Insureblocks

For today’s episode we are going to Munich with Bob Crozier, Head of Global Blockchain Centre of Competence at Allianz.

Bob shares his views on blockchain’s effect on the insurance industry and sheds some light on the Allianz approach to blockchain.

Blockchain in two minutes

A blockchain is a shared ledger record of transactions. When everyone in a network agrees a piece of information is correct, it is added to the ledger and the blockchain’s technology links each successive transaction to the previous one. The end result is an unbroken history of transactions that all parties can trust is correct.

 

Blockchain’s impact on the insurance industry

In August 2017 Bob wrote a blog post titled “how blockchain will impact insurance in 2017 and beyond”, where he examines how blockchain is changing how insurance companies operate on a fundamental level and the way insurers and customers relate in a shared economy.

This refers to the gradual change in which insurers realise that working together to solve common customer pain points requires rewriting the rules of business. Blockchain is the first time competitors have to work together to improve the industry and insurers have to learn to coexist in a world where the means of developing and delivering products or services, i.e. blockchain, require shared development and maintenance.

By working together Bob does not simply mean creating policies and exchanging risk, for which Lloyd’s of London already does a good job. Bob refers to solving more fundamental issues in the low value adding tasks that are a prerequisite for doing business. It is about solving common pain points and creating a customer-centric experience.

Bob’s post also introduces the concept of self-sovereign identity. Data privacy rules are increasingly granting more protection to consumers. Self-sovereign identity, therefore, refers to the way in which people can take control of their data and only give companies the data which is necessary for a product or service. This means that insurers will have to better calibrate the level of information required to provide a service, which will naturally lead to more customer-centric products and services. It is an opportunity for insurers to listen to customers and provide the services they want, in the right volume and in the right way.

If you are interested in Bob’s article, you can find it here.

 

Allianz and blockchain

Allianz is keen on experimenting with blockchain and Bob walks us through two recent projects.

 

1. Captive insurance blockchain

Captive insurance programmes, one of the most complicated aspects of commercial insurance, are established by multinational organisations which self-insure instead of purchasing insurance. This entails creating their own self-insurance program which pools together selected assets and insurance exposures from their global operations. They collect premiums from each operating company and pay out claims internationally as they arise. Due to the complexity of self-insuring, captive insurance companies use an insurer to effectively administer the program. Allianz is one of those insurers, having partnered with captive insurance companies to provide administration and compliance services utilising its international network.

Blockchain is integral in making this task simpler. The blockchain network automatically connects all the parties in the programme, including the captive management,

For today’s episode we are going to Paris with Laurent Benichou, director of R&D at AXA. Laurent will introduce a famous blockchain case study called Fizzy, AXA’s blockchain flight delay insurance policy.

 

Blockchain in two minutes

A blockchain is a fully distributed database. This means it has no single point of failure and no central managing authority.

Blockchain’s technical characteristics, such as its immutability and cryptographic verification, create numerous convenient features including fast and easy payments, smart contracts and the ability to indefinitely store information.

 

Fizzy

Fizzy is a fully automated flight delay insurance policy that runs on the Ethereum blockchain and allows customers to get indemnified as soon as they arrive to their destination. The process is fully automated, with a smart contract deciding whether customers are eligible for indemnification. This means no action is required by eligible customers to claim their indemnity.

AXA fully supported Laurent’s idea. Deploying Fizzy, which began development in late 2015, was easy from an internal point of view. This is because AXA is aware of customer pain points regarding flight delay insurance:

* Coverage exclusions reduce customer satisfaction as they can lead to cases where the policyholder is unaware whether they are covered or not.

* Customers do not know when they will be compensated.

* Customers have to provide proof of delay. This is a cumbersome process involving contacting the airline to provide proof and sending it over to the insurer.

AXA was excited to create a product that efficiently deals with these challenges. Fizzy is very transparent with no claim forms, proof of delay or other paperwork involved. These issues are all automatically dealt by Fizzy, which notifies the customer that the policy has been purchased successfully, that it is stored on the blockchain and that compensation has been completed. In that way, AXA tries to create trust between itself and its policyholders.

If you would like to find out more about the process behind launching Fizzy, Laurent has written a blog post which you can find here.

