An Italian Commercial Insurance Blockchain Pilot

Here at Insureblocks we love hearing about interesting real-life insurance blockchain pilots. So we were very excited to hear about the launch of Generali’s quotation process blockchain pilot. To learn more about this pilot we had the great pleasure of having Marco Boni, Group Head of Operational Excellence & Transformation at Generali, who is “genetically in love with technology”, join us for a chat on Insureblocks to take us through the journey they went through in building this Italian commercial insurance blockchain pilot.

2 Minute Definition of Blockchain

Instead of blockchain, Marco preferred to define what is DLT (distributed ledger technology). Small note to remember is that blockchain is a type of DLT. DLT is a technology that allows the storage of information in a distributed way. You can write on this distributed database, in an encrypted immutable way, after reaching a consensus amongst the participants. This technology enables you to increase the trust between all parties within an industry.

As the data is visible, agreed and secure, you can leverage smart contracts, self-executing codes, to automate business rules.

Challenges of the Italian commercial insurance ecosystem

Marco refers to the Italian commercial insurance ecosystem as “Spaghetti Insurance” as it isn’t that evolved. Therefore, the steps for the placement of commercial risk is done through manual activities. Back and forth information flow between carriers and brokers is done by phone and unstructured emails which complicates the matter when you have to draw up a policy based on this kind of unstructured information. This requires you to chase all the relevant parties to try and rebuild the entire negotiation, for the structure of the policy, that is perfectly in line with the needs of the client.

This is a very inefficient process which increases the risk of misalignment when structuring a policy.

Market perspective solution

Generali tackled those challenges by taking a market perspective and a market cooperation approach. They started from a business pain point that wasn’t connected to technology and realised that there existed problems that were shared at a market level.

They started by taking a market perspective approach by identifying the business pain points that were shared at a market level. This type of initiative and desire to solve those common problems together is within itself the biggest innovation they carried out over the last 2.5 years in the Italian market.

The initial founders of this initiative from the carrier side were Generali, AIG and UnipolSai with Zurich Italy recently joining the initiative. From the broker side the original founders were AON and Willis Tower Watson with Assiteca recently joining in.

 

Why was DLT selected over other more traditional technologies and what are the challenges with it?

Once the pain points had been identified in early 2016, the initial approach to resolving those problems was with traditional technologies such as centralised relational databases. However, with so many competitors sitting around the table it was quickly realised that such a solution wouldn’t be viable as it would require building a centralised infrastructure.

B3i: building a blockchain digital network of trust 

B3i, the blockchain insurance industry initiative, often comes up in episodes on Insureblocks. Greg Crow gave us an introduction to B3i in Episode 2 from an XL Catlin stand point. So we were very excited when we had the opportunity to talk to B3i’s CEO, Paul Meeusen.  In this exciting episode we discuss not only how blockchain can help build a digital network of trust but also hear about why B3i chose to replace the IBM Hyperledger Fabric with R3’s Corda to become their new blockchain platform.

 

2-minute definition of blockchain

Paul describes blockchain as a Cloud + +. What are the “+ +”? Cloud computing is about sharing. Sharing reinsurance contract needs to be done in a safe manner. Safety whilst sharing on the blockchain is secured through cryptography to safe guard data so that only the parties who are part of the contract can see it.

Another element of the “+ +” is the smart contract capability, which enable us to codify business rules for the sharing of value in an intelligent way.

 

B3i and its journey

B3i as a company, is only a few months old as it was recently incorporated in Switzerland. However, its journey started 2 years ago as a loosely held together joint venture. Initially as a group of 5, then 15 and then more insurance companies sharing their experience of blockchain. Early 2017 they built a blockchain prototype that became a minimum viable product (MVP) developed on IBM Hyperledger Fabric for a reinsurance application.

In the fall of 2017 they had a total of 36 market participants to market test the reinsurance prototype by simulating a range of CAT events. The positive results from this test formed the basis of B3i’s business plan to incorporate and raise funding from 13 insurance companies who became their funding shareholders. B3i is now raising a second round.

