because there is a record of the prices on the blockchain.
Clearly there many more benefits to the insurance industry than we can list here. The blockchain is real and already global insurance giant like Lloyds are reportedly already using the blockchain. Zimbabwean insurance players must seriously consider this technology if they want to improve operational efficiencies or to boost profitability.