 

Fizzy’s value proposition

Fizzy’s value proposition for AXA revolves around rebuilding trust in the insurance system.

 

1. Customer-centricity

Despite AXA being a party to the transaction, Fizzy will reinforce trust by ensuring total transparency in making policy payouts. As Laurent puts it, “it’s not the insurer, it’s the smart contract on the blockchain” that will decide whether the policyholder is eligible for indemnification.

This means that unlike traditional flight delay policies, where not every eligible policyholder asks for their indemnity due to the cumbersome process, Fizzy guarantees that every eligible policyholder will be compensated. Laurent is confident that customers will be willing to pay more for that guarantee, a necessary condition as paying every eligible customer  means the price will need to be adjusted to retain margins.

Having said that, Laurent is keeping the same margin for Fizzy as for other products (and perhaps even a lower margin for the first years). Fizzy is more about increasing customer-centricity than directly improving AXA’s profit line. In that way, AXA can build trust between themselves and their customers.

We cannot but notice how both Laurent and Stefan from

Today’s episode takes us to New York with Bill Pieroni, President and CEO of ACORD, the global data standard setting body for blockchain in the insurance and related financial services industry.

Bill shares his perspective about the importance of the uniform data standard provided by ACORD and the value of investing in blockchain and new technologies.

 

Blockchain in two minutes

A blockchain is a digitized, decentralized ledger of transactions.

The first step is a transaction request, such as a claim, contract or endorsement. This request goes over a peer-to-peer network and, after its validity is verified through cryptographic algorithms, it is combined into a new data block which is added to an existing blockchain, thereby completing the transaction.

In insurance, the peer-to-peer network can be comprised of insurers, reinsurers, brokers, independent agents, regulators or anyone with a vested interest in the insurance industry.

 

ACORD

ACORD is the global standard setting body in the insurance industry. It aims to bring together various stakeholders for whom collaborating would otherwise be difficult, either because they are competitors or because they lack the necessary infrastructure. For over forty years ACORD has been providing the infrastructure, facilitation and expertise to enable fast and accurate data interchange by creating electronic standards, standardised forms, taxonomies and tools. It boasts over 8,000 global members, with one third of all global premiums leveraging ACORD standards covering brokers, agents, carriers, reinsurers and solution providers.

 

 

With new technologies such as blockchain, IoT and usage-based insurance, data standards have become more important than ever. Investing in innovation runs a risk of becoming a one-off investment due to an inability to effectively leverage the technology. By setting a common data standard across the industry, ACORD helps lower the cost, risk and time associated with investing in innovation.

 

 

ACORD and blockchain

A great aspect of blockchain is that it requires a level of cooperation which brings together the stakeholders in the insurance industry. Operational efficiency is blockchain’s most popular feature. However, Bill reminds us of blockchain’s potential to enable the development of superior value propositions. Talented individuals across the insurance industry can work together to focus on meaningful differentiation rather than just thinking how to compete on price based on a specific set of data.

Following a proprietary approach to data standards would be a mistake. It would create barriers in the industry by limiting a product’s uptake and the the availability of vendors to develop innovative solutions.

Having a common data standard is therefore critical. It reduces risk and makes it easier for existing legacy platforms to adapt to blockchain. A common data standard does not only create a tactical advantage, ie cost reduction, it creates a strategic advantage as well. ACORD standards leverage much of the work done in the insurance industry in the past decades and share that with ACORD’s global network.

ACORD is involved in most, if not all, blockchain initiatives globally, either by helping develop their data standards or by directly leveraging ACORD standards as part of the initiative. Here at Insureblocks we have seen quite a few of these initiatives. Insurwave, B3i and R3’s

Welcome to another episode in ours News Flash series, where we share the latest developments in the blockchain space, straight off the press. Today we are joined again by Ranvir Saggu, who previously featured in Ep.8 – Building a Blockchain PoC/Pilot, and we welcome Bradley Brandon-Cross to Insureblocks for the first time.

