insurance Archives

Can Blockchain Power Insurance Domain – Part 3?

Posted on February 28, 2017 | by [email protected]

In my previous post in the series – “Can Blockchain Power Insurance Domain”, I have elaborated two other potential markers that would require blokchain’s aid to make the insurance sector gain good traction on the data front. The markers described are purely related to the kind of data that would disrupt insurance sector and its capture and maintenance methods through blockchain and other technological advancements. However it doesn’t talk about how Blockchain can empower the operations and procedures involved directly in insurance proceedings. This last post would be completely dedicated to the same cause. Let’s look into how blockchain can transform the operating procedures of insurance domain:

Updated Distribution and Payment models:

Many global insurance providers are collaborating and developing alliances to identify new payment business models (like bitcoin and other cryptocurrencies),to efficiently handle data through a single global ledger. More efforts have been dedicated to increase automation to proactively capture risk data in contracts also offers new opportunities to build market knowledge. This in turn helps in streamlining payment methodologies suitable to the needs of the users. On top of that, at the least, Global insurers can cut down on the asset management costs, by reducing the hedging fees that they generally pay to protect themselves from the currency fluctuations that exposes them to risk in the international transactions.

Reinsurance:

Reinsurance has always been a hot topic in the insurance sector where, expiration of insurance period might require parties to renew their policy by manual process. For industries and for the insurance of automobiles, smart contracts can be designed that would diligently cut down the work that is put in by middle men in re-enabling the policy. Also when a particular insurer is seeking to offload an equal amount of risk to two separate insurers. A blockchain ledger can provide insight and notification if one of those reinsurers then tried to offload some of its portion to a subsidiary of the other reinsurer.

Hence we see that from detection of fraud claims to stream lining the data for exploratory analysis, Blockchain also weighs good on the process optimization front of insurance sector and has true potential to power it in the time to come.

Can Blockchain Power Insurance Domain – Part 2?

Posted on February 28, 2017 | by [email protected]

I have elaborated in the first piece of these series of posts, how insurance sector has been functioning in a legacy system. I outlined the various problems that have cropped up over time owing to the set process imbibed into the insurance sector, over a period of time. Majority of these problems are prevalent due to the Data discrepancy and bad data capture. These issues many a times affect the insurance sector on the compliance front and also lead to losses that amounts to 1-2% of the total revenue. Mere monitoring of these issues at times might prove out to be costy. Hence I was exploring into ways Blockchain can cut into insurance sector and increase efficiency. We have already dealt about Fraud Detection and Risk prevention in the previous post. Let’s look into further issues that are potentially dangerous and can be resolved using blockchain:

Claims prevention and management:

While big data, mobile and cloud based models are already being employed to store and process claims data, it becomes inadvertently important to make the system transparent. In the processing of Claims prevention itself, new data streams can enhance the risk selection process by utilizing local and external risk and coupling it by analytics. Under such cases, a distributed ledger can help both the insurers, customers and other parties to instantly access the updated relevant information. The use of data stream from mobile phones or sensors can adjust the claims submission, reduce loss adjuster cost and increase customer satisfaction.

In the same fashion, the combination of sensor, satellite, imagery, mobile technologies and blockchain could facilitate claims payments and rescue services when natural disasters occur.

Internet of Things (IoT) and Product Development:

The actuarial analytics are actually dependent heavily on the data presented by technological set ups. As more devices and objects are connected owing to the data packs available, a lot of data will be collected and stored over a period of time. This data will be valuable to insurers as they would seek support for their models with updated data from time to time. Hence blockchain comes into play for managing these volumes of data independently and facilitates its availability for all the parties involved.

Hence we can see in the above cases that Blockchain can actually become the backbone of insurance sector. Follow this space for the next and the final part on how blockchain can power insurance.

Can Blockchain really power insurance sector – Part 1?

