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Emerging Tech’s Role in Insurance Industry Reform

Insurance industry could transform with the help of emerging technologies.

The insurance industry has seen a meteoric rise for quite some time now. The growth of the multi-trillion industry is expected to surpass the growth of the global economy in 2018-19. While Bruce Springsteen’s vocal chords hold an insurance of USD 6 million, Julia Roberts’ killer smile is insured for a whopping USD 30 million which just goes to show that pretty much anything can have an insurance.

Even as global premium volume is increasing by leaps and bounds, like most other industries, the insurance industry has continued to grapple with several challenges all these years. As an attempt to revolutionize the space, disruptive technologies such as blockchain, artificial intelligence (AI) and internet of things (IOT) are being implemented and studied by several industry giants and startups to offer faster payouts, gain trust, prevent frauds, minimize mismanagement and obtain a competitive edge in the market.

Why blockchain?

Insurance policies, as we know, are used to mitigate the repercussions of unforeseen tragedies. However, the traditional methods are prone to human errors and carry a risk of botching information. This instills a lack of trust in the clients which is so far the biggest challenge faced by the industry. Most individuals avoid purchasing insurance policies due to the risk factors.

The State Insurance Commissioner of Georgia was accused of a fraud of USD 2 million

In recent times, the underlying technology of cryptocurrencies has gone mainstream with its widespread applications in financial as well as non-financial ecosystems. Distributed ledger technology (DLT) is being advocated to reform supply chains by instituting transparency and precision.

Given the complexity surrounding insurances, DLT can be used to dumb down the procedure by instituting coordination between the issuers, brokers, re-insurers and consumers. The model ensures a streamlined information flow in the value chain. As transactions occur, the information can be updated on the ledger. The information recorded on the ledger is immutable which ensures authenticity of the records and mitigates fraud risks. Moreover, the security provided by the technology cuts down on the countless checks and data verification. Consequently, payouts are settled quickly and this improves the overall efficiency and enhances accountability and customer satisfaction.

Smart contracts give a real-time outlook of policy data like insurance coverage and payout details to the network participants post claims. Needless to say, this saves a lot of time for the company as well as the customers while procuring error-free data.

Real-life use cases in various insurance sectors

Several insurance giants are leveraging blockchain solutions due to the low operational costs and increased automation of processes. In Zimbabwe, officials from Insurance and Pensions Commission (IPEC) endorsed blockchain solutions to tackle the hurdles of the industry.

Earlier this month, as reported by BitcoinNews.com, a Sri Lankan firm embraced blockchain to provide agricultural insurance policies for smallholder paddy field farmers in Sri Lanka.

Last year, the effectiveness of blockchain technology was tested in the marine ecosystem for cargo insurances. With the goal of issuing faster payouts, the project was deemed successful by the two collaborating partners which extended the prospects of establishing a full-fledged version of the platform in the future.

Life insurance

Life insurance claims are perhaps the most difficult to file with the mundane task taking on the emotional toll. In such a scenario, a blockchain-based model certainly comes as a blessing with boosted efficiency and authentic insurance products.

In June 2019, leading global insurer, MetLife (Metropolitan Life Insurance Company), announced the adoption of Ethereum blockchain to revolutionize the life insurance industry. The smart contract platform dubbed “Lifechain” will serve the customers by providing the family with reliable data of the insurance along with automated claim procedure. Zia Zaman, CIO of MetLife Asia, said that the primary reason behind implementing the technology is to exploit the security benefits offered by it along with the freedom to incorporate multiparty participation. He also stated:

“If you try technology that has been around for twenty years you’re not going to learn as much as if you try it with a decentralized system like DLT, and that’s advantageous because we are realizing that there is a lower cost of implementation for this system versus the other way.”

On demise, Lifechain will encrypt the corresponding National Registration Identity Card (NRIC) number on the ledger following which a search will be initiated to determine if the deceased is insured. The platform will then notify the family promptly while initiating a claim.

The concept simplifies the excruciating process of filing a claim with an attempt to deliver quick services and foster better relationships with the customers.

Health insurance

Slowly but surely, the healthcare industry has recognized the unprecedented benefits of blockchain to provide a trusted infrastructure. Nevertheless, the paradigm shift from traditional methods to blockchain-based solutions requires ample time and groundwork, but the health insurance sector has left no stones unturned to experiment the technology.

