Reducing Human Error: The Promise Of Blockchain

Fraudulent claims continue to plague the global insurance market, but proponents of blockchain technology insist that a solution may soon be at hand. When implementation of these decentralized digital ledgers becomes widespread, some believe fraud could be reduced significantly. An estimated 5% to 10% of all insurance claims are fraudulent, costing U.S. non-health insurers more than $40 billion a year, according to a 2017 McKinsey & Company report, which suggested that “by serving as a cross-industry, distributed registry of external and customer data, blockchain can be used to identify fraud.” Indeed, a 2018 Boston Consulting Group (BCG) report predicted that an “all-blockchain” auto insurer could lower its total operating ratio by 10 to 13 points compared with a traditional carrier, two points of which would be from fraud detection alone.