and distributed ledger technologies (dlts) for the ... · tony sasso, head of operations the...

September 9 – 10 2019

Innovation and Distributed Ledger Technologies (DLTs) for the Workers’ Compensation and Disability Ecosystem

Tony Sasso, Head of OperationsThe Institutes RiskStream Collaborative

2 | RiskStream Collaborative CONFIDENTIAL

Agenda

• Insurance Industry Environment• InsureTech Landscape• DLT Key Concepts

• DLTs for “Real World” Ecosystems• Application of DLTs to the Workers’ Compensation and Disability Ecosystems

Recent Insurance Industry Environment


Industry focus shift to operational efficiency

0%

1%

2%

3%

4%

5%

6%

80

85

90

95

100

105

110

115

120

2001 2005 2009 2013 2017

P&C Industry Combined Ratio Fed Funds Rate

• Low interest rate environment

• Weak investment returns

• Constraining Insurer profitability

• FOCUS:• Operational

Efficiency


Potential impacts of automation on operations and employment

‐40% ‐30% ‐20% ‐10% 0% 10% 20% 30%

Data entry and information processing workers

Secretaries and administrative assistants

Insurance underwriters

Financial analysts and advisors

Claims adjusters, appraisers, examiners, and investigators

Information and record clerks

Financial specialists

Other office and administrative support workers

Sales and related occupations

Credit counselors and loan officers

Marketing and sales managers

Other management occupations

Computer occupations

Management occupations

Software developers and programmers

Legal occupations

Operations specialties managers

Market research analysts and marketing specialists

Actuaries

Operations research analysts

Mathematical science occupations

Statisticians

Expected P&C Insurance Employment Change (2016‐2026)

Data‐oriented positions expected to expand

Some traditional or administrative positionsexpected to decline

InsureTech Landscape


IoT, Blockchain, Automation and Analytics


Transitioning from Innovation to Delivering ROI

DLT Key Concepts


DLT is an evolutionary state based on previous technologies

Computers

Databases Encryption

Networks

E‐commerce


Blockchains (DLTs) combine databases with networks to establish trust

Blockchain:

• Adding anything to ledger is permanent

• Solves double-spending problem• Establishes trust and eliminates

middlemen which:1) increases security2) tears down walls3) speeds up transactions4) improves privacy

Blockchain is distributed database and shared ledger that maintains a continuously growing list of chronologically added records called blocks. In most blockchains new blocks and the data within (transactions, smart contracts, and so forth) are confirmed and verified through a decentralized consensus process called mining. This verification process removes intermediary validation and establishes trust without the use of a centralized authority


Databases vs Traditional Blockchains vs Canopy (our DLT framework)

• Centralized databases are faster and more efficient

than traditional blockchains, but are more susceptible

to loss when attacked/breached and do not ensure

transaction confidentiality among users.

• Blockchain transactions are fully transparent so that

every participant can verify every transaction for

themselves. However, blockchains have scalability

issues (throughput is as fast as the slowest node) and

transactions are not fully confidential.

• Canopy (DLT) is extremely scalable and highly

confidential per insurance industry ecosystem

requirements. Here RiskStream Collaborative’s notary

acts as the custodian, validating and preventing

duplicate transactions while making sure the network

is in sync.

Confidentiality/Security

Speed/Scalability

Disintermediation

BC

BLOCKCHAIN =

LOW HIGH

LOW HIGH

LOW HIGH

DATABASE = CORDA =

BC

BC

BC


What is a “smart” contract?

Smart contracts are just pieces of programmable code that can run in the blockchain.

The analogy of a series of “if then” statements works well to describe smart contracts.

While business logic forms a smart contract’s foundation, they are only as “smart” as the rules and logic coded into them.


…so with all that said, remember this…

Blockchain and other DLT solutions are “network based technologies” particularly well suited when:• Disinterested parties need to

operate as a network• Participants on the network

need to exchange data in a secure and permissioned way

• Transparency or auditability is required to keep track of “something of value” (e.g., assets, liability, contractual obligations)

DLTs for “Real World” Ecosystems


DLTs can form the backbone of “real world” ecosystems

Transactions(e‐commerce)

Smart contracts(computing)

Business Usage

Ethereum

Led to Led to

One Example

Led to

Public Blockchains

Private/PermissionedBlockchains


Potential for blockchain and other DLTs

Potential for Blockchain And DLT In Insurance

World Economic Forum: 10% of GDP stored on blockchain by 2027

McKinsey: Most Blockchain Use Cases are in Insurance

Deloitte: Adopting a common blockchain across insurance could create a step change in the industry

Capgemini: $21 Billion saved by instituting smart contracts in personal lines auto

Boston Consulting Group: 5‐13% improvement in combined operating ratios, a $200 billion opportunity

Application of DLTs to the Workers’ Compensation

and Disability Ecosystems


Why should I consider using DLTs in this space?