 

Paul Meeusen’s journey to blockchain

During one of Paul’s last role at Swiss Re, he was setting up a finance service centre in India.  Paul was stationed in India’s tech savy city, Bangalore. 3 years ago he tried to envisage the possibility of using blockchain for reinsurance processes by testing out its concept with his front line staff. They quickly realised that the technology could be used to reduce the inefficiencies around duplication and reconciliation.

Such a blockchain technology could bring all the brokers, reinsurers and primaries on a platform for working together and sharing data to make their lives easier.

Outside of the business environment Paul also noted that blockchain could be used for identity management and counter party management (eg. audit trail of provenance) in a country like India where proof of identity and of ownership is important where most information is stored on paper.

 

Blockchain providing peace of mind

In spite of having a laudable objective, insurance isn’t known for having a positive brand, or a positive customer experience as the likes of the ones of Silicon Valley. Paul makes the comment that “would you take your children to the broker...

Ep.14 – Blockchain use cases outside of insurance

For this week’s podcast we go out of the insurance world to explore some interesting blockchain use cases and pilots in other industries. In episode 6 we had Ryan Rugg introduce us to R3 the banking blockchain consortium. But for this one we wanted to go out a little bit further. As our guide for this journey we had the pleasure of having Lee Brenner, Chief Engagement Office at the Global Blockchain Business Council, live from Pennsylvania!

 

 

2 Minute Definition of Blockchain

Blockchain technology is a decentralised database that is connected together to create a permanent unchangeable record of data that is loaded onto blocks. Those individual blocks of data are connected to other blocks of data (ie. chained together) on this database. Blockchains act as global notary. Eliminates the middle man by creating a system of trust and a level of confidence between the actors on the system allowing for P2P transactions.

 

The Global Blockchain Business Council

The Global Blockchain Business Council (GBBC) came out of a meeting of thought leaders (blockchain, government and different industries) hosted by Richard Branson on Nectar Island to really think through how blockchain technology can affect civic society.

The idea of a global institution that unites individuals from the business community and from the blockchain community. The GBBC tries to advocate on behalf of the broader ecosystem to regulators around the world that if they try to regulate blockchain that it is done from an educated point of view.

Another aspect of the GBBC is engaging with government questions on who they should be talking to if either they want to get advice on blockchain or if they want to implement a blockchain solution such as on a land trust or a voting system for example. The GBBC can advice them on which companies can help government implement that whether it’s a startup or an enterprise. They can also share interesting case studies from the business world or from other countries.

The GBBC thus tries to build a broad network from the blockchain industry, the business world, to governments and regulators and to NGOs and charities.

 

Uses cases

Business Processes & Payments - BitPesa

A good example of how blockchain technology can be used in sectors outside of insurance is Bitpesa. Bitpesa tries to answer the question “how can we make financial transactions in Africa more efficient and secure?”. The current system is one were transactions are extremely slow, numerous intermediaries are involved, high costs and in general a very inefficient system.

Bitpesa created a blockchain solution that has built in data privacy, minimal fees and is mobile based thus providing the unbanked in Africa with financial solutions. This provides their customers the ability to make P2P transactions and regulators with automatic real time auditing.

 

Logistics & Supply Chain: Walmart

Walmart has started to use blockchain technology in their supply chain. An example of this was used for tracking pork from Chinese producers to the store front. Walmart wanted to track the origins of the meat and its location in transit along the supply chain. This process would usually take days but with blockchain it could be achieved in minutes.

Blockchain & Trade Finance

This week’s podcast is all about blockchain in trade finance. We were very lucky to have Marilyn Blattner-Hoyle, Head of Supply Chain and Trade Finance at AIG. In this episode she will share with us the pilot they ran with Standard Chartered and with TradeIX.

 

2 Minute Definition of Blockchain

Marilyn, approaches blockchain as a layman, so the way she looks at it, is blockchain is a form of distributed ledger technology, which simply put is a distributed database or ledger that can record and track transactions in a secure environment with optimal transparency. Cryptography underpins the way this is done.

The way AIG, and particularly Marilyn’s trade finance team look at blockchain is how it can be used to providing solutions to their clients by creating simpler ecosystems for allowing trade finance to occur.

 

What is trade finance?

