Insureblocks

For this week’s episode, we spoke to Sandip Patel, Global Managing Director for insurance across IBM. Sandip refers to himself as a lifetime practitioner in the insurance industry having worked for PWC and Aetna and IBM within the insurance industry. In this special episode Sandip shares with us what are IBM's 2019 insurance predictions.

 

What is blockchain in under 2 minutes?

Sandip reminds us that practitioners in the insurance industry are painfully aware of the friction and the manual cycles that are involved in different insurance processes.

Blockchain is an operating system for establishing trust in the insurance trust. A shared replicated and permissioned ledger technology which allows any participant in the business network and the business process, that they are engaged in across different parties, to see these systems of records. It’s a single system of records, ledger of transactions, with consensus, prominence, immutability and finality.

Blockchain carries the following three characteristics:

* A level of transparency where transactions can be inspected by the relevant parties who have been granted explicit permission to view them.

* A distributed ledger where there is a single immutable prominence regarding where the data came from and where they were actioned. This provides a level trust through every transaction flow through the blockchain.

* A level of audit trail that exists where previous transactions can be confirmed as having happened providing a level of trust in the entirety of the transaction.

 

IBM’s 2019 Predictions

Sandip detailed out IBM’s 2019 insurance predictions around three key points:

* Data

* New Digital Ecosystems

* Customer and ecosystem interactions to create a differentiated brand

 

Data

Digital transformation in insurance: Data is the new natural resource

There is a fundamental shift in how we think of data. Where data is becoming the new natural resource, particularly in insurance from a few perspective:

* Volume of data: The nature of data is changing. The rate and pace at which data sets are evolving is growing exponentially. Data sets are going to keep growing to petabytes level and more with which the insurance industry is going to have to deal with.

* Type of data: The nature of data both structured and unstructured is fundamentally changing. 60 – 70% of the data sets such as from wearables, sensors, and drones, often referred to as unstructured data sets since most computers haven’t yet been exposed to such type of data sets.

* Temporal factor of data (relevance). There are data sets which are being created which loose relevance within a few nanoseconds of being created.

The shift requires insurers to fundamentally rethink how to think about data. Traditionally insurers have thrived and excelled in capturing, storing and owning large volumes of data about their customers, products, risk factors, historical events...etc. In the future there are going to be very relevant data sets such as sensor data which informs certain risk factors at the point of time they are created where the paradigm of data is going to be how quickly are you able to capture the data set at the point of creation and enable some decision making based on certain risk factors.

Competitive advantage in the insurance industry today is defined by an insurer’s ability to leverage all this data – structured, unstructured, owned, bought, rented, accessed on demand – and drive insights at scale to proactively find new customer segments,

This week’s episode is slightly different from the norm – it was recorded off the fly and in the moment as a fireside style discussion. Walid had the opportunity to speak to Timothy Dwyer and Michael Fulton from Nationwide. During this podcast, we get an overview of Nationwide,  discussed their perspective and lessons learnt on blockchain and its recent Proof of Insurance POC.

First a little about our guests:

Timothy Dwyer, Vice President & Assistant Treasurer to Nationwide, returns to our podcast to provide some further insight into blockchain from Nationwide’s perspective. Tim’s role at Nationwide covers banking, credit and debt finance.

Michael Futon, Associate VP Technology Innovation, makes his debut appearance. Michael is the representative for Nationwide at the RiskBlock Alliance.

 

What is blockchain?

Michael answers this question from an innovator’s perspective –

Blockchain allows participants to do things differently – its key properties are its decentralised nature and immutability.

 

How important is immutability?

Michael points out that it is difficult to find perfect use cases for blockchain. Walid posed an interesting question – wouldn’t tamper evidence in a system/solution be enough? Michael and Tim both agreed that in many use cases, it would be more practical to have a system that permits (but records) changes as mistakes are bound to happen!

Although many use cases do not warrant the need for immutability, some specific cases such as asset transfer do require immutability (to prevent fraud and other forms of charge-back scams.) In some cases, reversibility may in fact be a desirable property – as referenced to during the discussion, in 2016, we saw the hack of the (first) DAO (‘DAO’ is an acronym for a ‘Decentralised Autonomous Organization’, recall that recently Hugh Karp from Nexus Mutual made an appearance on Insureblocks with a guest post– the Nexus Mutual is an example of a DAO.)