Pain Points

Increased Automation through Smart Contracts

Streamlined Access to Customer Data, Improve Customer Experience

Heightened Security

Increased Trust and Auditability

Improved Record Keeping, Lower Costs

• Poor Customer Experience• High Premiums• Slow Entry into Emerging

Markets• Weak Product Innovation

• High Administrative Costs• Costly Intermediaries• Fragmented Data Sources• Manual Processes• Fraud Prone• Stringent Regulation

Insured

Insurer

Benefits

Permissioned Data Sharing, Automatic Updates


Products, Pricing & Distribution

Underwriting & Risk Management

Policyholder Acquisition & Servicing Claims Management Finance, Payments &

Accounting Regulatory & Compliance

Parametric Insurance Provenance Policyholder Acquisition First Notice of Loss Data Sharing

Subrogation Motor Vehicle Proof of Insurance

Oracle aggregation service

Data Sharing and Risk Registries

Document Reconciliation (Placement

Documentation)

Asset Transfer (Certificate of Title–IoT)

Workers Comp Bill Review and Medical Claims Processing

Real‐time Regulatory Reporting

Telematics or IoT‐Based Use Cases

Self‐sovereign IDs Linked to Insurance

Surety Bonds (verification/validation)

Worker’s Compensation (EMR)

Reinsurance (Premium/Loss

Cessions/Execution of Treaties)

Agent/Broker Licensing

Insurance for transactional purchases

Digital Twinning Certificates of Insurance Fraud Registry Technical Accounting (maintaining/sharing of

financial records)

Sovereign ID (KYC/AML)

Microinsurance Mobile Insurance for Developing Countries

Marine Use Cases Policy Cancellation and Non‐Payment (use of

smart contract to trigger)

Multi‐layer claims settlement

New Forms of Raising Capital (Crowd

Sourcing)

Auto Titles

Peer‐to‐Peer Insurance Creation of a Repository of Truth for Underwriters

Onboarding and Policy Administration/Customer

Service Requests

Marine Claims Management

Multiple Payees Education Licensing

P&C: Blockchain / DLT use Cases Across the Entire Insurance Value Chain



Underwriting & RiskManagement

Policyholder Acquisition & Servicing

Claims Management Finance Payments & Accounting

Regulatory & Compliance

Payroll verification Proof of Insurance Tracking Proof of Coverage Workers Compensation EMR Workers Comp Bill Review and Medical Claims Processing—Fee schedule vs Non Fee

Schedule state

State Compliance and Reporting

Single view of worker, customer and insured

Underwriting information collection and exchange

Fraud and tracking‐‐Certificate of Insurance

Fraud Registry Subrogation Records preservation and management for internal and

regulatory audit

Secure date sharing with producers/underwriters/

agents

Medical Case Management Residual market pool mechanisms

Producer communications on UW Status (messaging

standards on decisioning and progress)

Claims Reporting and Cycle Time

Insured Portfolio and History Verification

First Report of Injury(ecosystem participant

notification and propagation)

Applicant (loss) coverage history and background

Injury match work classification

Workers Comp Use Cases Across Entire Insurance Value Chain


Process Pain Points

• Certificates are sometimes created based on fraudulent, incomplete or incorrect data

• Certificates are often static and not created or maintained in real‐time

• There is no cross check on certificates to verify they are based on accurate data

• Certificate holders take Certificates of Insurance at face value and rarely verify coverage

Summary of Fraud and Tracking of Certificates Use Case

Benefits of Distributed Ledger Technology

• Ability to create certificates in real‐time based on the most current data

• Ability to cross check insured data to check for abnormalities• Establishes a more direct link between payroll, work

classifications and the certificate of insurance• Facilitates tracking and audit of Certificates issuance and

reduces the ability to falsify or inadvertently misstate insurance coverage

A Brief Overview of the Use Case

• Create and issue the certificate of insurance in real time based on the most current data• Track the certificate through the life of the contract and flag inconsistencies for resolution• Change management and control to support real‐time notification and verification

