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Reducing value chain inefficiencies: insurance use cases
The document discusses the Corda platform and its application in the insurance industry, focusing on reducing inefficiencies in value chains through blockchain technology. It highlights the history and features of Corda, along with specific challenges faced in various insurance sectors including property & casualty, reinsurance, and life insurance. Additionally, it outlines current applications, consortium collaborations, and future developments projected for the blockchain insurance ecosystem.
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Reducing value chain inefficiencies: insurance use cases
- 1. CORDADAY BANGKOK 2018 THEFIRST CORDA EVENT IN THAILAND BLOCKCHAIN FOR ENTERPRISE
- 2. Reducing Value ChainInefficiencies: Insurance Use Cases Tom Menner Director, Solution Architecture for Asia Pacific
- 3. Introduction R3 is anenterprise software firm backed by a collaborative alliance of over 200 financial institutions, regulators, trade associations, professional services firms and technology companies developing on Corda, our blockchain platform designed specifically for businesses. Tom Menner Director of Solution Architecture for Asia Pacific [email protected] | @tmenner www.linkedin.com/in/tommenner
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- 5. Ethereum introduces smartcontracts Programmable Asset Restricted to Bitcoin Introduction of Smart Contracts
- 6. The shared controlof validated data
- 7. A brief historyof blockchain technology Altcoin rush Coin Protocols and Tokenization Attempt to move Ethereum to the enterprise 2009 Today Bitcoin Release Hyperledger Project 2015 Extends the concept in Bitcoin of decentralized storage to decentralized application R3 Consortium begins Corda open sourced The Network
- 8. Distributed ledgers andblockchain at a glance Cryptography to ensure identity authentication for each transaction Non-repudiation/immutability to preserve integrity of data and create an audit trail Smart contracts for the automatic execution of business logic when certain criteria are met Shared ledger so each participant sees the same view of the same data, updated in real time, subject to permissioning Distributed consensus to ensure the state of the ledger represents the agreed-upon truth of all stakeholders Ledgers Distributed Ledgers Blockchains Crypto- currencies Non-blockchains Industry ledgers
- 9. Introducing Corda Privacy Nodes shouldbe able to transact and have the assurance of validity and uniqueness but retain absolute privacy of the transaction history. Interoperability and Reuse Privacy should not come at the expense of interoperability of Corda nodes. Corda retains this privacy but allows any node to transact without creating islands of assets or liquidity issues. Smart Contracts Corda provides advanced smart contracts that are multi-asset and a workflow framework that spans organizations. Corda retains these characteristics but solves key challenges of blockchain
- 10. Where we arenow From projects to applications, members to partners • Corda 3.2 and Corda Enterprise 3.3 released, 4.0 by EOY • The Corda Network is nearing general availability • 50+ CorDapps that are currently in development • Several Insurance CorDapps already live across the globe • Over 200 partners connected including technology partners, systems integrators, consulting firms, and infrastructure providers
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- 12. Property & Casualty- Challenges Regulatory Requirements Data Acquisition & analysis Inefficiencies Litigation Risk Reactive Billing 6 5 4 3 2 1 Challenges Archaic billing systems, complex billing processes etc. leading to high reconciliation costs Extensive reliance on broker/ insured to provide underwriting data, advise of change in risk etc. to underwrite endorsements Risk of lawsuits due to ambiguity in loss conditions, assessment procedures, claim settlement delays etc. Stringent and dynamic regulatory requirements impacting several areas: non- renew decisions, claims assessment paperwork, changes in filed rates impacting in-flight policies etc. Inaccurate, disparate sources of data acquisition leading to long underwriting cycles (6+ months for complex products) & inaccurate risk profiling Inefficiencies and extensive manual intervention across transactions – contract placement, claims etc.