Simply put, trade finance is the facilitation by banks, financial institutions and other funders to support sellers selling goods and services and buyers buying them. There are many different ways to do trade finance whether with receivables, payables, loans or traditional trade finance with instruments like letters of credit. All areas of trade finance are ripe for blockchain/DLT solutions as we have seen with many pilots. So the issues with centralized databases, legacy systems, and fragmented paper driven solutions and even with fraud make blockchain a great potential solution for this industry.

 

Hurdles with trade finance that blockchain can overcome

The reason blockchain and trade finance are natural partners is because much of trade finance is paper driven, fragmented, with different systems even within corporates, and certainly centralised databases that have a single point of failure.

For example, there is lots of paper-based invoice requirements. There are requirements for following different stages of an invoice life cycle and so there are lots of different data points that are super key for trade finance and so by being able to optimize all of those data points in a centralized place, where there's essentially one source of the truth; that's a game changer for the industry.

That’s something that the trade finance industry doesn't have right now and if it can be solved you can increase the trust between the parties. You can make it simpler to execute transactions at volume and then you can also add far more ecosystem participants such as corporates, banks and insurers.

But at the moment, that's all very difficult. So even within trade finance you have lots of corporates that use multiple banks to do lots of their different trade finance around the globe with lots of different systems for each jurisdiction and it's very difficult to merge those. By using blockchain or in fact even other forms of technology, such as even API's to be able to integrate legacy systems with something like a distributed ledger, that opens up opportunities that don't mean that you have to make full scale adoption a requirement now.

 

The first blockchain-enabled trade finance system

In October 2017, AIG launched its first blockchain-enabled trade finance system alongside Standard Chartered and TradeIX. The proposition is essentially based around a receivables finance deal where a large multinational corporate logistics client wanted to sell its receivalbes to Standard Chartered to give its core customers more time to pay. The reason blockchain was used was because the corporate wanted the capability to have a multi-bank structure as well as multiple insurers supporting the same.

Insurwave - A Maersk pilot for marine blockchain insurance

Too often in the insurance industry we entertain in navel gazing by looking at what we do and what our competitors do, instead of really focusing on who keeps our lights on… our customers. So, for this week’s podcast we look at a customer’s perspective of marine insurance by talking to Lars Henneberg, Head of Risk Management at the logistic and transportation giant Maersk.

Maersk is the pilot customer of a new marine blockchain insurance platform called Insurwave that was launched by EY, Guardtime, Microsoft, Willis Tower Watson, XL Catlin, MS Amlin and ACORD.

As a special treat I was joined by Marilyn Blattner-Hoyle, Head of Supply Chain and Trade Finance at AIG as my co-host.

 

2 minute definition of blockchain

For Lars, blockchain is a technology to share real time data. It gives perfect visibility to the participants. It can conduct a number of transactions simultaneously across a multiparty value chain.

 

What is marine insurance and how does it work?

Shipping has always been in the business of taking risks. As Lars says, “in shipping we like risks we just don’t like the burden of them which is why we come to insurers”. There are four type of risks that require marine insurance:

* hull and machinery of the vessel itself,

* container boxes,

* the cargo that is inside the container and

* all the liabilities that you can incur as a ship owner (Eg. pollution, damage to the cargo, or injures to the crew)

 

The marine insurance value chain and its challenges

The way that risk is transferred to the insurance market is very long and cumbersome. The distance between risk and capital is simply too long. You’re left with a very long value chain with too many intermediaries, that is very manual:

* A ship owner goes to a broker

* The broker goes to an insurer

* The insurer takes the risk and goes to another broker

* The broker finds a re-insurer who takes part of the risk

* The re-insurer goes to another broker to find a retrocession insurer

This value chain is very sequential and linear in how business operates with many frictional costs involved in it. As an example, for Maersk to insure one of its vessels it would typically take 100 document transactions and involve about 50 different stakeholders across the value chain.

There is a lack of transparency in such a value chain because a lot of information gets lost. Significant value leaks because all the intermediaries in the value chain take a portion of the premium as it goes through the value chain. For example up to 40% of the premium is transactional costs. This creates a level of dissatisfaction amongst insurers' customers as the system is antiquated, it is costly and inefficient.

 

Challenges within the marine industry

The lack of data is a big issue to the marine industry. No one has a holistic view of the risk because insurers have chopped up the risk in fragmented lines of business. Some insure the ports, some insure the vessels, some insure the finance but no one has a holistic view. At the same time there is no real time visibility to the participants in the value chain.