Following the subsequent collapse of the DAO due to this hack, there was a hard fork on the Ethereum network – this split the network into ETH (Ethereum) and ETC (Ethereum Classic) – the hard fork represented a split in consensus - some parties wanted the DAO attack victims to be returned their money, but others did not. The DAO attack is an excellent example of the case where parties agree to “reverse” transactions on an otherwise immutable network.

As our speakers point out, immutability and irreversibility need not be mutually exclusive – take the example of storing your books of accounts on the blockchain. The standard practice in the accounting profession is to never delete an incorrect transaction but to make a rectifying entry – the same idea may be applied to a blockchain – errors made may be corrected in subsequent blocks with a reference to the block containing incorrect/inaccurate information.

 

An introduction to Nationwide

In this week’s episode we get an insight into how blockchain can enable ‘mutualisation’ and learn about social insurance from VouchForMe. Our guest is Matt Peterman, Founder, VouchForMe and InsurePal. Matt’s experience spans private equity and fraud detection in the insurance industry. It was roughly 3 years ago that Matt realized that ‘mutualisation’ in insurance was gone – this realization led to Matt co-founding InsurePal.

 

Breaking down the jargon

What is blockchain?

“Blockchain is a mechanism where we can send information and money at the same time through non-centralized institutions.”

Matt provides the example of Ethereum by highlighting that instead of sending money through Swift, people can now send money through a network for 25,000 miners (who form the Ethereum network) in a P2P (peer-to-peer) manner.

 

What is Ethereum?

“Ethereum is a software of the future (economy.)”

Matt makes a profound statement that Ethereum is ‘a software’ and not ‘the software’ i.e. it is still early days in the blockchain/crypto world and only time will tell which software (public blockchain) prevails and reaches mass adoption.

In this light, a recent article published on CoinDesk sheds some light onto why public blockchains are yet not suitable for enterprise needs. There are indications that the technology needs time to mature to become enterprise grade.

 

Permissioned blockchain v/s Ethereum (public blockchain)

Matt highlights that the Ethereum network is secured by over 25,000 nodes whereas a permissioned blockchain network implemented by a consortium might have as few as 4 or 5 nodes securing the network.

A node may be thought of as a point where information is confirmed, stored and validated.

 

The notion of ‘mutualisation’

From an underwriter’s perspective

From his experience in fraud detection, Matt recalls that there is a lot of opportunistic fraud and premium leakage in the insurance industry today. The Association of British Insurers concluded that there is one insurance scam roughly each minute!

At the point of underwriting, there are numerous scams such as prospective policyholders claiming they have a garage for their car, when, in-fact they do not. Insurance companies today are trying to fight fraud by using big data or by trying to link customer provided data with other data-points including social media (Facebook, Google etc.)

A mindset problem

Matt points out that people think of insurance as a necessary evil. In some cases, insurance companies are thought of as government-sponsored entities which can be ‘used’ to obtain money from time to time!

As Matt suggests, most people forget that these malicious activities increase the cost of claims which in-turn increases the premium charged to the end customers. In the UK alone (for FY 2016), insurance fraud cost the industry $1.3 billion and the industry spent $200 million trying to combat fraud. The origins of insurance can be traced back to Edward Lloyd’s coffeehouse where parties agreed to share risk (which reduces fraud) and it is this notion that VouchForMe is trying to bring back using blockchain.

 

‘VouchForMe’

The notion of 3rdparty underwriting

Traditional underwriting involves pricing using data ma...

For this week’s episode, we spoke to Arun Narayanan, Head of Data and Analytics at Ed. This episode provides an excellent insight into the specialty insurance market at Lloyd’s and how blockchain based solutions can streamline processes, generate savings and promote product innovation.

Ed Broking is a global wholesale insurance broker which is headquartered in London with offices in China, Dubai, Germany, and the USA.  Ed Broking provides clients with broking facilities for a wide-range of specialty business lines such as aerospace, marine cargo, construction and energy.

What is blockchain?

 “Blockchain is a distributed ledger that sits on a peer-to-peer network where transactions are validated by every other member in the network.”