- 13. Reinsurance - Challenges Regulatory Requirements Dataacquisition Contract Placement Litigation Risk Claims Settlement Pay-out Calculations 6 5 4 3 2 1 Challenges Archaic billing systems & complex billing processes for certain types of reinsurance policies (e.g. proportional reinsurance) leading to high reconciliation costs Complex claims settlement procedures based on type of reinsurance policy ranging from straightforward claims to complex claims settlement procedures (for example risk attaching) Risk of lawsuits due to ambiguity in loss conditions, assessment procedures, claim settlement delays etc. Stringent and dynamic regulatory requirements impacting several areas: non- renew decisions, claims assessment paperwork, changes in filed rates impacting in-flight policies etc. Disparate sources of data acquisition leading to long underwriting cycles for complex types of reinsurance policies Inefficiencies and extensive manual intervention across the contract placement life cycle
- 14. Life Insurance andAnnuities - Challenges Regulatory responsibilities Complex underwriting processes Time consuming checks Death Claims registration Data reconciliation Billing 6 5 4 3 2 1 Challenges Archaic billing systems that lead to inconsistencies & multiple bills for group life versus individual life products Extensive data reconciliation efforts between insurers and reinsurers a significant barrier to CFO cost management Frustrating, inefficient death claims registration process with extensive paperwork and coordination across multiple entities Regulations around timely payout of Defined Benefit/ Contribution plans and laws like ERISA if not followed can lead to extensive regulator imposed fines Complex underwriting processes which can take 6 to 8 weeks with 20% customer drop-out rate KYC verification process estimated to take 2 weeks while at 95% accuracy
- 15. Example: CordaInsure Broker Reinsurer PolicyRequest InsurerProposed Policy Policy Request Proposed Policy Primary Policy Reinsurance Contract Loss Oracle Loss Data Loss Data Process Description: 1. Broker initiates the policy placement process with the Insurer on the Corda ledger. 2. Insurer reviews the submission request and reaches out to the Treaty Reinsurer. 3. After completing negotiations; the primary policy between the Broker and Insurer is signed on by both parties and placed on the Corda ledger; a similar process takes place for the Reinsurance contract. 4. In the event of a loss, the Loss Oracle (ex. Property Claims Services) provides loss data to the Insurer and Reinsurer. 5. (Re)insurer initiates the claims payout process. Bank Premium Loss Payment Premium Future state policy placement and claims triage on the Corda DLT
- 16. Examples of currentinsurance apps on Corda B3i InsurWave ChainThat Blocksure RiskBlock Alliance Indian Insurer Consortium + Cognizant Italian Insurer Alliance + Capgemini Vesl CryptoBLK Reinsurance network of apps- natural catastrophe excess of loss as first use case Marine hull insurance Policy placement and technical accounting for reinsurance Policy placement and technical accounting for reinsurance Platform for insurance apps - notice of loss and parametric insurance first Policy data sharing Regional insurer consortium building quoting and binding solution Trade credit insurance platform Motor insurance platform Project Sibi (Internal) Worker’s compensation claims platform Project Ring of Rosies (Internal) Pandemic reinsurance platform CordaInsure (Internal) Policy placement and claims triage
- 17. Blockchain insurance consortiums •Began with: Achmea, Aegon, Ageas, Allianz, Generali, Hannover Re, Liberty Mutual Insurance, Munich Re, RGA, SCOR, Sompo Japan Nipponkoa Insurance, Swiss Re, Tokio Marine Holdings, XL Catlin and Zurich Insurance Group. • Since added: AIA, AIG, Aon, Chubb, Covéa, Everest Re, Gen Re, Guy Carpenter & Marsh, JLT Re, Leadway Assurance, LocalTapiola, Mapfre Re, Navigators, PartnerRe, QBE Re, SAHAM Assurance, Sava Re, Takaful Emarat, TigerRisk, Trust Re, UnipolSai and Willis Re • Began with: American Agricultural Insurance Company , American Family Insurance, Chubb, Erie Insurance, Farmers Insurance, The Hanover Insurance Group, Horace Mann Educators Corporation, Liberty Mutual Insurance, Marsh, Munich Reinsurance America, Inc., Nationwide Insurance, Ohio Mutual Insurance Group, Penn National Insurance, RCM&D, RenaissanceRe, State Automobile Mutual Insurance Company, United Educators, and USAA • Since added: Acuity Insurance, Amerisure Mutual Insurance Company, Assurant, BB&T Insurance Holdings, Inc., D. Francis Murphy Insurance Agency, Inc., EMC Insurance Companies, FHM Insurance Company, GEICO, State Farm, Travelers, TrueNorth Companies, and W.R. Berkley
- 18. Blockchain insurance consortiums •Developed a blockchain solution in India to facilitate cross-company data sharing, enabling insurers to reduce the risk of data breaches, fraud and money laundering, while delivering superior experience to customers through improved process efficiency, better record-keeping, and accelerated turnaround time • Members: Cognizant, SBI Life Insurance, Max Life Insurance, Canara HSBC OBC Life Insurance, Edelweiss Tokio Life, IDBI Federal Life Insurance, Birla Sun Life Insurance, HDFC Life, Kotak Life, Tata AIA Life, PNB MetLife, IndiaFirst Life Insurance, ICICI Prudential Life Insurance, Bharti AXA, Aegon Life, and SUD (Star Union Dai-ichi) Life Insurance • Initiative to optimize corporate risks quotation, negotiation and binding processes using blockchain technology • Members: Generali Global Corporate & Commercial Italy, AIG Italy, Unipolsai, AON, Willis Towers Watson, Capgemini Italy • Insurwave maritime insurance includes asset registration, settlements, ID management, interest management • Members: EY, Guardtime, Microsoft, Acord, Maersk, Willis Towers Watson, XL Catlin, MS Amlin
- 19. Insurance partner pipeline MVP/ Pilot Production/ Implementation POC TrackingActively EngagedProspect Onboarded Partnership Maturity Path to ProductionCurrently on radar, with potential to target. Leads to be qualified through formal team process. Qualification process complete and partners onboarded to network. Supporting early build to validate design. Supporting functionality testing by potential end users. Supporting deployment and go to market.