Ranvir is CEO at Blocksure – a blockchain business specifically focussing on implementing blockchain in the insurance space, and is currently focussing on Blocksure OS, which is a platform set to revolutionise the insurance industry. He is a seasoned insurance executive with over 25 years in-depth experience across various composite insurers, with hands-on experience in delivering large transformational programmes at the highest level.

Bradley is Managing Director at Commercial & General– a small independent insurance broker which focuses on both commercial and consumer insurance lines. Bradley also has a wealth of experience in insurance, leading GE Capital’s primary insurance business in Europe and responsible for innovative products such as the first Shariah compliant insurance product authorised by the FSA.

Ranvir and his team at Blocksure have been developing Blocksure OS for 4 years, with 2 years in concept and 2 years spent on PoC and validation. Throughout the final year they were looking for pioneering brokers to partner with in designing an innovative concept product on their new platform. Bradley and his team at Commercial & General were instantly excited by the technology and the prospect of reducing costs and improving customer flow and beginning product development on their Blocksure OS platform.

The Product

Together with Covéa Insurance, Blocksure and Commercial & General are releasing Insure Now. Insure Now is a tenant’s policy targeted at millennials, where blockchain facilitates policy administration and premium collection with the entire insurance methodology built around the technology. It is the first insurance product in Europe which utilises blockchain and the first product to be built on the Blocksure OS platform, which uses a microservice architecture with R3’s corda platform at its core. The product is smartphone based, with an app controlling the interactions of the customer, catering for their every need through a simple user interface on their phone, a revolution in the paperwork heavy insurance world.

The blockchain engine allows secure and validated contracts in each part of the database which can be viewed in real-time by all parties, behind a web-enabled front end. Previous platforms utilised for tenant’s insurance have been plagued by issues with database integrity and data transferral between brokers and insurers, and third-party administrators. However, blockchain should alleviate some of the back-office costs by removing these issues and a huge amount of the administrative mess, ensuring that companies can focus on the customer experience. Real-time updates and automated functionality allow changes to policies to be administered with minimal fuss and within seconds, reducing cost and time and providing obvious benefits to the customer.

What challenges have been faced in blockchain adoption?

At Commercial & General, one of the main hurdles to overcome was understand...

This week we look at the exciting journey from Bitcoin to enterprise Blockchain with Burak Yetiskin, a director at Deloitte in Switzerland.

Burak, a former cryptologist turned strategy consultant, has been working in consultancy for nine years now. His last three years have been spent working exclusively on DLT and blockchain technology within the financial services and insurance sectors at Deloitte.

Blockchain in two minutes

Simply put, blockchain is the underlying technology of Bitcoin, where Bitcoin was the first application of distributed ledger technology (DLT) used for transactions, in the form of the first decentralized cryptocurrency.

Following from the first deployment of blockchain technology and the success of the first Bitcoin transactions, the technology is being scaled into something much greater than previously imagined. What was originally created to underlie an online currency is becoming a complete distributed solution, revolutionising global business and trade. This revolution is paired with a change in perception, as blockchain developed from ‘the technology behind bitcoin’ into a distributed ledger solution allowing the immutable agreement of facts, statements or contracts in the business world.

What is Blockchain? CNBC explains the break-though technology from CNBC.

How did the banks and governments react to Bitcoin initially?

Due to Bitcoin’s lack of central authority, it was and partially still is perceived to represent a shadow finance world, where the participants are unbound by regulations such AML, CTF and KYC, meaning governments had reason to be fearful. China’s move to ban access to cryptocurrency exchanges in addition to ICOs until clear regulatory requirements are introduced exemplifies this scepticism, with hopes that the volatility of the market can be regulated and protection measurements can be put in place.

The small-scale adoption of cryptocurrency worldwide does not threaten established institutions and governments; however, they’re increasingly realising the potential of bitcoin and also the underlying technology. A recent speech from Chinese President Xi Jingping outlined the value of blockchain to modern technological advancement, with Chinese Central Television stating that “the value of blockchain is 10 times that of the internet” in a recent show. This represents a significant U-turn in their standpoint on the technology. They are not alone in embracing blockchain, with numerous Proof of Concepts and pilots built using blockchain or DLT inspired technologies (see Ep.8 – Building a Blockchain PoC/Pilot), with cases of usable money transfer and trade finance platforms emerging recently from huge institutions such as Santander and HSBC.