After providing a technical definition of blockchain, Arun proceeds to explain the benefits and features of blockchain:

* Blockchain can improve data sharing – Each transaction stored on the distributed ledger must be validated and these transactions are visible to all parties with requisite permissions. Thus, blockchain can enable data sharing between parties that may potentially have conflict of interests (for example, insurers and reinsurers.)

* Blockchains are secure – Cryptography (cryptographic hashes) ensure that transactions once stored on chain cannot be tampered with – this makes the information in the blockchain secure and verifiable.

* Blockchain can generate savings – There is a large amount of manual work done in the Lloyd’s market today (especially in the specialty business lines). Smart contractscan help automate some of these tasks to save time and money.  At the same time, immutability and time-stamping in a blockchain provides a verifiable audit trail for regulatory or internal compliance processes, thereby generating even more savings.

 

Will blockchain disintermediate brokers?

At the start of this calendar year, there was a lot of discussion around the possibility that blockchain will disintermediate brokers entirely. However, over the past few months, this idea has been replaced by a notion that blockchain will enable brokers to focus on their core competencies – translating complex risks their clients face and bringing appropriate risks to the correct sources of capital (underwriters).

It goes without saying that automation may eat into some of the existing revenues of broker, but it is important to remember that blockchain, which may cause this revenue loss, will also reduce costs and create significant new product opportunities.

 

Brokers leading the charge in blockchain – is this counterintuitive?

Some examples of brokers playing an instrumental role in blockchain are:

* Marsh: In collaboration with IBM, ACORD and ISN, Marsh has launched a commercial Proof of Insurance solution on the IBM Hyperledger protocol. Extending this idea of proof of insurance, in October this year, Marsh collaborated with Evident to launch a

For this week’s episode, we spoke to Ashish Gupta, CEO of docprime.com and CTO of Policybazaar. This is our first time focusing on the Indian insurance ecosystem and Ashish provides an excellent insight into the $95 billion insurance market along with Policybazaar’s latest blockchain implementation. Indeed, an episode you cannot miss!

Policybazaar is India’s leading insurance aggregator which provides a platform for retail customers to purchase health, life and motor insurance. Currently, Policybazaar has control over roughly 80-85% of the insurance aggregator market in India and the platform transacts roughly 30-40% of all personal line’s insurance cover sold in India.

 

What is blockchain?

“Blockchain is a more secure and dispersed way of saving data.”

Ashish explains that in the Indian insurance market, data has been traditionally stored in servers – data is disjointed, there is a lack of transparency and a lack of trust during data exchange. Blockchain is resistant to change i.e. data is verified and parties can trust the data.  Furthermore, data can be allowed to communicate to unlock value.

 

Policybazaar and Blockchain

Recently, Policybazaar announced its partnership with Accrivis network– a data integration platform provider to implement blockchain solutions.

 

What problems can blockchain solve for Policybazaar?

Ashish begins by providing a quick overview of how Policybazaar enables insurance purchases – by virtue of being an aggregator, Policybazaar interacts extensively with its customers and typically makes the transaction on behalf of the customer. Traditionally, API’s together with databases would enable this transaction to flow from customers to Policybazaar’s payment and insurance partners.

“Data doesn't need to necessarily reside in two places; one of the big problems is data sanctity across data storage mechanisms.”

Ashish explains further by stating that Policybazaar has validations in place to check the customer’s name, age, email, phone number and other details. Similarly, its partners might have the same or a similar set of validations at their end too! This potentially leads to issues during data exchange and transfer.

Blockchain is an attractive proposition for Policybazaar since a platform can be set up jointly with its partners – ownership is shared by Policybazaar and its partners - thus, everyone in the network shares, sees and trust the same version of the truth. This reduces operational cost and speeds up response time to customer queries.

 

Merits of blockchain

“The duplication and maintenance of data becomes extremely expensive, painful and time-consuming. (Introduction of blockchain) makes these issues goes away.”

Ashish answered the difficult question of why blockchain v/s a centralized database by highlighting the key utility of blockchain in the insurance industry – Immutability. Since cryptographic hashes change if data is modified, blockchain prevents modification of data (a problem that often arises from Policybazaar’s experience.)

 

The current blockchain implementation

Presently, Policybazaar is exploring the application of blockchain for its payment mechanism and the reason for doing so is that Policybazaar is currently experimenting with offline payment mechanisms such as cash collection.

