The power of the blockchain consortium in Insurance
The following article is an extract from Rick Huckstep's feature post in the September edition of InsurTech Insights.
To achieve industry wide benefits from blockchain, and distributed ledger technology, is going to require industry wide adoption. Being the only one with a blockchain solution is like being the first person to buy a telephone. This is one of the challenges to the adoption of blockchain tech in the back office of the insurance industry. The fact is that blockchain technology needs to be used by multiple parties across the value chain to deliver meaningful benefits to all stakeholders.
This is where the power of the consortium lies in the insurance industry.
B3i was the first and has evolved from an industry collective into a commercial startup. Their first product is expected to go live by the end of this year with a property cat XoL reinsurance contract using real contracts and real data on blockchain technology.
For me, the most significant announcement from B3i came in June this year. Having spent the last couple of years looking at all the available blockchain solutions on the market, B3i selected R3’s Corda as the platform for their applications and business network. This makes perfect sense given R3’s specific industry focus on the unique requirements of the financial services sector. (See here for my interview with R3's Ryan Rudd about their partnership with ChainThat as they enter the insurance sector).
For the latest issue of InsurTech Insights from The Digital Insurer, I spoke with Christopher McDaniel, the President of RiskBlock Alliance. For those of you unfamiliar with RiskBlock Alliance, it is a not-for-profit, industry-owned consortium founded by The Institutes. This is a 100+ year education and research organisation with a 40-member board including CEOs of some of the largest insurers.
The RiskBlock Alliance only started a couple of years ago and I asked Christopher how it came about. “There was a lot of talk about the potential of blockchain across the insurance industry. But it wasn’t so clear who to turn to. At The Institutes, our senior exec members increasingly wanted to get under the skin of blockchain and understand what it could really do for their industry.
“So, they created a task force and after 6 months we had built 4 PoCs. This got the insurance firms interested and we created RiskBlock Alliance. It’s a 501-C6 organisation, which means it’s a not for profit, industry owned organisation. We have no plans to go the B3i route and become a commercial organisation.”
The way the RiskBlock Alliance works is that all members have a stake in the organisation. The members, which are the insurance companies, are involved in everything from governance and development through to strategy and direction. The RiskBlock Alliance wants to serve the whole insurance sector and it is already in P&C, moving into Life and Health, and will enter Workers Comp next year. It is also expanding out globally having entered Europe and is now opening offices in Asia.
The RiskBlock Alliance have created Canopy as a true ecosystem built by their own software factory. They’ve partnered with R3 to run it on the Corda platform and it is architected to allow others (members and non-members) to build proprietary systems that can plug and play across the Canopy network.
Here’s the sweet thing about Canopy. Think of it like plumbing. Everyone shares the supply of water in a common and consistent way. Whilst also enabling everyone to add their own sinks and taps and appliances to suit themselves.
This is why the Consortium approach at RiskBlock Alliance is likely to succeed. It’s a model that allows rival members to share benefits where no competitive advantage exists (in the plumbing). But it also allows members to keep their data separate and build their own competitive advantage into apps using the common SPKs, tool kits and standards within the Canopy network.
Christopher explained: “Within 5 years, we envision the Canopy network to be just like turning on the tap. Everyone can rely on it, just like they rely on their plumbing.
“But don’t underestimate the work we have to do because this sounds simple but it isn’t. Our industry is large and complex. P&C has very different requirements to Life & Health. Countries and jurisdiction differ too. We have to build all this flexibility into Canopy to be able to cater for a global insurance market.
“Which all means that Canopy will likely become a collection of multiple Canopys that are bridged together, defined by common standards and a single technology architecture. Canopy equalizes everything and enables everyone to talk to everyone else, even if that is across different blockchain solutions.
“And our plan is to develop standard interfaces for common data types such as telematics or IoT. All this goes into the Canopy toolbox that everyone has access too.”
So there you have it. In simple terms, blockchain is the data layer, Canopy is the interface for data exchange, and proprietary apps provide business functionality. All built on a common set of industry wide standards.
The ChainGang from The Digital Insurer
In August this year, The Digital Insurer launched its latest initiative on digital innovation for the insurance industry, called The ChainGang. The focus of The ChainGang is the application of blockchain and distributed ledger technology across all lines and segments of the insurance industry.
The launch of ChainGang started with the first of a quarterly series of webinars led by Simon Phipps of The Digital Insurer, supported by Martin Kornacki and myself. The webinar included contributions from Christopher of the RiskBlock Alliance and from Zach Piester, co-founder of Intrepid Ventures.
The webinar also featured 3 blockchain technology firms pitching real world use cases of blockchain in insurance:
To access the presentations and watch the replay of the webinar, go here.
The next ChainGang webinar will be part of #LiveFest, the world's first virtual, global, digital conference on insurance innovation.
Attendance is free for the virtual conference that will be held every Friday throughout November with 4 regional and 1 global event.
Registration can be found here.
The author, Rick Huckstep, is the chairman of The Digital Insurer, a keynote speaker, advisor and investor in technology start-ups.