 

The Bitcoin ‘hype’ of Q3 2017 – what triggered it?

The hype was fuelled by extreme market volatility,

Insurwave, the new marine insurance blockchain platform launched by EY, Guardtime, Microsoft, Willis Tower Watson, XL Catlin, MS Amlin and ACORD and piloted by Maersk has been a recurring theme here at Insureblocks.

In a previous episode, Insurwave - a Maersk pilot for marine blockchain insurance, we examined the client’s perspective. In a more recent episode, Insurwave: the complete story with EY, we discussed the process of creating Insurwave. To complete the circle, today we will look at Insurwave from an insurer’s perspective.

For today’s episode we were lucky enough to have two speakers, Madeline Bailey, Head of Strategic Initiatives at MS Amlin, and Hélène Stanway, Digital Leader at XL Catlin.

Blockchain in two minutes

Blockchain is a distributed ledger that allows users to share data in real time in a secure and immutable way. This data can be related to assets, for example the location of a vessel, or it can be a smart contract, a piece of code set to execute when a set of specified parameters is fulfilled.

Blockchain has the potential to create trust between parties in the insurance industry and improve risk intelligence, lowering costs and benefiting parties across the insurance value chain.

 

Why Insurwave?

In the past four years the marine insurance industry has experienced declining performance and increasing combined operating ratios. It has become necessary, therefore, to take a strategic look at the industry and consider how new technologies can improve efficiency. In building Insurwave, both MS Amlin and XL Catlin were willing to take a leadership position in the insurance industry and commit to a vision of how the industry is going to develop.

In an industry not known for embracing change, developing Insurwave came with challenges. Working alongside competitors and completely re-inventing the underwriting process is not something insurance companies have done before. However, every participant was keen to grasp an opportunity to cooperate with representatives across the value chain and consider what each needs out of an insurance transaction to re-imagine the underwriting process.

The low margins plaguing the insurance industry posed an additional challenge. Unlike usual, well defined projects, it is harder to quantify the costs and benefits of investing in innovation. For that reason it was important to have a clear set of goals with Insurwave. One of the main factors Insurwave has been successful is its focus on providing hull and war cover for its pilot with Maersk.

What insurwave does?

 

Insurwave’s effect

Insurwave allows parties to seamlessly share data between them. By combining blockchain with IoT data, parties have access to real time information. At the moment Insurwave provides over thirty data points per vessel. The aim is to get to fifty. Insurers get more data, get data of different types and get it in real time.

Up until now, insurers traditionally looked backwards to quantify risk. This means the insurance industry has yet to come up with a definitive an...

In one of our previous episode, Insurwave - a Maersk pilot for marine blockchain insurance, we introduced Insurwave, a new marine blockchain insurance platform launched by EY, Guardtime, Microsoft, Willis Tower Watson, XL Catlin, MS Amlin and ACORD and piloted by Maersk.

This week we are joined by Shaun Crawford, Global Insurance Sector Leader at EY and one of the founders of Insurwave. We will be discussing the complete story of Insurwave, from Proof of Concept to launch.

 

Blockchain in two minutes

A blockchain is a series of blocks of continuous records, where a previous block is effectively a cryptographic copy of the information from the preceding block. The blockchain is managed autonomously using a peer to peer network, meaning that the whole network will know if a peer makes a change to the blockchain. Therefore, everything has to be authenticated. This leads to a live, immutable audit trail.

 

Insurwave

Insurwave is the first product of Insurwave Ltd, a joint venture between EY and Guardtime, a blockchain company whose experience ranges from the NHS to the US Air Force. It is a blockchain platform linking the shipping industry with the brokers, the insurers and reinsurers. At the moment it is focused on providing hull and war cover.

Insurwave is built on the open source version of Corda (See Corda's latest announcement). The reason for this choice is that Corda is a very mature and privacy-focused blockchain. In other blockchains every peer has access to all the data on the blockchain. Insurwave, however, deals with sensitive company information and requires certain data to only be accessible by certain peers, making Corda the best choice.