For this week’s episode, we had the opportunity to speak to Antonio Di Marzo, Product Owner - Commercial Insurance at B3i, at the B3i headquarters in Zurich. Antonio provides an excellent insight into B3i’s upcoming project – commercial insurance on the blockchain which was announced in September this year at the ‘Rendez-Vous de Septembre’. If you haven’t listened to the earlier News Flash episode regarding this announcement, now is a good time to do so!

Prior to his current role at B3i, Antonio spent over ten years at Generali Global Corporate and Commercial. During his time at Generali, he was involved in building a global platform and he feels deploying this platform across various countries was the biggest challenge he faced. Antonio brings this experience of leading digital transformation and dealing with different cultures to B3i.

 

What is blockchain?

“Blockchain is a catalyst (for industry); this technology is bringing people together, empowering people and enabling transformation.”

Antonio believes there is no set definition for blockchain because the technology is evolving rapidly. He compares blockchain today to the internet in the 1990’s – there is lack of clarity regarding a definition but there is a clear indication that the technology has the potential to increase customer satisfaction, increase industry profitability and increase insurance penetration.

“Blockchain has the potential to empower people to challenge the status quo. Insurance is an enabler for human beings.”

Antonio recognizes that insurance provides peace of mind, encourages constructive risk-taking and provides a cushion for the bad times. Furthermore, he believes blockchain can help increase insurance penetration. This sentiment is shared by many others at B3i  – Philipp Tölle, Co-Architect at B3i, was recently interviewed and he spoke along similar lines.

“Blockchain is bringing trust, integration and automation.”

Antonio stresses that prior to the advent of blockchain, participants in the insurance industry were working in silos.The breakthrough that blockchain has provided is a shift in the industry mindset towards working in ecosystems.

 

Foundations of B3i

The Lloyd's – B3i connect

“Lloyds is an example of success. However, it is not technology enabled, it is human being enabled.”

Following a question about Lloyds offering a (physical) insurance ecosystem, Antonio clarified his earlier statement about blockchain enabling ecosystems in the insurance industry.

Although he acknowledges that Lloyds has spread to various countries and it serves as an excellent model since all competitors behave in a similar way, he asserts that B3i wishes to build several ecosystems that are interconnected and allow easy integration of new ecosystems.

“What if we copy the Lloyds mindset and spread (the model) using a technology that can support such activity?”

 

Enter B3i

“(B3i was formed due to) the willingness to check if this technology (blockchain) was an enabler for the insurance industry.”

Antonio explains that that the founding members of B3i recognized that they all wanted to seriously explore what blockchain was capable of – hence, it was natural to join forces. Even though each founding member was capable of exploring bloc...

In this week’s episode we get an insight into blockchain from the perspective of Swiss Re and hear about the lessons learnt from their projects. Our guest is Jags Rao, Blockchain Workstream Lead, Finance Reinsurance at Swiss Re.  Having started out his career over 22 years ago as a software engineer working on a COBOL system, Jags has seen tremendous changes in technology – today he is a strong proponent of distributed computing and he is betting big on blockchain!

 

What is blockchain?

“(Blockchain is) a platform in which you can validate transactions, and this makes blockchain fascinating!”

According to Jags, blockchain consists of several components - a network, a protocol, and a distributed ledger. From the business perspective, blockchain permits virtual recording of economic transactions i.e. an exchange involving something of value – which could be a will, a deed or even a title license. From the technology perspective, it is an open-ended database which records transactions in an immutable fashion.

 

How did the blockchain journey begin?

Jags introduced blockchain to Swiss Re. However, his personal journey in exploring blockchain began by looking at Bitcoin. Jags realized that the technology underlying Bitcoin could be relevant to the enterprise world as it could solve some of the fundamental problems in the insurance industry.

“The insurance industry has been financially healthy, but operationally less efficient. This is partly due to multiple layers of counterparties in the insurance value chain.”

According to Jags, blockchain brings the promise of creating a common network to allow counterparties to track data driven interactions without needing to maintain their own systems. Blockchain will not help just one company but help the industry as a whole.

 

Blockchain in the insurance industry

Is blockchain a challenge, an opportunity or a threat?

“This (referring to the change driven by blockchain adoption) is a clear business model innovation opportunity for us (Swiss Re.)”

Jags acknowledges that innovation in the insurance industry today is being driven by the end customers of insurance – the change in customer demand makes it easy to bring about change in the industry.

