On-chain insurance protocols can effectively prevent fraudulent liquidations by leveraging blockchain's transparency, immutability, and smart contracts. Claims are recorded on a tamper-proof ledger, ensuring data integrity and traceability. Smart contracts automate claim validation, enforcing predefined conditions and reducing human error or manipulation. Multi-signature mechanisms require consensus from all parties—policyholders, providers, and insurers—minimizing unauthorized claims. Real-time data sharing and audit trails enable quick detection of anomalies, such as double-dipping or phantom billing. By integrating AI and machine learning, protocols can analyze patterns to flag suspicious activities proactively. However, challenges like scalability, regulatory compliance, and data privacy must be addressed to ensure robust fraud prevention.