In January 2019, health insurance giant Aetna collaborated with IBM to devise a network based on IBM’s blockchain platform. Per the release, the primary reason for introducing blockchain was to achieve a smooth and secure information exchange to reinforce efficient claims and payment processes.

Soroush Abbaspour, IBM’s program director of blockchain for HCLS, stated that smart contracts will be the driving force to garner efficiency as they will permit cheaper claims and payment processes along with transparency in the network. He stated:

“Smart contracts on blockchains can be used to implement contract terms and business rules in a trusted execution environment. The benefit of blockchain is to dramatically reduce administration costs by eliminating duplicate processing, reducing disputes, and allowing for more effective risk management through real-time visibility and provenance leading to broader adoption of value programs by providers.”

Title insurance

Title insurance primarily insures an individual from the financial losses endured due to the defects in the title to a property. The title insurance industry is implementing blockchain for efficient title registries. Although refashioning the model will affect the process of title search requests, certifications and the issuance of  insurance policies, the industry is eyeing the transition to exploit the benefits that it brings along while continuing to perform other key functions in real estate.

UBITQUITY is one such platform with uses Blockchain-as-a-Service (BaaS) to provide title companies and municipalities benefit from a “clean record of ownership, thereby reducing future title search time, and increasing confidence/transparency”.

Even in the crypto insurance industry, leading insurers such as Marsh & McLennan and Aon are extending blockchain startup services to cater to the specific requirements of crypto protection. With the increase in demand for crypto premiums, insurers are being driven towards low-cost services.

In the coming years, the need to switch to better business models cannot be overlooked by the industry to achieve a robust and frictionless ecosystem. With real-time visibility and settlement of contracts, the program will attract more customers with effective risk management.

With endless possibilities, it is only up to the market players to explore the vast potential of the emerging technologies and incorporate what takes them to the forefront of the realm. The brisk DLT-based models already hold evidence to provide a sophisticated and advanced insurance program compared to the traditional counterparts.

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IBM Layoff Sees 1,700 Go but Spares Most Blockchain Staff

IBM Layoffs 1,700 But Spares Most Blockchain Staff

The Block Crypto has reported that a global IBM layoff has seen some 1,700 positions shorn off its workforce, but that its blockchain division was spared the majority of this decision.

Sources close to the tech giant told The Block that earlier in June, IBM let go of 1,700 employees, but did not really touch those working for IBM Blockchain. Those who were released from that division were working on the consulting side, they said, and still only made up a “very tiny, tiny percentage” of the total layoffs. They said:

“The product team had no layoffs, there was nothing out of development. It was very limited on the blockchain side.”

There was no specific comment on how its blockchain operation had been affected by the current downsizing, but VP of IBM Blockchain Technology Jerry Cuomo said: “Blockchain skills are the priority… And we’re full-steam ahead of blockchain… We plan to grow for a very long time.”

Job postings online for IBM blockchain roles do appear to suggest Cuomo’s telling the truth, with scores of open positions stretching from India in South Asia to Australia in the Pacific. CNBC’s own reporting of the “resource action” does indicate that it was in fact its GTS cloud infrastructure that bore the brunt of the job cuts.

“We are continuing to reposition our team to align with our focus on the high-value segments of the IT market, and we also continue to hire aggressively in critical new areas that deliver value for our clients and IBM,” explained IBM spokesperson Ed Barbini in an email to CRN.

Before the cuts, the company had a reported workforce of 340,000 people across the globe, which means only a 0.5% contraction in size after the IBM layoff.

 

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Nordic Bank Nordea Opens Blockchain Platform to SMEs

Nordic Bank Nordea Opens Blockchain Platform to SMEs

Nordic banking institution Nordea has now widened access to its blockchain-based trading platform we.trade by allowing small and medium-sized enterprises (SME) to use it.

Its Global Head of Trade and Finance and Working Capital Management, Patrik Zekkar, said that this should help in reducing the “trust deficits” in cross-border trade, seeing that more than half of SMEs are forced to make payments before receiving goods or services:

“Almost 60 percent of the SME’s said that they have to make advance payments so there is obviously a sense of insecurity surrounding cross-border trade. This is unfortunate, not only from a liquidity standpoint, it may also lead to companies refraining from trading and not growing.”

The platform allows users to utilize smart contracts to select certain conditions that, when met, will trigger a payment to another party. This means automated release of payments upon meeting contractual agreements, preventing fraud and reducing disputes.

A dozen banks make up the IBM Blockchain-based platform, includin Deutsche Bank, HSBC, KBC, Rabobank, Santander, Société Générale and UniCredit, and was joined by Nordea in 2017. A soft launch last month saw its very first customers being served.

