I’ve felt as an orphan child within the Daily Fintech family, at the end of the common table but the uncomfortable ‘outsider’ because the content I produced for publication was not Fintech or Blockchain oriented. The Insurtech content has always been embraced as an integral part of the blog, but like the student who does not quite know how to affix the sash on the uniform I have been feeling a little insecure.
Patrick Kelahan is a CX, engineering & insurance consultant, working with Insurers, Attorneys & Owners in his day job. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.
Hard to believe that lede? Should be, and is. My DF colleagues are experts in what they write of- finance, crypto, and by extension, Blockchain, and collegially embrace the InsurTech discussions. So not under any pressure to do so but having an intellectual and industry curiosity I figure it’s time to discuss insurance and Blockchain- unmixed oil and water, or tasty salad dressing? Blind dates or maybe life partners?
I am privileged to have insurance connections/colleagues who understand Blockchain and are willing to share perspectives, so I reached out to several for background and explanation. See, while I am no expert at Blockchain (BKCN), crypto, distributed ledgers, etc., I do understand the basics, and have yet to find a ‘tipping point’ application of the principle for insurance. One might figure if there was, a 5 trillion USD industry would have integrated the idea already. Instead, there are rumblings of the benefits of BCKCN but few projects at scale.
- Addenda, an insurance subrogation solution founded by CEO Walid Daniel Dib, and located in the U.A.E. Addenda has developed a BKCN alternative to what has always been a manual process fraught with delays and errors, subrogation of claim payments. The decentralized, trusted nature of BKCN lifts much of the existing barriers to efficient subrogation settlement through placement of immutable records of the loss that the parties can mutually access. With sufficient subscription by companies, is it possible the volume of liability arbitration would be reduced in other markets?
- B3i– a Property Catastrophe Excess of Loss Reinsurance application, with John Carolin at the helm as CEO. B3i is a vanguard of what might be commonplace for the insurance BKCN future- a Distributed Ledger Technology (DLT) that is owned by 18 insurance market participants, with active involvement by 40 insurance companies, shareholders, etc. As such the question of who supports the ledger financially is answered, who has participation rights, and how is the common ‘language’ or protocol of data insertion determined. As John states, placing reinsurance has traditionally been a very analog process, with the height of innovations being email communication of terms and bids. BKCN through B3i ‘democratizes’ the data, and access to the players, and encourages use of smart contracts with their basis being the set terms within the ledger. Can this democratization and sharing of costs be expanded to include other types of insurance, and a far broader community of permitted companies?
- Blockclaim, a BKCN innovator founded by Niels Thoné that has an aim of clarifying what is now fifty shades of gray (not that one!) that are generated by the many participants involved with insurance claims, and the volume of data that claims generate. Changing a cumbersome multi-lateral, manual/digital approach of claim handling to a permissioned ledger allows concurrent access to immutable claim facts for all involved parties, leading to less cumbersome (read as more prompt) claim handling. Can this principle also be broadened to include underwriting characteristics for insured property? One might think so with sufficient mutual ledger support across a spectrum of companies. (update as of 2/06/2020- am informed that Blockclaim pivoted in later 2019 from blockchain claim tech to an AI focus- will dig in for more info. However- every iteration of insurance and blockchain interaction- success or failure- is a meaningful learning)
- Ryskex, a “blockchain based ecosystem for alternative risk transfers”, championed by CEO and co-founder, Dr. Marcus Schmalbach. Ryskex stands for ‘risk exchange’, focusing on new forms of identified risk, and/or previously non-insurable risk in a B2B environment. The firm’s principle- if these unique risks are typically outside an indemnity risk prediction form, applying parametric principles to these risks, in conjunction with AI methods for determining indices and with trigger forms/indices stored within a ledger for transparency and ease of payment, BKCN can facilitate risk vehicles in less insurance traditional forms that capital markets are more apt to adopt. Can insurance evolve into a capital risk model and less of a peril/indemnity model? Dr. Marcus makes a case for it. In parallel with the risk model changes Marcus is supporting a soon to be released book with John Donald, “Heartbeat in the fog – Parametric Insurance for Intangible Assets”. While this second book of John’s has a focus on newer risks, e.g., cyber, its principles lend well to parametric and BKCN. And who am I to question its utility, as Dr. Marcus cites John as the “master mind” and “one of the smartest guys I ever met.” We won’t let Dr. Marcus kid us about being a smart person in the room; his upcoming journal publication that focuses on insurance of 2030 has a fascinating excerpt speaking of an insurer of the future:
“if you have sufficient capital at your disposal, you can be an insurer. Capitalism meets Anarchism- an ecosystem based on transparency and security of blockchain technology…because of a risk trading ecosystem instead of industrial insurance.”
An additional recent insurance blockchain success deserves mention- insurance startup Etherisc’s quasi-parametric project conducted with partner firms Aon and Oxfam- micro-policies for crop failures for Sri Lankan farmers. Not a direct parametric solution but a transparent form where the policy data and payment expectations resided within a blockchain ledger, and automatically triggered. Progress.
And are there firms working in the background to facilitate organizations’ migration to blockchain environments? Yes, of course. Global consulting firms are actively pursuing blockchain programs as are startups and independents. A US-based firm, Fluree, is actively developing data platforms for what they refer to as the ‘Fourth Industrial Revolution.’ In discussion with Kevin Doubleday, Marketing Communications Lead at the firm, Fluree (as do many companies) recognizes the traditional database structure of data, middleware, and now APIs is being overwhelmed by the volume and form of data and business processes driven by same. Many suggest that blockchain is not the ideal option for use in insurance claims processes due to the varied forms of and demands on data (thanks, Mica Cooper and Chris Frankland for that discussion), but as Kevin and I discussed perhaps considering eating the elephant one bite at a time by choosing insurance processes that would have narrow but meaningful applications, e.g., subrogation (as noted above), transparency and immutability that would facilitate anti-fraud efforts, or deed and title data repositories. Fluree is also focused on having a universal access format that will accommodate all users. Current users of Fluree’s services includes life insurance solution startup, Benekiva, whose co-founder and all-around smart tech person, Bobbie Shrivastav introduced me to Fluree. Quite a bilateral endorsement.
So, Blockchain and insurance, dating but not yet in a committed relationship. Seems we might be wise to plan a formal ceremony a few years from now when the relationship ‘learnings’ have been resolved.
And, perhaps now I can have a seat at the big blockchain table at DF. 😀
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