Overall it is a very fragmented,

Bonus episode - "Pulse" episode of blockchain in insurance

This is an exciting “Pulse” episode where we get a sense of what the insurance industry feels about Blockchain. In this episode I interviewed 12 delegates who attended the Blockchain for Insurance summit here in London on the 22ndand 23rdof June.

 

Each delegate was asked to answer two questions:

* Is Blockchain all hype?

* Is the insurance industry ready to embrace blockchain?

 

We would like to thank the following participants for participating to this “Pulse” episode, in order of appearance:

* Benoit Abeloos, Policy Officer, Blockchain, FinTech, Startups and Innovation at the European Commission

* Susan Holiday, Principal Insurance Specialist at IFC - International Finance Corporation

* Dante Disparte, Founder and CEO at Risk Cooperative / Co-Author Global Risk Agility and Decision Making

* Martijn Minkenberg, Dutch Association of Insurers

* Ruth Cameron-Errington, Deputy Global Claims Operations Manager at SCOR

* Mark Cook, Global CIO at Marsh

* Sylvain De Crom– Head of Research and Development at Aegon Blue Square Re

* Mark Simpson– Head of Consultancy at Armour Risk Management Limited

* Lee Brenner– Head of Partnerships & Marketing Strategy at the Global Blockchain Business Council

* Mark Nance– VP, Chief Data Officer at American Fidelity

* Michael Smith– Innovation consultant at American Family Insurance

* Cecilia Persson– Manager Underwriting & Risk Control

 

Have a listen to this episode and let us know what you think by writing your answers in the comments below:

* Is Blockchain all hype?

* Is the insurance industry ready to embrace blockchain?

 

Building a blockchain insurance ecosystem in Singapore

For this week’s Insureblock’s episode we headed to Singapore to meet an interesting startup, called Inmediate.io. which utilises blockchain and smart contracts. We had the pleasure of interviewing its CEO, Otbert de Jong and CTO, Nelius Strydom.

Inmediate is the first Singapore digital broker. They operate a b2C platform for retail insurance and operate a b2b insurance technology distribution business. They have specialised in building a connectivity platform with insurance companies by creating an API network that enables them to offer real time processing of insurance. Now they are aiming to build a new age ecosystem by utilising blockchain and smart contract technology where insurance can be sold in a quicker and more efficient manner.

 

2 Minute Definition of Blockchain

Blockchain is a digital wallet that allows you to store information and validate that information in a decentralised way.

The traditional model in cryptocurrencies is one that allows you to run digital wallets for customers to make payments. Inmediate takes that very model to the next level by enabling their digital wallets to enable insurance contract information and allowing them to run standard insurance contracts for customers. This removes the ambiguity around policies and contracts as everything is hard coded onto the blockchain. The smart contract then allows you to monitor triggers against the blockchain, which when any of them are affected they can have a predetermined outcome.

 

Why Singapore?

Otbert and his wife were living in Singapore and needed to purchase an insurance policy for their car. They found the traditional local experience in Singapore was very inefficient and along with Nelius they set out to modernise it.

Whilst Singapore is renown for big very tech savvy with a high penetration in mobile devices. Its insurance digital penetration is significantly lower, compared to Europe, resulting in much lower sales conversion.

For Nelius, this presents a large market opportunity that leverages that clear Asian big tech infrastructure and large market of mobile users into one that successfully purchases insurance policies online. The reason he believes this hasn’t yet happened is that the traditional online buying process isn’t where it should be, especially when you compare it to the one in Europe. Nelius and Otbert believe they can rectify that.

 

The Inmediate Ecosystem

Otbert believes that if they want to have a smart contract based blockchain insurance, they require to have  3 stake holders: insurance companies, distributors and customers.  These stake holders need to be able to work together in a unified way. Otbert and Nelius set themselves out to build a network in a similar manner that Visa has set up a payment network around a common set of standards. By getting these stake holders to agree to those common standards the participants can work together in a more efficient and easy manner to offer customers “smart insurance” presented in a unified way.

 

Why would insurance companies join the Inmediate Ecosystem?

