Since the pandemic, digital transformation has been at the core of every industry. How has the insurance sector reacted to the disruption and what has been the impact?
Amit is the Head of Asia Pacific and is responsible for the growth and business performance in the region. He also leads R3’s strategy in APAC, including market entry strategy, pricing strategy & sales/partnership strategy. Amit is a business leader with 18 years of experience across strategy and operations, business development and commercial solution design. He is a seasoned professional in CxO engagement, stakeholder influencing, and has industry experience in digital payments and enterprise IT services. Prior to R3, Amit has held various senior business development & operations roles. He has worked at Visa as Digital Partnerships Lead, at PayPal as Head of Cross Border Trade for APAC region & Hewlett Packard as Head of Strategy and operations. Amit has also worked with The Boston Group, Google, and Wipro Technologies in the past. Amit holds an MBA in Strategic Management, Finance and Entrepreneurship from Chicago Booth and a B. Tech from IIT-BHU.
In an interaction with Shweta Papriwal, Editor, indiainfoline.com, Amit Ghosh, Head of Asia Pacific, R3 said,
"Blockchain is the ideal solution for the insurance industry to address the end-to-end issues facing insurers".
In India, the pandemic has drummed up awareness about the need for an insurance policy with a local industry player reporting a spike in the number of individuals who now believe that insurance is a necessity. To meet the growing demand for insurance, and to ensure business continuity in the midst of the pandemic, insurers have begun to digitise and adopt remote ways of working. Various steps have been taken by organisations, such as the adoption of digital communication and collaboration platforms to better handle policy services and claims processes.
The insurance sector in India has also seen a steady increase in the number of fraudulent claims over the past years. These include scenarios of staged incidents—such as an orchestrated fire in Hyderabad in May 2020 to claim insurance, and various motor vehicle incidents. Forensic science lab, Truth Labs, has also shared that the fraudulent claims received amounted to a total of a whopping Rs 350 crore from across the country. As a result, companies are now turning to emerging technology such as blockchain and AI to reduce the level of insurance fraud in the country.
There has been a tremendous increase in digital frauds since early 2020, with consistent issues in fraud detection and risk prevention in insurance. How can blockchain address these concerns?
Insurance fraud in India costs about Rs 40,000 crore annually, and comprises 8.5% of the total industry revenue. This massive loss in revenue has prompted Indian insurers to adopt measures to curb fraud. However, lack of information sharing now stands in the way of efforts to stop insurance fraud. Insurers have traditionally been resistant to information sharing due to competition, and concerns around data security, and choose not to share client details with one another. This causes a virtuous cycle, where fraudulent claims continue to take place. However, blockchain technology has the ability to reimagine the insurance industry and offer profound benefits for both insurers and consumers within the space. To give you an example, below are some ways blockchain technology can address fraud:
● Fraudulent claims can be detected automatically on the blockchain—pre-determined algorithms ensure fraud is detected objectively.
● Automatic sharing of standardised data allows for a quicker investigation process, reducing the time spent on compliance processes.
● Using a cryptographic technique called hashing, data resiliency is ensured while maintaining confidentiality. Hashing in blockchain is a technique that translates a piece of data into a unique “fingerprint”. A cryptographic hash is used to conduct quick comparisons of large data sets to verify that that data has not been altered.
Modern claims management is a complex process. How is R3 improving or simplifying it?
Blockchain is the ideal solution for the insurance industry to address the end-to-end issues facing insurers. The claim process is convoluted, with dated billing systems and processes resulting in high reconciliation costs, ambiguity in loss conditions and settlement delays. This creates high expense ratios for insurers. Distributed ledger and blockchain technology enable the entire insurance ecosystem to streamline operations and drive down operating costs.