Since their first trials in July 2018, we.trade has claimed the first commercially-viable trades that harness blockchain technology.

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Hyundai to Integrate Blockchain into Financial System with IBM’s Help

Hyundai

Hyundai Commercial has announced a partnership with IBM for the development of a blockchain-based financial system. IBM also announced the news regarding the partnership during its recent IBM Think 2019 event.

Hyundai Commercial is South Korea’s leading automobile manufacturer’s finance company. It provides financial and leasing services to Hyundai for construction equipment and commercial vehicles.

In the said partnership, a new supply chain financing ecosystem will be created for Hyundai Commercial. IBM is expected to use open source Hyperledger Fabric blockchain technology in order to achieve this goal.

After successful implementation of the blockchain-based financing ecosystem, manual processing will be replaced with automatic processing, thereby enhancing the efficiency. Moreover, a real-time view of all transactions on blockchain will be available to all network participants including manufacturers, dealers and distributors.  It will also ensure efficient and secure distribution of this data.

Furthermore, Hyundai Card (a separate Hyundai financial services subsidiary) has asked IBM to develop a chatbot for its customer services utilizing artificial intelligence. IBM will use its machine learning technology for the said project.

Recently, IBM declared to utilize its blockchain technology along with the Internet of Things (IoT) to develop a sensory system for real-time groundwater tracking in California. On the other hand, in order to promote fintech startups in Busan, HyundaiPay signed a Memorandum of Understanding (MoU) in the previous week. It is expected that as blockchain regulations become lucid, more and more industrial investors will join the sector.

 

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Will Big Enterprises Control Blockchain Innovation?

Multi-national tech giant IBM has been making multiple headlines in recent days, getting involved in several large-scale blockchain contracts and patent filings despite recent failings in one of its most lucrative deals in Australia.

The biggest blockchains in the world

IBM and other tech behemoths, 30 big banks and other organizations including JPMorgan Chase, Microsoft and Intel have been coming together in the form of the Enterprise Ethereum Alliance (EEA).

It is a group formed of Fortune 500 enterprises that are looking to build upon the Ethereum blockchain, the only popular one that supports smart contract technology. It’s presenting somewhat of a contradiction to the technology itself as Ethereum was designed for public use and, therefore, broadcasts transactions to all nodes in the blockchain.

This means that the tech has to undergo rigorous modification for privacy-centric corporations such as IBM. These moves are somewhat contrary to the decentralized blockchain ethos and could provoke responses from purists who are against such industry heavyweights, especially ones who creating privatized or patented blockchain technologies.

IBM patents and contracts

July has been a busy month for IBM. On 5 July, the company filed a new patent application as a means for developers to catalogue coding updates and milestones on a blockchain. ‘Blockchain For Program Code Credit and Programmer Contribution in a Collective’was published by the US Patent and Trade Mark Office (USTPO).

On 8 July, the Australian government signed a deal worth USD 740 million with IBM, securing it as its major tech partner for the next five years, with IBM’s automation and blockchain services being part of it.

9 July sees the tech juggernaut partnering with the US state of Delaware, signing yet another lucrative contract of USD 780,000. The contract has IBM being responsible for creating Delaware’s blockchain-based corporate filing system.

In January, it was reported that IBM and MasterCard were tied second for the companies with the most blockchain patents filed with 27 each, now in June, they have 42 “alive” patents with four being “dead”. In the technology industry, IBM holds twice as many than its nearest competitor, Dell.

Cross-patent collaboration?

Though it’s not just patents that IBM has been filing at a startling pace, the company has been working on projects such as Blockchain Loans in Africa and Humanitarian Aid Challenges.

Manny Schecter, IBM’s chief patent counsel, said in a 19 June Forbes report: “With respect to the foundational elements of specific blockchain technologies that are based on open source software components (e.g., Hyperledger), a cross-licensing patent consortium covering those elements is worthy of some consideration.”

He added, “IBM is a founding member of Open Invention Network (OIN), which is a shared defensive patent pool with the mission to protect Linux. A similar construct to protect the foundational open source components of certain blockchain technologies may make sense.”

While his words may chime with a collaborative attitude between companies, somewhat evoking the distributed ledger ethos, there could be a patent race that leaves much of the innovations we see today from smaller startups stifled and the dream of a decentralized future could find itself in the grips of privatized centralized companies.

 

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