The main benefit for insurance companies is in the cost savings. A smart contract based blockchain can completely transform the existing policy and claims process resulting in significantly lower administrative costs that traditionally supported those inefficient processes.

This new infrastructure openness up opportunities for insurance companies to develop new products for new markets in a more cost-effective manner.

 

Benefits for consumers

RiskBlock Alliance

This week’s Insureblock’s episode takes us to Pennsylvania, USA, where we had the chance to interview Christopher McDaniel,  President of the RiskBlock Alliance; an industry-led consortium that collaborates to unlock the potential of blockchain across the insurance industry.

 

2 Minute Definition of Blockchain

For Chris, there are three fundamentals to blockchain:

* Ubiquitous data – all data is synchronised between the participants behind the scenes.

* Immutable – data cannot be erased. It is a perfect audit trail with a one source of truce for the participants using the blockchain.

* Smart contracts – the capability of saying if a situation exists do something on the blockchain. It is a way of automating different processes that may exist on the blockchain.

 

What is the RiskBlock Alliance

The Institute is an organisation that has been around for a hundred years in the property and casualty space. It provides education and research in that space. 18 months ago, the board of the Institute tasked the RiskBlock Alliances with:

* Proof of concept - could blockchain be used in the insurance space

* Proof of collaboration - can we get competing firms to work together around a common goal

By June 2017, four proof of concepts were set up with over 40 insurance entities collaborating together, leading to the formation of the RiskBlock Alliance.

In Chris’ opinion, one of the smartest things that the RiskBlock Alliance did was instead of jumping into the deep end of the pool was taking 12 weeks to really define what the RiskBlock Alliance was going to be and what value it will bring to its members. They created a consortium of insurance carriers, reinsurance and brokers to build a blockchain framework with multiple use cases on top of it. The framework is really key, as it is the first truly enterprise friendly reusable blockchain framework.

 

Why use blockchain?

Prior to the RiskBlock Alliance one of the Institute’s members built a Proof of Concept for a compelling need in the insurance industry and tried to get the rest of their peers / competitors to join in. They received a lot of pushback from their competitors. RiskBlock being an independent trusted source was able to bring that exact same solution with the participation of all its members in the roll out of that particular use case. Blockchain is a “team sport”. If you are doing something that is individual to your organisation there are more likely better solutions out there than blockchain. However if you are looking to join together different entities and competitors and want to have them share information in an ubiquitous, secure and real time manner, then blockchain is the best solution for that.

 

Getting competing entities to work together

Everyone seems to think that they have the secret sauce. In one example of a use case need around subrogation – the process between 2 insurance firms who are involved in an auto accident (for example) with a need to negotiate a final financial settlement. Arbitration may be involved and it’s a very painful manual process. By creating a blockchain solution you can automate that process and create efficiencies for all parties. Effectively the way to getting competitors to work together is by ensuring that the value they get is greater than their competitive fears.

 

Building a truly digital process

80% of blockchain use case are in the efficiency area. 20% is in new products, new channels, new ways of doing things.

Blockchain’s disruptive potential

For this week’s Insureblock’s episode we were extremely lucky to catch up with Magda Ramada Sarasola, Senior Economist at Willis Towers Watson, to discuss the disruptive potential blockchain can have in the insurance industry both now and in the future.

 

2 minute definition of blockchain

Technically the definition is that it is a shared distributed ledger, whose core concepts are that it is a way for people that don't know each other and don't trust each other but need a way to transfer value between each other. A good example of that is Bitcoin – the first blockchain technology used for transferring value without anyone actually overseeing that market. For this to successfully happen you need three things:

* The value being transferred arrives to its intended recipient without it being intercepted or modified. This a role which has traditionally been occupied by clearing houses or trusted partners. In a blockchain world you don’t need them

* You have to make sure that whoever is sending that information or that value owns it and hasn’t spent it before to avoid double spending

* The transaction is considered valid between the two parties and is successfully recorded onto the blockchain

So to resume blockchain is a means of actually transacting value in a way that you know doesn’t require anyone to be providing trust in that system (ie. no central intermediary).