Desired Outcomes and Value Drivers

• Ensure that injured workers are appropriately covered for injuries and minimize disputes• Reduce the number of fraudulent certificates created• Reduce carrier premium losses as a result of misreporting• Provide an easier to follow audit trail• Enable a trusted bidding process to improve outcomes for workers, employers and clients

W

I

E

L

P Workers

Employers

Legal

Payroll

Insurers

MMedical

Key Stakeholders Involved


Process Pain Points

• Inability to easily transmit and track current payroll information

• Inability to share payroll data across entities• Inability to provide portability among payroll processors• Inability to correlate and cross check payroll data with

certificates of insurance and actual employee records

Summary of Payroll Verification Use Case


• Tracking and sharing of payroll data in real‐time• Streamlined coordination among employers, payroll providers

and insurance carriers• Ability to cross check payroll data against issued certificates of

insurance• Minimizes the potential for coverage lapse due to payroll

processing delays• Minimizes the potential for coverage disputes due to E&O


• Set up a system to share and track payroll information and provide access to an audit trail with a goal of reducing the opportunity for fraud

• Streamline the information exchange and verification process to reduce administrative burden on all participants


• Reduce the number and amount of under reported payroll, reducing carrier premium losses• Provide for an easier audit trail to allow for better policing of fraud• Reduce number and amount of falsified or misstated payroll transactions• Limit the number of coverage disputes due to data inaccuracies or delays

W

I

E

L

P Workers

Employers

Legal

Payroll

Insurers

EMedical

Stakeholders Involved


Process Pain Points

• Historical data may be sourced from multiple system, may be inaccurate, and is difficult to source and transmit

• Inability to share data across multiple parties• Data anomalies or inaccuracies are challenging to spot in time

to take corrective action• Lack of transparency across sources provides the opportunity

to “game the system” or circumvent the rules

Summary of Insured Portfolio and History Verification Use Case


• Sharing of (appropriately anonymized) data across carriers from multiple reporting sources in real time as a basis for verification and analysis

• Ability to verify data on policy application against actual history• Ability to create an audit trail to look for cancelled policies and

other troublesome indicators to clarify and correct data quality• Shifts focus from data quality and provides the opportunity to

focus on more productive value‐added services


• Provide for the ability to collect and retain historical data on employers as an input for setting premiums

• Provide an auditable, trusted account of past reports to improve data quality, identifying data anomalies and inspect potential fraud

• Provide trendable historical data to facilitate better coverage and risk management decisions


• Allow carriers to share anonymized historical information on insureds speed research and clarify discrepancies• Alleviate operational administrative burden interacting with multiple payroll processors• Improve the overall quality of underwriting data and reduce the opportunity to misrepresent payroll information• Improve carrier’s ability to provide accurate and appropriate premium quotes• Present opportunities for carriers to engage in discussions with employers on coverage adequacy• Shift the emphasis to more proactive methods of risk management and cost containment which benefit workers,

employers, legal and judicial authorities, and the industry

W

I

E

L

P Workers

Employers

Legal

Payroll

Insurers

EMedical

Stakeholders Involved


Other leading ideas…

• Payroll integration for insurance premium processing

• Case management support (shared view of progression towards return to work)

• Medical bill review automation

• Treatment appropriateness reviews and efficacy analytics

• Safety analytics• Secure and anonymized IoT data collection (oracle services)

• Case adjudication and appeals support

• Automated payments processing


RiskStream Workers’ Compensation Labs concept

Mission – To respond to member and ecosystem participant interest in emerging use cases, insurance sectors, technologies and opportunities which may benefit the insurance industry, as well as its ecosystem participants, subscribers (policyholders), beneficiaries and society; by collaboratively evaluating applicability, feasibility, timing, returnon investment, and financial and human capital requirements to align on a plan to design and develop new products.

