Blockchain solution. The problem of fraud can be solved using an industry-wide centralized repository of information, which will operate algorithms for the detection of chronic offenders, repeated statements, data inconsistencies and other signs of fraud. Similar solutions are already in place in other sectors, such as credit bureaus and multi-listing (MLS) real estate.
First successes (cases):
- Everledger. A distributed ledger in which the transaction history of diamonds is recorded for each individual stone, manufacturer, middleman, and buyer. Among other things, the platform allows you to check information about current and previous insurance claims. It helps to detect and prevent fraud, as well as to counteract such.
- OpenIDL (Оpen Insurance Data Link). IBM Blockchain-based network that provides efficient, secure, and permission-based statistics collection and sharing. Offers a secure and reliable blockchain-environment for storing data (about policies, insurance premiums and payments) and selectively sharing them with the American Insurance Services Association (AAIS) as an advisory organization and authorized statistical agent.
# 2 Claim Management and Treatment
Problem. Health insurance is a prime example of how mistakes and inefficiencies in the claims process lead to unnecessary and often excessive costs, which ultimately are reflected in
higher insurance premiums and an increased cost of medical services.
Thus, the 2017 Change Healthcare report found that 9% of health insurance claims are rejected, which is accompanied by appeals. Each appeal response leads to a cost of $ 118 per claim, or $ 8.6 billion in total administrative costs. These expenses are compensated by insurers by increasing the cost of insurance services.
Blockchain solution. The technology allows you to create a single version of the document of claims, the management and filling of which will be carried out automatically. This allows you to achieve effective management of relationships with the service provider, increase their transparency, speed and flexibility.
First successes (cases):
- Insurwave. Platform for insuring ships. Uses smart contracts to accompany all documents related to the maintenance of ship and cargo insurance processes. Insurwave is developed by Guardtime with the participation of EY, AP Møller-Maersk, Microsoft and the leaders of the insurance industry XL Catlin, Willis Towers Watson, ACORD and MS Amlin.
# 3 Customer identification
Problem. Brokers, insurers, reinsurers, banks and other participants in insurance operations must comply with the requirements of KYC (Know Your Client) to all of their counterparties. This is a procedure for the identification of the individual, which includes the collection of
personal data about the client, his property, health, social status and verification of his personality, which requires time, money and labor resources.
In the insurance industry, the KYC procedure must comply with global anti-money laundering standards that have put forward the Financial Action Task Force (FATF) and the International Monetary Fund (IMF), as well as local legislation, if any. There are no separate rules and standards for the KYC procedure in insurance, but usually it takes place in three stages:
- Customer Identification Program (CIP). The minimum CIP verification includes verification of the first and last name, date of birth, address and identification number. To do this, the user must provide several paper and / or digital documents: a passport, driver's license, social security card, electricity bills and other utilities.
- Customer Due Diligence (CDD). The audit should identify and confirm client objectives / actions, as well as assess the risk of money laundering and / or terrorist financing. Depending on the perceived risk, the check can take place in one of three scenarios: Simplified Due Diligence (SDD), Basic Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD).
- Current user monitoring. A program for continuous monitoring that tracks the relevance of the data, the status of the user and the compliance of the current level of risk prescribed in the insurance contract.
In some cases, after another routine check, it may be necessary to create a Suspicious Activity Report (SAR) if the user has violated the law, is behaving inadequately or is showing strange (atypical) activity.
Blockchain solution. Insurers can create or use an existing blockchain solution for KYC, where all documents are written to the distribution registry and encrypted using cryptography. Access to documents will be available only with the help of encryption keys (open and one-time closed) that are available to the client. Using these keys, the client will provide access to documents for a limited time sufficient to verify them.
This approach will allow users to retain full control over their data, which is important for complying with a number of laws relating to privacy and data protection. For example, the rules of the European "General Regulations on data protection" (GDPR). In addition, the transition to the blockchain will reduce the time and cost of KYC checks.
First successes (cases):
- Prototype PwC and Z/Yen. Solution to speed up the process of user identification. The network keeps records of customer documents and evidence of verification by the authority that issued them. It speeds up the procedure and enables the client to maintain control over personal data.
- IBM Blockchain Trusted Identity. Hyperledger Indy DLT based platform for personal identification in accordance with the standards of the Decentralized Identity Foundation (DIF) and the World Wide Web (W3C).
# 4 Reinsurance
Problem. Reinsurance allows
insurance companies to reduce their exposure to losses by transferring part of the risks to a reinsurer or a group of reinsurers. Due to this, the insurer can issue policies with higher limits and protect itself from excessive losses in case of major disasters: forest fires, hurricanes, tsunamis, earthquakes, financial crises, etc.
Under the current approach, the reinsurance transaction is processed manually and is determined by one-time contracts, which leads to difficulties, since each contract covers a partial risk or a specific event. Problems arise when an event occurs. It may take up to three months to make a decision on a contract. And if you consider that the insurer usually concludes a reinsurance contract with several companies, it becomes clear why reinsurance leads to an increase in premiums by 5−10%.
Blockchain solution. By the estimates of consulting company PricewaterhouseCoopers, the introduction of blockchain in the reinsurance process will reduce the associated costs by 15−25%, which for the industry will result in 5−10 billion dollars in savings. The main way to achieve savings is to use the blockchain's ledger, which will allow insurers to quickly and safely transfer information about insurance policies.
First successes (cases):
- iXLedger (formerly ICO InsureX). A solution developed by iX Technology Group for effective collaboration and data exchange between insurance providers and insurance agent networks throughout the insurance life cycle.
- B3i Services AG. Consortium, that belongs to 16 insurance companies. B3i develops standards, protocols and network infrastructure to eliminate friction when transferring risks in the reinsurance process.
# 5 Micro insurance
Problem. Microinsurance is the protection of people or low-income groups (up to $ 4 per day) from specific risks in exchange for the regular payment of insurance premiums, that is, insurance with micro-payments and low coverage. The main problem of microinsurance is that it is not available for those who really need it. Reliable
insurance providers are mainly located and operating in Europe, North America and East Asia. Whereas potential consumers of microinsurance are poor regions of India, Africa and Latin America.
Blockchain solution. Blockchain technologies can help bring together suppliers and consumers of microinsurance on one site, giving them the opportunity to enter into direct insurance transactions. Such platforms will facilitate simple, transparent and peer-to-peer contracts, as well as help circumvent corrupted bureaucracy.
First successes (cases):
- PAL Network. A startup from Singapore, created to provide insurance protection to people outside the countries of the first world, reducing the gap between consumers and insurance providers. The desktop version can be downloaded on Github, the PAL Wallet mobile app on Play Market.
- VouchForMe (formerly InsurePal). Social insurance platform that provides discounts to insurance company customers if there are guarantors. It is a combination of traditional insurance and P2P approval, backed by social proof of financial security.
- SafeShare. The solution is to formalize the insurance relationship between the parties that use a shared consumption economy. That is, to insure the transactions of one-day rental housing, real estate and equipment.
# 6 Peer to Peer Insurance
Problem. Peer-to-peer insurance is when people, instead of giving money to the
insurer, join together in groups (partnerships, communities), form a mutual aid fund from which insurance payments are made. Traditional P2P insurance involves transactions on a non-commercial basis. In 2015, this
market was estimated at 64 billion dollars, and it is estimated that by 2025 it will reach 1 trillion dollars.