Claims management is also a costly process for general insurers as it makes up the bulk of the insurers’ costs. This is due to the prevalence of paper claim forms, manual data processing, and presence of information silos spanning across multiple entities. With the use of blockchain, companies like Ledgertech have managed to enjoy greater efficiency and lower costs. Ledgertech leveraged R3’s Corda Enterprise platform to develop an insurance solution to handle the entire underwriting and claims process end-to-end. This insurance solution has been deployed by India’s major insurer, Bharti AXA, for their motor claims business. The result? Bharti AXA managed to slash overall motor claims management costs by 5%— from 15% to 20%, and drastically reduced the time taken to complete damage assessment of 50% of claims—from hours or days, to minutes.
What are the biggest challenges faced by microinsurance that blockchain/tech can solve?
Legacy placement, underwriting and claims processes have made microinsurance unfeasible as the associated costs would exceed the small premiums of such policies. These issues were often further complicate by middlemen, agents, co-operatives, and credit unions sitting between the insurer and the customer.
With blockchain, insurers are able to automate microinsurance processes end-to-end across the entire value chain, eradicating the need for middlemen—making microinsurance economically viable through the use of blockchain technology.
Blockchain has several recognised benefits in microinsurance:
● It can establish peer-to-peer confidence to improve transparency and accountability for communities living in remote regions of the world.
● Enable real-time payments to policyholders at viable prices—leading to greater customer experience and product feasibility.
● The virtual nature of payments makes geographical barriers meaningless and avoids governmental bureaucracy.
As an example, Blocksure has been successful in creating a scalable microinsurance solution using R3’s Corda, reducing policy processing costs at less than 25% of these small premiums.
Any business use cases on your work in this segment?
R3 works across sectors and provides a blockchain platform tailored for business needs. For the insurance or insurtech segment, we have been helping countless businesses overcome the challenges of legacy-based enterprise technology platforms. Some use cases can be found below:
● HCL Technologies: Developed on Corda, HCL launched BUILDINGBLOCK, a blockchain platform that focuses on processing insurance master policies across different platforms. The platform also ensures that all stakeholders have real-time visibility when it comes to any amendments and approvals. It reduces the turnaround time and establishes accountability and proof of records.
● Cognizant: Leading insurance providers such as ICICI Prudential Life Insurance, SBI Life Insurance, HDFC Life, Kotak Life, and Cognizant have developed a secure data-sharing blockchain solution which is built on Corda. Not only does this solution promote a culture of information sharing, it also enables insurers to reduce the risk of data breaches, fraud and money-laundering, while delivering superior experience to customers through improved process efficiency, better record-keeping, and accelerated turnaround time.
What insurtech trends do you foresee in India and APAC region?
As we head into the new normal, digital establishments are now perceived to be a safer alternative to brick and mortar operations, organisations are steadily pivoting toward the use of technology to ensure business continuity and the ability to efficiently serve customers remotely. Due to this, we have seen a greater adoption for insurtech solutions such as blockchain that are tailored for business needs. The demand is towards a platform that is interoperable, scalable, safe and cost efficient.
To thrive in the new normal, organisations have to ensure that their business processes are efficient and flexible. Information sharing and collaboration must occur in order for the industry to progress. For companies hoping to not only survive but thrive in this new world, blockchain is key to businesses to tide through disruptions and quickly adapt to the new normal—enabling industry leaders of tomorrow to make smart decisions, collaborate on global platforms, react quicker to market turbulence and changing consumer attitudes.
We are also seeing a greater demand for permissioned blockchain platforms over public platforms. Many organisations do not want their transaction details visible to everyone—including competitors— when using a public blockchain. As such, organisations are moving towards permissioned platforms, such as R3’s Corda, where entities must be pre approved before they can access information within the blockchain—instilling greater trust, transparency and efficiency.
We are also seeing a rising trend of adoption of technologies like blockchain in the government sector. The National Level Blockchain Framework announced by the Indian government recognises the importance and potential of blockchain for the development of shared infrastructure. The Centre of Excellence (CoE) set up by NIC with an objective to promote use and enable rapid adoption & on-boarding of Blockchain based solutions strengthens the reach of this technology.
Blockchain is the ideal solution for the insurance industry to address the end-to-end issues facing insurers.