How blockchain helped Reliance General Insurance save INR 500 million in fraudulent claims

While CIOs from the BFSI sector are still mulling over the pros and cons of blockchain, Reliance General Insurance turned towards distributed ledger and the results are showing.

Vivek Zakarde
Reliance General Insurance / Filo / Getty Images

A battered and bruised BFSI sector witnessed banks lose INR 1.76 lakh crore in the last three years. The predicament extended to the insurance space as well – of the INR 70,000 crore paid, the General Insurance Council revealed that 10-12 percent of insurance claims were fraudulent.

In all fairness, it’s not just Indian insurance firms that are bleeding thousands of crores every year. The US Insurance Information Institute estimates about 10 percent of the industry’s incurred losses result from fraudulent insurance claims.

Now the prime reason for fraudulent insurance claims stems from transaction records being tampered with or manipulated.

Vivek Zakarde, Head of Business Intelligence, Data-ware & Analytics at Reliance General Insurance Company was quick to identify that validation is one of blockchain’s strongest suits, and therefore a perfect solution in the insurance space.

The blockchain deployment spearheaded by Zakarde gave the general insurance giant a highly reliable historical record of claims details which could be used to identify patterns of fraud.

As a result of the implementation, Reliance GI was able to save INR 49.63 crore – money that would otherwise be lost to fraudulent claims. Not just that, the company was also able to achieve a reduction in turnaround time amounting to 30.5 days.

What ailed the claims process?

Vivek Zakarde Vivek Zakarde

"Prior to the blockchain implementation, claimants could forge false documents and we found it nearly impossible to fully verify the rightfulness of claims or assess the severity."

-Vivek Zakarde, Head of Business Intelligence, Data-ware & Analytics, Reliance General Insurance

In addition to falsifying service claims, policyholders often attempt to file claims for ineligible dependents and withhold medical conditions.

Furthermore, it consumed a lot of time to gather the required information for verifying or settling an insurance claim. “The claims validation process takes a long time and relies completely on human judgment. We also discovered multiple claims requests were being filed on a single policy,” revealed Zakarde.

The insurance major also faced challenges stemming from a lack of transparency in asset tracking and creating unchangeable datasets.

So what makes blockchain the knight in shining armor?

Due to its decentralized nature, blockchain grants unparalleled immutability and transparency; it minimizes counterfeiting, double-booking, and making alterations in the contract is virtually impossible.

How blockchain turned things around at Reliance GI

In a nutshell, the blockchain deployment brought about a fundamental change in the way business was carried out – instead of each party keeping separate records that could be lost or altered, transactions can now be recorded permanently on a decentralized ledger.

Zakarde zeroed down on three key factors that helped Reliance GI save INR 50 crore and slash the turnaround time by 30 days:

  • Firstly, it minimized counterfeiting through digital certificates that would establish ownership,
  • It minimized double-booking (that’s processing multiple claims from the same vehicle accident), and
  • Blockchain made it virtually impossible to alter documents or contracts.

“Blockchain also helped us detect patterns of fraudulent behavior and verify the identity of claimants and policyholders,” he added.

1200x800 Vivek Zakarde, Reliance General Insurance

"With blockchain in place, users can check for counterfeit products, diverted or stolen goods, and fraudulent transactions. This makes fraud detection a whole lot easier."

Fraud detection is by no means a simple job. Products like electronics, luxury goods, and pharmaceuticals are labeled and their history and supply chain data is stored in the blockchain. With blockchain in place, users can check for counterfeit products, diverted or stolen goods, and fraudulent transactions, thus making fraud detection a whole lot easier.

Blockchain – a double-barreled blaster

It’s not just money Reliance GI was able to save with blockchain, it was also able to shave a significant amount of time off the claims process.

The traditional claims process – a long-winding, cumbersome procedure, without doubt, is essentially an 8-step process starting with the accident/incident and ending in claims settlement. With blockchain, the entire process is consolidated to just four steps.

Automatic data collection and reconciliation of claims in real-time eliminates the need for drawing up an initial contract with the parties involved. Additionally, the back-and-forth process of reviewing and verifying contract terms is also eliminated.

Zakarde revealed that with blockchain in place, Reliance GI was able to achieve a reduction in turnaround time totaling to an impressive 30.5 days.

Amidst the sense of uncertainty and numerous challenges faced by the BFSI sector today, industry initiatives like Bank-Chain, India's first blockchain consortium, can eventually help financial institutions save significant amounts of time and money, and that, most definitely, is a silver lining.

Related:

Copyright © 2019 IDG Communications, Inc.

Download: EMM vendor comparison chart 2019
  
Shop Tech Products at Amazon