Jags describes Swiss Re as a “risk knowledge company.” The key factors driving profit in insurance today are –

* Risk management

* Global diversification

* Informational asymmetry

Informational asymmetry in the value chain generates profits for participants. However, blockchain provides a common network where participants come together – thus reducing informational asymmetries.

This raises an interesting question – in an environment where blockchain is eliminating informational asymmetry, how should an incumbent react to maintain its leadership position?

Jags views this impact of blockchain as an opportunity to innovate with business models and not as a threat to the existence of (re)insures.

 

The network effect

“Collaboration is key; blockchain is an ecosystem solution.”

Jags asserts that Swiss Re does not consider blockchain as an internal process improvement tool but rather as a mechanism to engage with the ecosystem where a critical mass of players can be achieved. Highlighting that over 60 cooperatives have been formed that are relevant to the insurance business, Jags stresses that there is a need for team spirit and the ecosystem way is the only way forward.

Jags was asked about blockchain solutions in other industries – such as

In this week’s episode we will investigate how blockchain is being deployed in the healthcare and the health insurance industry. Our guest is Ahmed Abdulla, CEO & Founder of Digipharm. Prior to founding Digipharm, Ahmed was a Global Health Economist at Rosche and Research Associate at the University of Liverpool. In addition to his present role as CEO, Ahmed is a Blockchain expert in healthcare for the United Nations Economic Commission for Europe.

Blockchain in two minutes

According to Ahmed, blockchain is a collection of records – referred to as ‘blocks.’ Through cryptographic hashes, a block is linked to the previous block. This creates an open and distributed ledger, which is cryptographically secure, timestamped and immutable.

 

Digipharm and value-based healthcare

Digipharm began as a project a year and a half ago with a goal of becoming an independent third-party platform to implement value based healthcare which is the notion of paying for healthcare on the basis of the performance of the treatment or drug.

Ahmed explains that there are two major factors that prevent patients from accessing the best healthcare facilities.

1. Cost

Speaking from experience, Ahmed highlights that pharmaceutical companies spend millions in R&D activities for new drug development. Once a patent for a drug has been obtained, the pharmaceutical company must undergo the process of securing FDA or EMA approval. Hence, there is a short period of time between receipt of approval and expiry of the patent i.e. the company must recover its expenses and generate profit in a relatively short period of time.

As a result, the prices of new drugs are usually quite high – customers are unable to handle the ever-increasing cost of medical treatment and parties (such as the Government, insurance companies etc) struggle to meet these rising costs.

 

2. Uncertain medical outcomes

Approval for new drugs or treatments are given based on evidence collected during clinical studies. Thus, there is uncertainty of the performance of such drugs and treatments – this creates the need for a mechanism where performance data is tracked, and outcomes data is used to pay for healthcare.

As described by Ahmed, there is a misalignment of incentives of various stakeholders within the health economy. Customers and other payers (Governments and insurance companies) wish to reduce the rising cost of medical treatment and counter the uncertainty of the outcomes of medical treatments, pharmaceutical companies are forced to charge high prices to recover their investments into R&D and regulators are unable to lower standards to maintain safety.

 

Implementation of value-based healthcare

Does such a model exist?

“Value-based Health Care is a mature concept. It is not something that Digipharm has developed. The issue lies within its implementation.”

When asked if such a model can be implemented, he explained that the ‘outcomes’ of a treatment or drug which form the basis for determining payments under a value-based healthcare system can be quantified. In this regard, he gave some examples –

* For cancer related treatments,

For this week’s episode we had the pleasure to hear about the exciting blockchain work IBM does in the insurance industry and beyond. We very pleased to have Craig Bedell, Global Insurance Industry Executive, and Annap Derebail, Executive Architect Financial Services Sector from IBM, take us through IBM’s journey with Hyperledger Fabric and some interesting blockchain case studies.

 

Blockchain in 2 minutes

Annap

Annap chose to explain what is blockchain from an insurance perspective. The insurance industry operates within a network that involves brokers, service providers, regulators, advisory services, other insurance carries and reinsurers. They transact business across this network by exchanging assets that typically historically have been recorded in ledgers or systems of record by each party involved in these transactions.

