A 19-member consortium of life insurance companies
in India is looking at using blockchain technology to share customers’ medical records amongst each other — securely and with the consent of customers. There is also a plan to employ the technology to bring in effective fraud management. And the insurers have roped in IT firms IBM and Cognizant to help them build the solutions.
Blockchain, the newest buzzword in technology, is an encrypted digital database containing information (such as records of financial transactions) that can be simultaneously used and shared within a large network. It is this technology that India’s leading private insurance companies
such as SBI Life Insurance, Max Life Insurance, Birla Sun Life Insurance, HDFC Life, Kotak Life, Tata AIA Life and so on, are planning to use to share a customer’s medical records among themselves. The idea is that this will free customers from the hassle of having to provide insurance companies
with documents each time they renew or buy another policy. “Customers will have the biggest advantage as they don’t need to constantly give us this information,” said Anand Pejawar, President Operation, IT and International Business at SBI Life Insurance. “Further, it helps improve our underwriting of policies and understanding of risks.” “Insurers are still deciding what documents need to be uploaded pre-claim or post-claim. We have been asked if the solution will enable privacy and security of content,” said Jitan Chandnani, Blockchain Offerings and Engagement Leader at IBM India and South Asia, which is a technology partner in the project.
Once the Insurance Regulatory and Development Authority of India (IRDAI) approves the use of the technology and the system becomes operational, a customer who purchases a policy from Company A will have his medical records encrypted and digitally stored on the company's server. Thereafter, if the same customer purchases another product from Company B, his medical record can be shared as a transaction on the blockchain from A to B.
Each insurer will be assigned a member identification number on the blockchain. When a company sends a request for accessing a particular customer’s medical record, the customer will be sent a token through a one-time-password. The token, when given to company B, will allow company A to share the data on the blockchain. There will be 19 nodes or authorised insurance entities on the blockchain across companies as well as nodes with the Life Insurance Council and Insurance Information Bureau (IIB) — both semi regulatory bodies. Recently, the Irdai was given a demonstration of the technology, but it is still unclear if the apex insurance regulator will also be part of the blockchain. “We roped in the Insurance Information Bureau (IIB) and the Life Insurance Council so that they may eventually run the blockchain and use the data for their analysis. At the same time, they can have oversight as semi-regulatory bodies,” said Pejawar.
The blockchain is an extension of an earlier idea that the IIB had initiated through a software called Quest where the same information would be shared between insurers via excel files. But this process had several drawbacks such as the lack of security and the absence of a consent mechanism for customers.
The life insurance business in India is huge — as of March 2018, and barring the Life Insurance Corporation of India, there were 6.86 million active life insurance policies across 23 private players. According to data from the Irdai website, these 6.86 million policies cover the lives of over 125.6 million Indians, totalling ~593.14 billion in premium revenue.
Which brings one to the second-use case of blockchain: effective fraud management. This platform, distinct from the one on which the medical data will be shared, is being developed by Cognizant. Under this, each insurer will upload customers’ data related to all their policy holdings, the sum assured for, how many times they’ve been rejected when trying to buy a policy, and other information.
“If any company detects an anti-money laundering violation or realises that a customer has provided information to commit a fraud, this will be automatically updated into a central database accessible to other industry players,” said V Viswanand, Senior Director and Chief Operations Officer at Max Life Insurance. The centralised database will store data on customer frauds, which is a distinct feature of the Cognizant-based blockchain and not the medical records blockchain.
Each player has to know whether particular claims have been received and paid by other companies, and if the customer has been flagged for fraud or violations before. Pejawar said this information was never available from one source and companies would have to ask each other for it. Blockchain solves this gap in the claims management process. “Bogus claims and frauds will be automatically eliminated. This could help bring down compliance costs, and because the data on blockchain cannot be tampered with, insurance companies will be far more comfortable when underwriting policies,” he said.
Despite all the advantages of using blockchain, concerns about the security of the information and the reliability of the consent mechanism remain. “The potential challenges that the medical record part may face are in the areas of data privacy and customer consent. The regulator may have different views on storing medical records in a central database even with customer consent, and customers themselves may oppose it,” points out Viswanand.
After it is approved by Irdai, the platform is expected to take another year to become operational. Over the next three months, IBM will conduct pilot studies and launch a beta version. The companies say that they may look at reinsurance as one of the potential next-use cases for blockchain technology. And once the platform is scaled and proves useful, general insurers might take to it too.