- 20. Getting started Technical Accounting &Settlement Proportional reinsurance premium and claims settlement on ledger Near Term (1-3 years) Focus on projects with a clear path to production that help in reducing costs and eliminating inefficiencies intra and inter organizations. Claims settlement for complex reinsurance policies ex. Risk- attaching / loss- occurring Trigger based invoicing Contract Placement Smart-contract based elementary claims triage for XOL Reinsurance Fact verification via Oracles and data providers for CAT Loss settlement Medium Term (3-5 years) As the ecosystem develops; the focus can shift to revenue generating opportunities as well as complex processes that involve regulators; while building the ecosystem for previous projects. Long Term (>5 years) These use cases will materialize as supporting technologies gain popularity and achieve economies of scale to support business innovation, new product launches etc. Smart-contract based auto-underwriting for simple reinsurance policies ex. Reinsurance treaty IoT based loss control Cash on ledger for instantaneous settlement Cross-asset contract placement and claims triage ex. Combining marine cargo and hull risks Regulator integration for Multinational Programs for tax calculations IoT based dynamic risk pricing Blockchain is a journey, not an event - start today with an eye on the future.
- 21. Summary • Blockchain solutionsare being developed and tested for a range of Insurance use cases • Policy administration • Payouts • Claims management and verification • New product and platform development • Record keeping • KYC and client onboarding • Digital cash, tokenized assets, loyalty rewards, etc. • In many cases consortiums are leading the way with research, including R3 itself • An easy way to educate and look for compelling use cases is to follow the consortiums and their projects, and even get involved
- 22. Next steps • Considerblockchain projects for insurance networks with multiple counterparties and in the service of new business models (e.g. loyalty & reward points, digital cash for liquidity, tokenization of assets, etc.) • R3 is not the only blockchain platform company, but it is certainly the most successful one in Insurance and is emerging as a de facto standard • Our head of insurance strategy Ryan Rugg (based in NYC) will be visiting Asia for 2 weeks beginning Oct 17 – we’re happy to schedule a meeting (schedule permitting) or a call. • Feel free to reach out to local AP contacts for more information: Carl Wegner, Managing Director, Head of Asia [email protected] Tom Menner, Director of Solution Architecture for AP [email protected] Sharon Yuen, Sales Lead for AP [email protected]
- 23. Partner CorDapp Stage/Planned Go-Live Use Case B3i Live 2018 Q4 Focused on building a platform to handle reinsurance contracts on a state of the art distributed ledger. 1st app slated to go live by end of 2018 covers the core functionality required to enable a distributed smart contract management system for Property Catastrophic Excess of Loss contract. Blocksure Live Insurance operating system built on Corda by leveraging Acord standards, focused on full life cycle insurance sales, administration and claims. First live transactions are focused on Commercial and General (broker) to place all lines of business in general insurance underwritten by the insurance group Covea Insurance. InsurWave Live World’s 1st marine insurance Blockchain platform leveraging Acord standards to support more than half a million automated ledger transactions & help manage risk for more than 1,000 commercial vehicles in Year 1 by connecting the end-to-end insurance supply chain over Corda. RiskBlock Live 2018 Q4 Focused on building a platform to handle primary insurance contract placement with the 1st use case on Proof of Insurance (POI) to provide means to transfer insurance information in real-time across parties to quickly identify uninsured/underinsured motorists. ChainThat Live 2018 Q4 Part of ChainThat’s integrated and modular Insurance Blockchain Framework (CT-IBF); ChainThat’s Insurance Accounting and Settlement solution provides management of insurance and reinsurance technical and financial accounting & supports ACORD Ruschlikon EBOT data standards. Vesl Live Trade credit insurance platform connecting borrowers, insurers and financiers into a single specialized marketplace where SMEs can access insurance and financing to facilitate pay per transaction scheme making it simple and more affordable to purchase trade credit insurance. Cognizant Live (Developing phase 2) Corda-based solution among the Life Insurance IT Leaders Forum (consortium of 13 life insurers in India) for sharing of key customer claims data in a self-sovereign model to reduce cost, fraudulent claims and ensure receiving party has latest customer data. Capgemini Live Industry consortium for the 1st Blockchain (Corda) based solution for the corporate insurance market in Italy to improve customer service in the risk assessment phase, manage and optimize negotiation and quotation times, for Property risks (with eventual expansion to other LOBs) . DigitalInsurance
- 24. CORDADAY BANGKOK 2018 THEFIRST CORDA EVENT IN THAILAND BLOCKCHAIN FOR ENTERPRISE