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Un-’block’ your business 1.0: The New A 'AI' B 'Blockchain' and C 'Connected Devices' of Insurance

Another new year begins and many of us are probably shopping for insurance again because our provider just put up the premium on our renewals. We think they do this because they want to make more money (which could be the case as well) but equally the amount of fraud (accounts for 5-10% of insurance costs) that happens puts pressure on the insurance providers which directly feeds back to our premium. In many cases, after checking the same data on us again by going through similar questions, we are offered a policy better than last year! Similar painful experiences when one needs to go through a claim settlement process where multiple parties are involved and settlement usually takes weeks or even months. Clearly, these are all not great customer experiences.

So, Amazon and Google are now entering the insurance business. Is that a weird proposition or a natural progression by virtue of them having access to so much data and information on individuals and businesses that they can leverage this asset and offer a more relevant insurance and better seamless experience? This is exactly the digital disruption insurers are facing today. But insurers have the advantage of not only having access to all this data but also the experience and license of providing protection for decades and hence the well-earned trust. In this blog, we see how insurers can bring together the new age ‘ABC’ for a true digital experience and keep themselves relevant and competitive. An end to end transformation of the insurance underwriting and claims process leveraging powerful advances in artificial intelligence, blockchain and connected devices (IoT) can bring the same experience to the customers that Amazon and Google are challenging to offer.

The Insurance Process and the current inefficiencies / challenges

The current pain points in the insurance underwriting and the subsequent claims settlement is very widely known. From the customer’s perspective, both the policy setup and the claim settlement process are long, tedious and unpredictable. They also don’t see any stability on their insurance premiums YoY even when they have made no claims. From the insurer’s perspective, the operational costs are escalating, frauds are increasing and customer retention is also costing them heavily.

 

Let’s bring together the A (AI), B (Blockchain), C (Connected Devices) for a ‘D (Digital)’ experience

Starting with one of the retail insurance underwriting and claims process (say car insurance), insurers could leverage the powerful combination of emerging technologies to transform the industry and create a lean efficient process leading to a much better customer experience.

Applying AI

The customers data is an asset the insurer already has access to (for existing clients) including all his contracts and claims. Insurers also have access to claims data of people who are not existing clients that is shared via joint initiatives (like MIB) to combat fraud. First step to create efficiencies would be to look at digitizing and automating the insurance policy setup/ underwriting process using AI technologies. Insurers can use both existing information/data and pull other relevant information from the internet on social websites, perform deep data analysis to create a personalized auto filled insurance policy for the customer. Existing documents may also be digitized and converted to usable information using image recognition techniques. The auto-filled forms created using these techniques can be used to communicate with the customer using chat-bots. Chatbots use AI technology advancements in language processing and generation and even sentiment analysis to make sure the customer is happy with the proposal ( 74% of the customers say they are happy to receive an automated digital proposal) . These automations can reduce operational costs tremendously for the insurers and improve customer experience multi-fold. Many of these initiatives are already under-way in the industry but let us look at combining this with other emerging technologies to get an end to end experience.

Benefiting from Blockchain 

The insurance policy created through an efficient automated touchless process could then be setup as a smart contract on a permissioned blockchain shared and agreed by the insurer, service provider, the customer and even the customer’s bank. This smart contract can be triggered automatically by a particular event – say an accident for a car insurance, a fire for a building or home insurance or a death for life insurance. The event can request a provider to initiate a repair process or trigger a request to health provider to initiate a treatment process and if the conditions of the contract are met, the contract can also trigger a payment creating a near real-time settlement experience for the customer. In addition, the cryptographically secured immutable nature of the blockchain would mean huge reduction in fraudulent claims as all events, claims and payments are captured in a timestamped manner. The shared ledger also means complete transparency for the customer through the entire process. All this timestamped information can then fed back into the data that the AI used for the underwriting process to create a realistic insurance plan. Another huge benefit from blockchain is for the claim data sharing between insurers which today is limited because of concerns of losing competitiveness. Blockchain enables creating the right channels of data sharing between insurers without needing to have a central intermediary and also allows selective sharing by setting up the right channels.

Combining the Connected Device

We mentioned the automated triggering of events to create an end to end experience. This is where the ‘C’ of digital experience comes. Smart Connected Homes can trigger an event on the blockchain in the event of a fire or a wearable health device could trigger an event for medical attention. Similarly connected car solutions like Wipro’s Autoinsights could relay real time information on the car’s health or even the driver’s habits. These connected devices not only can help trigger an insurance event, they also capture and keep information that can become another important data feed for the policy underwriting process. What if all this information from connected devices is also stored on a blockchain so these become immutable timestamped records further reducing fraud. This circular application of all 3 emerging technologies creates a very powerful proposition to create a true digital experience.