As they compete with each other they don’t necessarily trust each other. The effect of this lack of trust is that when ledger’s mismatch for whatever reason, either due to error or incomplete updates, businesses would spend considerable time and resources to resolving these disputes or reconciling records.

Blockchain fundamentally brings a shared replicable ledger that records who owns what within a business network so that there are no disputes and records don’t have to be reconciled.

 

Craig

For Craig, blockchain is a technical platform for conducting transactions on a shared permanent ledger that records every aspect of every transaction between all associated parties. Don Tapscott, author of the blockchain revolution, refers to blockchain as being the second coming of the internet, the first internet being the internet of information and this second internet, blockchain, being the internet of value.

 

Hyperledger

Hyperledger was founded back in 2015 when a number of companies that were working on blockchain realised that they could achieve more by working together rather than separately. They came together with the aim of pooling resources in order to create open-source blockchain technology for anyone to use. The members put the governance under the foundation or guardianship of the Linux Foundation. The organisation now has over 230 member organisations from a wide variety of industries.

 

Three key principles, why insurers should consider Hyperledger

According to IBM, there are three key principles, why insurance companies should consider Hyperledger:

* Open source: the code is written in a reliable manner, has no vendor lock-in, resulting in high quality solutions

* Open governance: all technical decisions carried out within Hyperledger are made by a group of community elected developers.

* Open community: An open community concept which establishes enterprise friendly consistent handling of IP and this is done by adopting the Apache 2.0 license and the Creative Commons attribution 4.0 license for content.

Beyond these three key principles there are a set of design principles for enterprises: modularity, security, interoperability, availability of open APIs that enable ease of dealing with these sorts of Hyperledger blockchain frameworks.

 

IBM’s involvement in Hyperledger – Fabric

Hyperledger Fabric has a modular based platform for building distributed ledger so...

Welcome to another exciting episode of Insureblocks! Today we are joined by Stan Nazarenko and Karl Stanley who discuss how blockchain can enable seamless data transfer in the insurance industry.

Stan Nazarenko is the CEO of Piprate which is an InsurTech data sharing platform. Piprate aims to provide companies in the insurance and reinsurance space with a way to share data that creates trust, accountability and transparency.

Karl Stanley is an AVP at Technology Ventures for Renaissance Re. Renaissance Re is a global reinsurer specializing in writing P&C business which has been in existence for 25 years.  Technology Ventures at Renaissance Re is a combination of a Corporate VC arm and an innovation department – the objective of this function is to keep an eye on emerging technology, provide advice to the VC arm on technology investment and develop internal technology strategy for both the short and long term.

 

Blockchain in two minutes

Our guests were asked the customary Insureblocks question to share their perspective on what blockchain is and perhaps, what it means for the insurance industry.

According to Karl, from a non-technical perspective, blockchain is a shared and tamper-proof data store. From a technical perspective, it is a decentralised shared ledger which relies on distributed computing and asymmetric cryptography (public-private key pairing.) Distributed computing is important since the ledger is shared by all parties and replicated across all nodes in the network and cryptography maintains the security of the system. Explaining further how cryptography secures the system, Karl stated that since blocks are hashed, a change in data stored in a block results in a change in the hash which indicates that tampering of data has taken place!

Stan chose to provide a less technical and more business-oriented definition of blockchain. He stated that blockchain is a technology that allows a network of participants to agree on a single, shared and consistent state of the world. It also allows participants to update the state.

 

Some insight into Piprate

Insurance professionals are always looking for the most attractive risk. Precise and trusted data is required to understand risk. Today’s data sharing involves a combination of excel spreadsheets, emails, file shares etc. These methods of data sharing are not secure, not compliance friendly and pose the grave threat of cyber risk.

Piprate permits seamless data sharing by using data wallets -  a list of all data possessed by a member of the network. The goal is to help everyone along insurance value chain to get most comprehensive risk representation – thereby bringing risk closer to capital, permitting better pricing and facilitating precision underwriting.

 

Why did Piprate choose blockchain?

Stan was posed the question on do they really need a blockchain based system for the effective exchange of data between the parties along the value chain. In his view the challenge of using  APIs either to connect insurance players along the value chain or via centralized institutions is three fold:

* Who will hold the data? Will data be held by the firms’ respective authors? Will it be via a centralized party? If these firms get hacked, acquired, or go out of business will the data become inaccessible?