Posted on February 27, 2017 | by [email protected]

Blockchain technology has been heralded as one of the most iconic technologies to emerge late 2000’s with numerous applications. It’s a technology that simplifies the existing legacy processes and boosts their performance delivering robust and secure results. Hence its disruptive nature has found applications in various sectors with firms willing to take a bet on using this product. It has already made its mark in supply chain, document sharing, authenticity verification, cross border transactions and post trade settlement analysis. Now according to major strategy firms, it also has the potential to disrupt one of the finest financial products. Let’s deep dive into how that can be possible:

Background:

Insurance is one of the world’s oldest and finest financial product with a market cap of $ 5 Trillion. It has been existent from 3rd BC practiced by Chinese and Babylonian traders to transfer risk so as to minimize losses. From then on, Insurance sector has undergone many changes and has reached an equilibrium system where the process of Insurance has become a reliable one. Despite these changes, the sector still has its own set of inherent problems that have proven to be detrimental to its smooth functioning. Major strategy firms have already explored the problems along with blockchain solutions. Let’s look into these problems one by one and see how blockchain would be helpful.

Fruad detection and risk prevention:

The major problem associated with the sector currently would be the false claims that surface owing to frauds. Blockchains ability to provide a public ledger across multiple parties, eliminates the potential for errors or fraudulent activities. A digital depository that is decentralized has the ability to independently verify the authenticity of the customers, their policies and transactions. Blockchain can keep a track of all the customer related activity and in a sense provide the customer journey right from the time of issuance of the policy to its claim.

Hence false or fraudulent claims can be eliminated as issuers will be able to identify duplicate transactions or those involving suspicious parties. Insurers have suffered with fraudulent claims especially in the US healthcare system which amounts to atleast 1-2% loss in total revenue every year. This can be attributed more to the gap or error in the patient level data and their prescriptions which affects medicare providers significantly.

I will talk more about how Blockchain can power insurance sector in the subsequent parts.

Bitcoin Exchanges can now be covered for Theft: Mitsui Sumitomo Insurance offering a unique policy

Posted on December 6, 2016 | by [email protected]

When there is a digital ecosystem that is minting money, there would be graded tech hackers attempting to steal it. Story of Bitcoin and Bitcoin related businesses are no different. Major exchanges are always prime targets of such thefts and even high level security might turn out to be futile. Few of the notable examples are Mt.Gox which caused the rapid downfall of Bitcoin and the very recent Bitfinex hack. Even though Bitfinex is trying its best to reimburse the victims of the hack, it gets difficult to build a trustworthy Bitcoin exchange with such events. It also gets difficult for exchanges to operate in full confidence. Trying to change this landscape, Mitsui Sumitomo is offering insurance to exchanges against thefts. Let’s look into the details of this policy:

History of insurances in cryptocurrency world:

A formerly existing wallet service named Elliptic Vault was probably the first ever insured bitcoin service. They launched in January 2014 and named Lloyd’s as their insurer. Unfortunately, Lloyds backed out of the deal, but the service was able to find another insurer, CBC insurance. Following this, the Great American Insurance Company offered the first official Bitcoin Insurance coverage policy to businesses. Later, bitcoin vault Xapo announced that they were using AMBest to insure their high-security vaults. Following year, Coinbase and BitGo made insurance protection a common feature in the largest bitcoin wallet services.

What Mitsui Sumitomo offers?

Mitsui Sumitomo is offering a unique policy for Bitcoin exchanges around the world. The plan’s total theft cover ranges from ten million yen (US$88,500) up to one billion yen (US$8.85 million). In addition to theft, it also covers loss from internal and external threats, including employee theft, mistakes, cyberattacks, and other unauthorized access. Additional to the recovery amount, the policy comes with a range of damage control and prevention services.

The plan’s announcement states:

“In order to prevent damage caused by cyber-attacks, targeted mail training and information leakage risk, we provide cyber risk countermeasure services such as security diagnosis and checklist for employees.”

First takers:

The new insurance product was developed in partnership with Japan’s largest exchange, Bitflyer. The exchange helped develop a policy that protects against losses at both the exchange and customer levels, and is the also the first policyholder. BitFlyer now accounts for an overwhelming 68 percent of the yen trading volume.