Methodology– RiskStream has identified a 3 step process to work with interested participants to set objectives, design and document solutions aimed at developing innovative proofs of concept for evaluation

Collect ideas from across our ecosystem network and bring key parties to the table to

discuss…

• Technology and operational trends

• Industry developments• Opportunities to improve

outcomes for all industry participants

Brainstorm on topics and evaluate industry trends/data

to…

• Assess a measurable Return on Investment

• Determine applicability across a wide range of participants

• Allow the group evaluate and prioritize the best and most impactful ideas

Vote to determine the best and most viable ideas and

assess agreed upon methods to fund the design and delivery of

proofs of concept by…

• Conducting formal working group meetings

• Documenting requirements• Aligning on buy‐in and support

from participants to proceed

How do industry consortia like RiskStream help?


Value Proposition

Backed by The Institutes and trusted by the Risk and P&C Insurance industries for over 100 years

Partnering with LIMRA to bring Blockchain To the Life, Annuity and Retirement space

Collaborating with multiple industry associations across theInsurance space

Non‐biased, industry focused non‐profit and member owned

Certified Blockchain Professional andCertified Blockchain Engineer programs

Certified RiskStream Ready Designations for Solution Providers

No science experiments! Focused on creating real world production applications that bring value to members

Build once, use many approach to architecture, use cases and reusable

tool kit components

Platform agnostic, supporting the building of and communication

between various current and future flavors of Blockchain

No storage of members’ important data on the Blockchain

Multiple Use Case build approaches: Member Only, Collaborative, Solution Provider Focused,

RiskStream Only or a Hybrid of any of these options

First true industrywide risk and insurance consortium cutting across all insurance industry sectors


RiskStream Ecosystem| Participant Categories

Membersa. Carriersb. Producersc. Reinsurers

Membersa. Carriersb. Producersc. Reinsurers

Civicsa. Regulatorsb. Governments

Collaboratorsa. Legal Entitiesb. Banksc. Energy Companiesd. Others

Non‐Profitsa. Associationsb. Academiac. Consortia

Providersa. Consultantsb. Software Devs.c. Platformsd. TPAse. Analytics


P&C Members

L&A Members

Providers

Collaborators

…to be announced

soon

Civics

Non‐Profits

Civics

RiskStream Ecosystem


RiskStream Sectors & Geographies

RiskStream Presence

Future expansion

Planned expansion

Sectors1. Property & Casualty

• Personal Lines• Auto & Home

• Commercial Lines• Surety & Workers Comp.

2. Life & Annuities• Life, Health & Retirement

3. Reinsurance

What questions can I answer for you?

Appendix: About Us


Accomplishments Through 2018

October 2018Use Case Committee to select and prioritize the next use cases to present to the Advisory Board for approval

June 2018Framework and Use Case Development Begins

May 2018PSP Contracting CompleteDLT Platform SelectedUse Cases Awarded to PSP’s

January 2018Use Case Committee and Working Groups kicked offTechnical Partners selected

December 2017POI Minimum Viable Product with Nationwide

July 2016Thought Leadership Begins

December 2016Recommendations on Blockchain Consortium Circulated to TI Board

February 2017TI Board Requests Launch of Four Working Groups Members Join

June 201740 Companies Involved. Four POC’s completed. Consortium formation approved

September 2018LIMRA and RiskStream announce formal relationship. LIMRA to become administrator for L&A sector

September 2018Test version of MVP/MVN completed

October 2018Blockchain Initiative Conference in NYC

April 2018PSP’s On-boarded

November 20181st Cohort established


Key Accomplishments in 2019

May 2019Completed final draft of IP Policy and drafted internal policies & procedures.

April 2019Hosted industry at RiskStream’s Meetup & Modules in conjunction with TI’s inaugural Future of Risk event.

April 2019Launched Canadian working group for FNOL PPA.

March 2019Reinsurance placement development on Canopy began

February 2019Member testing on Canopy began

March 2019Formed L&A Advisory Board

March 2019Commercial use case working group began exploring POI, FNOL, Property & GL

May 2019Under Advisory Board direction, resumed L&A working groups

February 2019• Demonstrated

POI and FNOL production ready use cases

• Published ROI report


Canopy 1.x – 2.x

2018‐20192017

1.x 2.x

POI(POC)

FNOL(POC)

Subrogation(POC)

Parametric(POC)

P.POI Auto(BUILD)

P.FNOL Auto(BUILD)

Subrogation(WORKING GROUP)

Parametric(PAUSED)

• Application Programming Interface• Canopy 2.1 – Minimum Viable Network

(In progress)• Canopy 2.2 – Production deployment

(Ready for Production, Summer 2019)