 

Building Insurwave

Building Insurwave required looking beyond the insurance industry. Guardtime was chosen both for its expertise in blockchain and its range of experience. Gathering a group including shipping, insurance and technology leaders created a team capable of critically examining existing processes to build a new product from the ground up.

The first step in building Insurwave was to create a PoC. This revolved around ten use cases and considered how blockchain can improve efficiency and reduce costs. In doing that, it was always important for Insurwave to be a new proposition, a completely new business model, rather that a digitisation of existing processes. Insurwave has been an opportunity to re-imagine how the underwriting process would be in the future and how claims handling could become more efficient. The end result is that Insurwave can improve cost efficiency by at least 40 per cent.

As the insurance industry isn't particularly known for embracing change, building a completely new platform can be challenging. What made Insurwave feasible was having a small team. Having just one shipping company, one broker, an insurer and a reinsurer ensured that the team could examine all facets of the insurance industry while also remaining flexible.

 

Insurwave's potential

Creating an immutable audit trail and seamlessly sharing data between parties has the potential to improve existing practices in numerous ways.

 

1. Bring risk closer to capital

For shipping companies like Maersk, a major benefit of Insurwave is that it allows them to bring risk closer ...

Welcome to the first episode of our new News Flash series, where we share the latest developments in the blockchain space, straight off the press. In today’s episode we have Ryan Rugg, Global Head of Insurance at R3 and a regular speaker at Insureblocks.

R3, which featured in one of our previous episodes (R3 – The blockchain banking consortium) started in 2015 as a consortium of financial institutions that joined forces to test blockchain solutions. Three years later, their hard work has culminated in an exciting new project and we are proud to announce the release of Corda Enterprise to the insurance industry.

Corda Enterprise is R3’s commercial offering that brings greater enterprise capabilities to the Corda platform. It builds upon Corda’s functionality, enhancing availability, security and performance.

 

Corda

Corda, the blockchain created by R3, is the only blockchain that has been designed and built specifically for business. Corda’s focus on privacy, security and scalability distinguish it from other blockchains. Unlike Ethereum and Hyperledger Fabric, where all the information is shared between every node on the network, Corda shares information on a bilateral and multilateral level only with parties that need to see it.

This choice has certainly paid off as there are currently over 200 financial institutions, regulators, insurers, trade associations, professional services firms and ISVs that are working on Corda. Many of these have featured on Insureblocks, such as B3i, which replaced the IBM Hyperledger Fabric with Corda, Insurwave and RiskBlock.

Corda also appeals to industries beyond insurance. Fusion LenderComm, a syndicated lending platform and GuildOne’s Royalty Ledger, a blockchain solution for the oil and gas sector, both utilise Corda.

This wide participation across industries is the reason Corda is an open source project. R3 wanted Corda to be a decentralised and open environment where every company can work with others or create and share their own innovative solutions. Continuing in this spirit, Corda and Corda Enterprise are fully interoperable. Anyone can remain on Corda without procuring the Enterprise licence. Anyone can upgrade to Corda Enterprise and still work with applications on the Corda blockchain.

 

Why Corda Enterprise?

The whole idea of Corda is to enable businesses to transact directly and privately, reducing transaction costs and streamlining operations. However, many large users faced technical, regulatory and compliance issues that prevented them from using blockchain internally at scale. After listening to Corda members’ requests, R3 is launching Corda Enterprise and has implemented additional functionalities so that every business can benefit.

These extra features enhance security and make Corda Enterprise easier to scale:

* Blockchain Application Firewall - enables Corda Enterprise to be deployed inside corporate data centres while retaining the ability to securely communicate with other nodes on the netw...

Creating a decentralised insurance model with blockchain & smart contracts - Etherisc

This week we are taking a broader look on how blockchain can transform the insurance sector. Specifically, we will consider how blockchain and smart contracts can be used to create a decentralised insurance model.

With us we have Stephan Karpischek, co-founder of Etherisc. Etherisc is building decentralised insurance applications on the Ethereum blockchain. They began in 2016, pioneering a flight delay application utilising a public blockchain. Currently they are developing over 20 products and will soon release a product covering hurricane insurance for Puerto Rico.

Etherisc’s vision is much larger than simply developing its own applications. It is building an open and free protocol for decentralised insurance so that companies can develop their own insurance products using smart contracts.