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Comments: (7)

Shailendra Malik
Shailendra Malik - DBS Bank - Singapore 23 January, 2018, 03:372 likes 2 likes

Identifying the trends, potential fraud and improving the digital experience are key areas that any Insurer would like to improve upon, as this creates customer retention and a simplified workflow eases out the claims process for those who need it. But why we need to push blockchain in this procedure.

Today Blockchain is being tossed as a Silver bullet to all the woes of exisitng process gaps and failures. Yes smart contracts is a novel idea to create an easy way to capture value of that contract, but isn't that part of your process automation. The touchless process you highlight can be a simple instrumentation implementation that can deliver the desired output without overloading the Insurer with the need to put a blockchain solution in their infrastructure. 

Priya Lakshmi
Priya Lakshmi - Own - London 23 January, 2018, 06:52Be the first to give this comment the thumbs up 0 likes You raise an interesting question. Even though I am a blockchain enthusiast, I also share the sentiment it is not a panacea ( see my other blogs) but there are some applications that will see definite benefit of the technology In this case , in addition to what I mention in the blog : 1. Smart contracts not only allow automation but they allow the agreement to be done collectively by all parties and therefore can be auto triggered without objections. This also greatly improves regulatory compliance as regulations can now be proactively coded in the contract ( remember PPI! ) and not reactively implemented / checked 2. Blockchain’s applicability to any settlement is one of the best usecases as the shared immutable feature greatly reduces reconciliation and settlement time. Now whether reduced settlement time is a good thing is a question for another blog ( I have addressed it a bit in one of my blogs ) 3. Combating fraud will need insurers to share data and today that is done through intermediaries , again something blockchain eliminates Hope this clarifies the applicability of blockchain to this particular case Do keep a watch for my blogs and do challenge when you see blockchain may not be the answer
Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 23 January, 2018, 18:21Be the first to give this comment the thumbs up 0 likes

I covered two examples of Blockchain insurance in AXA Fizzy - The New Kid On The Blockchain and Atlas Etherisc - Another New Kid On The Blockchain. Claimless settlement is the key customer benefit. But, as I've highlighted in both posts, that doesn't need Blockchain. It can be accomplished equally well via electronic versions of conventional contracts. That roughly speaks to your point #1. I honestly don't get the Blockchain advantage under your point #2 and #3. 

End of the day, insurance buyers don't decide the architecture of insurance apps - insurers do. Blockchain must have a compelling benefit for insurers if they were to move their existing insurance apps to the Blockchain. And there is. I'll be covering it in a follow on post.

Priya Lakshmi
Priya Lakshmi - Own - London 23 January, 2018, 19:05Be the first to give this comment the thumbs up 0 likes Thanks for your comments and will read your blogs when time permits . My point 1 is not about settlements , it’s about the ability to have smart contracts shared between participants . Point 3 is about sharing data without intermediaries . I look forward to your next blog . Reinsurance is one of the other key applicability in Insurance which also benefits from the smart contracts Yes customers don’t decide architecture , they look for seamless digital experience where there is no need for reconciliations because of time delays
A Finextra member
A Finextra member 01 February, 2018, 18:27Be the first to give this comment the thumbs up 0 likes

Hi Priya, could you share some details on what smart contracts are and how they help in blockchain.

Priya Lakshmi
Priya Lakshmi - Own - London 02 February, 2018, 10:25Be the first to give this comment the thumbs up 0 likes

Hi Ram

Smart contracts take the power of Blockchain to the next level as it one of the key underpinnings of the technology . While the Blockchain holds the record of every transaction in an immutable distributed ledger, smart contracts help to define the rules of the transfer or value. Smart contracts are codes and rules that self-execute when an event occurs (These contracts sit on a distributed decentralized Blockchain and are therefore immutable. This allows for trusted transactions to be carried out between two parties who do not know each other. There are even discussions of making smart contracts legal or define regulations in them.

There are some good videos on Youtube that introoduce this concept more.

 

hope this helps

 

thanks

priya

A Finextra member
A Finextra member 02 February, 2018, 14:261 like 1 like

Thank you Priya for the details and explaining the concept of smart contracts. Will check out the youtube videos.

Priya Lakshmi

Priya Lakshmi

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This post is from a series of posts in the group:

Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.


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