BLOCKCHAIN APPLICATIONS FOR INSURANCE SEPTEMBER 2018 Lara M. - - PowerPoint PPT Presentation

BLOCKCHAIN APPLICATIONS FOR INSURANCE

SEPTEMBER 2018 Lara M. Lyberg, Business Strategist, Blockchain

For Educational Purposes Only

• Blockchain Overview
• Insurance Use Cases: Opportunities and Challenges
• Industry Consortia: Where We are Participating
• Q&A

AGENDA

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BLOCKCHAIN OVERVIEW

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• A new type of database
• Distributed ledger technology (DLT) is a consensus of replicated, shared and

synchronized digital data

• Blockchain, a type of DLT, is comprised of immutable digital data in groups called

blocks

• Started with a paper by an unidentified author in October 2008
• Based upon concepts developed from the 70’s and forward

BLOCKCHAIN: WHAT IS IT?

http://www.blockchaintechnologies.com/blockchain-definition https://digitalasset.com/faqs.html

“Satoshi Nakamoto”

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BLOCKCHAIN ACTS AS THE TRUST LEDGER OF THE INTERNET

?

1980 1994 2015

Internet Age Blockchain IT Supremacy

Transition from paper to digital capabilities Network Logic enables communication between users Trust Logic promises transparency between users

Mougayar, William. The business blockchain: Promise, practice, and application of the next Internet technology. Hoboken, NJ: John Wiley & Sons, Inc., 2016. Print.

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HOW WILL BLOCKCHAIN AFFECT BUSINESS?

Funding & Investing Raising money & investing without intermediaries Exchanging Value Decreases settlement time & cost Moving Value Lower cost & faster transactions Authenticating Value & Identity Intermediaries no longer needed Lending Value Peer to peer lending Storing Value Individuals may not need to rely

• n banks if it can be stored on the

blockchain Accounting for Value Real-time, transparent audit & financial reporting Insuring Value & Managing Risk More comprehensive reputation scores

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Sm Smar art t Co Cont ntract ract

“A computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts allow the performance of credible transactions without third parties.”

SMART CONTRACTS FOR TRUSTLESS COMPUTATION

https://en.wikipedia.org/wiki/Smart_contract

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CONSENSUS IN PUBLIC BLOCKCHAINS

A user makes a transaction, which is added to a memory pool of a node. A miner validates all transactions to prevent double-spending and bundles them into a block. The miner then runs the consensus mechanism, in this case, proof

• f work.

If the miner wins consensus, then its validated block is added to the node’s blockchain, and all nodes in the network are updated.

• http://tech.eu/features/808/bitcoin-part-one/
• Nick Emmons, Blockchain Developer

Mi Minin ing g and d Proof

• f of Work

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CONSENSUS IN PERMISSIONED NETWORKS

Practic ctical al Byzantine zantine Fault ult Tolerance erance Practical Byzantine Fault Tolerance enables a system to withstand errors from not more than 1/3 of nodes without compromising the integrity of data. The Byzantine Generals’ Problem refers to coordinating a dispersed army amidst traitors.

Microsoft, 1982, The Byzantine Generals Problem, https://www.microsoft.com/en-us/research/publication/byzantine-generals-problem/

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• Multilateral B2B workflows where each participant independently validates each other’s data accuracy and/or

processes

• Industry utilities that would benefit the industry's players and avoid the challenge of ownership
• Replace an otherwise adequate centralized solution to de-risk central points of failure from cybercrime

TWO MAIN TYPES OF BLOCKCHAIN USE CASES

Mu Mutua uali lize zed d Data ta

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“Intrinsic” or “native” or “built-in” tokens, which are made-up resources that have some utility, such as:

• Block validation incentives, also known as miner rewards
• Transaction spam prevention, since if all transactions cost some token, it limits the ability to spam
• Asset-backed tokens, which are claims on an underlying asset from a specific issuer

TWO MAIN TYPES OF BLOCKCHAIN USE CASES

Tokeni eniza zation ion Fund nd s Token en s

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INSURANCE USE CASES: OPPORTUNITIES AND CHALLENGES

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Today

MASTER DEATH FILE FOR LIFE INSURERS

Physician’s Statement Funeral Director SSN Death Master File Beneficiary Life Insurer Payment Physician’s Statement Funeral Director SSA Beneficiary Life Insurer Faster, Automated Payment Block

• ckchain

chain

https://www.cognizant.com/whitepapers/blockchain-a-potential-game-changer-for-life-insurance-codex2484.pdf

State Health Department

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• Identifying suitable use cases and partners requires collaboration and business and blockchain knowledge
• Legal precedence and regulatory guidance are limited in certain areas of blockchain
• Insurance companies must meet stringent compliance requirements while exploring new blockchain capabilities
• Financial institutions face reputation risk if technology exploration proves too risky
• Technology integration requires roadmap planning and blockchain training

CHALLENGES

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WHERE WE ARE PARTICIPATING

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THANK YOU Please feel welcome to contact me at Lara_Lyberg@JHancock.com