 

Blockchain (and Ethereum) in two minutes

On a first level, a blockchain is a data structure. On a larger scale, blockchain is an experimental field where we can try and build new incentive schemes. It is an opportunity to re-evaluate how economic actors cooperate and make decisions. We can use blockchain to develop new financial instruments, and more generally a new financial system, that works better than the current financial industry and economic structure.

The Ethereum blockchain adds another infrastructure layer. At its core, Ethereum is meant to be an open space. Everyone can join the Ethereum network and develop their own applications and financial products. This means that Ethereum is supported by a large and diverse community of developers who make sure the blockchain rises up to any challenges it faces, such as cost of transactions. This makes Ethereum one of the most mature blockchains to tackle the decentralisation of the insurance industry.

 

The decentralised insurance model

1. The goal of decentralised insurance

So why should we decentralise insurance in the first place? In the current insurance model there is an asymmetrical relationship between the insured and the insurer. The insurance company manages both the risk pool and the pay-out. They are therefore incentivised against paying out claims, at the expense of the insured.

A decentralised model using blockchain offers a solution to this problem. Blockchain can be used to build automated systems that manage the risk pool just like an insurance company, minus the commercial incentive to withhold pay-out.

 

 2. Smart contracts as a public utility

A decentralised insurance model assumes that any company can provide their own insurance product. To achieve this, it is necessary to make the means of providing insurance easily accessible. Etherisc's solution to that is a smart contract that is freely available to copy and use. Anyone would be able to use this technology without requiring a licence.

As often happens with free software, funding can be an issue. Etherisc is using a token sale to fund this idea and has already raised enough money for a few developers to start work on this protocol. In the end, however, making smart contracts a public utility is a community project requiring the feedback and engagement of the developer community.

Bonus episode: diversity in blockchain

Ryan Rugg & Madeline Bailey on Insureblocks

As a man of mixed origins and as a father of two little daughters I am concerned by the lack of diversity that we find in blockchain and in the insurance space. To help me tackle this important issue I had the great pleasure to have Ryan Rugg (previously on Ep. 6 - R3 - the blockchain banking consortium), Head of North America for R3, and Madeline Bailey, Head of Strategic Initiatives at MS Amlin.

At MS Amlin, Madeline is head of strategy and innovation, charged with leading the blockchain efforts on the Insurwave platform, whilst Ryan spearheads the insurance effort at R3, working alongside other B3i collaborators on the Corda platform.

 

Is there a diversity problem in blockchain?

Between Ryan and Madeline, both recognised that diversity is vital for collaboration amongst teams and across the industry within such radical innovations such as blockchain. By ensuring that all individuals are heard equally, all perspectives can be included making the sector stronger. The collaborative nature is at the heart of blockchain’s use in insurance, where its purposes are to break down the barriers associated with different individuals and allow effective communication across all groups, with Madeline expressing her pleasure in collaborating with all involved parties whilst working on Insurwave.

Efforts to ensure diversity exist, with various internships targeting minorities and women in the financial sector, however Ryan also states her focus on mentoring start-ups helping to provide women with opportunities to succeed in InsureTech. Madeline joins her in these beliefs, aiming to provide more gateways for women into technology, whilst showcasing current female movers-and-shakers, such as Hélèn Stanway and Charlotte Halkett, in attempt to improve the female outreach for the industry.

 

The gender pay gap

Following on from a social experiment in Norway (where young boys and girls were asked to undertake an identical task and then given different size rewards), both Madeline and Ryan expressed the need for equal pay, with rates of pay based on skill sets rather than gender or race.

Ryan supported this by mentioning the sales force CEO, who analysed the pay across his whole company, and then levelled off the gender pay differential, costing him 3 million dollars in the process. He was then shocked to discover merely a year later, that the differential had reopened, calling for increased awareness for equality in the process. Whilst Madeline and Ryan both agreed with this statement, they also recognised the need for women in senior management rolls and conference positions to ensure that the richness of views is captured at all levels of business.

Equal opportunities

Whilst increasing female presence in senior management positions is important, education and support are also crucial in providing equal opportunities for wom...