 

Your journey to blockchain

4 years ago, Magda was working on a micro-insurance project for a client looking to expand in Africa. At that point she came across blockchain as a concept and spent a whole week on YouTube videos trying to understand what it was and then convinced her editor to run a piece on it. 45,000 visits were reached within a week of publishing her article and Magda’s life changed overnight as did her role. Ever since that day Magda’s journey became one of increasingly learning about the technology, thinking about the impact it would have to the insurance industry and actually developing solutions for her clients.

 

Blockchain’s disruption potential – short to medium term

In the short term it is about traditional insurers exploring blockchain in the content of how they interact as an industry to enabling shared databases in a semi trusted or trust less type of system. The use cases we are seeing are looking at interaction among peers, interaction among competitors, synchronisation or self-synchronisation of databases. At increasing efficiency and driving down costs around things like reconciliation in a semi trusted environment.

However, the actual attributes that makes blockchain a sociological revolution aren’t being used in that context.  The same thing with smart contracts and how they are being explored in policies like marine insurance, supply chain management, and cat bonds, what we are doing is taking parametric insurance and using a very simple type of policy that we can automate and use a smart contract to automate that policy. Technically automation is something that doesn’t need the blockchain.

Magda sees the insurance industry using blockchain as an excuse to do automation that was long over due and that could have been done with other technologies. What a smart contract is automating is a relationship between two contracting parties that do not necessarily trust each other and have a conflict of interest and they agree on that contract and put it in a place where neither part can actually modify the terms. The first example of such an insurance policy was with the fight delay policy (eg.

Since 2016 we have seen a plethora of Proof of Concepts (PoC) in the insurance space. Some of these PoCs have moved up to the stage of becoming a Pilot. For this week’s episode I had the great pleasure of chatting to David Edwards, CEO at ChainThat and Ranvir Saggu, CEO at Blocksure to discuss building a blockchain PoC and/or pilot in the insurance industry. Both of their respective companies provide enterprise solutions using blockchain, DLT and smart contract to insurance companies.

 

2 Minute Definition of Blockchain

David - Blockchain in insurance is a group of technologies that enables us to transact between parties without having a centralised service provider. Promise of a shared process and what you see, I see.

For Ranvir, it’s a scalable technology that allows insurance partners to build network ecosystems. That can remove up to 30 – 50%of back-office costs, speed up processes and drastically improve the customer experience.

 

Why hasn’t blockchain happened yet?

The insurance industry is slow to adopt new technologies. 2017 was the year of demonstrations and proof of concepts whilst 2018 is the year of large consortiums coming out including the big 4 being involved in blockchain insurance.

Ranvir reminded us that it took at least 10 years for people to start realising the potential of the internet from the moment it started - "We have to remember that we are dealing with a nascent technology which we are trying to apply in a very regulated industry".

There are numerous hurdles that insurance companies have to overcome to be able to appreciate blockchain technology. Risk departments, compliance departments, claims and finance departments all have to learn how this technology can benefit them. This isn’t going to happen overnight but slowly and surely.

For David insurance companies have to work with their counterparties, potentially their competitors. It requires ecosystem to get these solutions off the ground, and that’s a challenge particularly relevant to the insurance industry. We have seen it with the challenges the London Market had in taking it of the ground. All counter-parties need to invest and be as enthusiastic about the project as each other.

 

Two years ago it made a lot of sense to go down the PoC phase as we weren’t quite sure what could be done with the technology and not many people had  experimented with it. But now there has been so many completed PoCs, so many papers and studies that there isn’t any more real need to prove the technology.

David - "So if you’re going to do something with Blockchain you should build a pilot, put some success criterias, with a mentality to get some value out of it instead of just getting a press release out."

For Ranvir it’s also about how you do the pilot. Understanding what is it we’re trying to do? It is recognising that there is a lot people with a vested interest, managing their P&L and their cost base. Lets try to do it in a low risk way. What is the lowest risk way for getting to a pilot. You got to have a commitment to take this out to market and when that happens and we see the technology working we will then see a snowball effect.

 

How do I convince my peers to adopt blockchain?

David – First we need to forget the terms DLT and blockchain and instead focus on the business value, the results it will bring to the business and what the savings will be.

Ravir – There are two ways of doing it. First thing the person has to realise what are the strategic aims of that business and the second is what can they do with blockchain?