• Canopy 1.0 – Limited production


2019 ‐ 20202018 ‐ 2019 2020

2.x

Canopy 3.0

4.0

2020 Use Case(BUILD)




P.POI Auto(BUILD)

P.FNOL Auto(BUILD)

Parametric(PAUSED)

Subrogation(WORKING GROUP)

• Application Programming Interface• Canopy 2.1 – Minimum Viable Network

(In progress)• Canopy 2.2 – Production deployment

(Ready for Production, Summer 2019)

3.x

C.POI Auto(PAUSED)

C.FNOL Auto(PAUSED)

AnalyticsAggregator

Comm. Prop & G/L(PAUSED)

Reinsurance(WORKING GROUP)

P.POI Auto(WORKING GROUP)

P.FNOL Auto(WORKING GROUP)

Subro(WORKING GROUP)

Surety(WORKING GROUP)

Worker’s Comp(WORKING GROUP)

The Institutes RiskBlock™ Alliance

Logical System Architecture

Member Node

Member Node

Member Node

Canopy Notary

Claims System

Claims SystemClaims System

Canopy Network Services

Control Framework Network Map

Security

RiskStream Collaborative Network

Canopy: Network Diagram


Technical Overview Video

Tech Overview Video https://vimeo.com/330862636


The Canopy Network is a private permissioned network of nodes. Members provision nodes and use Canopy’s Enterprise Network Management Services (Doorman) that serves as a gatekeeper for the Network to participate in transactions. Permission is granted and digital certificates are issued after a manual verification process to ascertain the identity of the business requesting access.

Canopy implements Authentication using OAuth 2.0 protocol. Requests are authenticated on entry to Canopy based on the systems that initiate them and a token is returned. Members, pass the token and the user‐id of the employee making the transaction request to Canopy for authorization. Authorization is role‐based, and is invoked at each service call. Canopy APIs are private and will be further protected by establishing user level rate limits.

Canopy Security

Administrator and developer access to Canopy infrastructure is granted using a Role Based Access Control Mechanism and governed through policies and security controls established by RiskStream Collaborative.

Canopy’s management platform monitors infrastructure, network, application, and user access and raises alarms when specific resource consumption thresholds are met and/or vulnerabilities detected.

All nodes, which include computing and storage resources are provisioned and secured in a virtual private network (VPN) and not accessible via the internet. Node resources are only accessible via secure VPN connections. Internode communication is established via secure TLS protocol using the AMQP Message format.

OAuth 2.0PrivatePermissionedNetwork

Role‐BasedAccessControl

VPN,TLS,AMQP

ConstantNetworkMonitoring


Services

GOVERNANCE

DELIVERY MODEL

SHARED SERVICES

Advisory Board Technology Committee Use Case Strategy Committee

Human Resources Information TechnologyMarketing Finance

ProductsUse Case Strategy Committee

OperationsTechnology

Technology CommitteeWG WG WG WG


Strategic Advisory BoardExternal Support

Legend

Consortium Members

Head of Relationships

(Open)

Head of Products(Brendan Picha)

RiskStream

Executive Assistant(Charlene Speaker-

Grove)

Vice President(Patrick Schmid)

President(Christopher McDaniel)

Head of Technology

(Patrick Millar)

Nominating Process

RiskStreamInstitutional Board

Vendors

Technical Oversight Committee

(Technology Lead)

Use Case Working Groups

Use Case Strategy Committee(Business

Operations Lead)

The Institutes Shared Services

Human Resources Marketing Finance Information

Technology

Head of Controls/Security

Head of Operations

(Tony Sasso)

RiskStream Collaborative Internal Operations


External Operations

Security & Audit

Framework & Product Development

UseCase

UseCase

UseCase




Policyholder Acquisition & Servicing Claims Management Finance, Payments &

Accounting Regulatory & Compliance

Parametric Insurance Provenance Policyholder Acquisition First Notice of Loss Data Sharing

Subrogation Motor Vehicle Proof of Insurance

Oracle aggregation service

Data Sharing and Risk Registries

Document Reconciliation (Placement

Documentation)

Asset Transfer (Certificate of Title–IoT)

Workers Comp Bill Review and Medical Claims Processing

Real‐time Regulatory Reporting

Telematics or IoT‐Based Use Cases

Self‐sovereign IDs Linked to Insurance

Surety Bonds (verification/validation)

Worker’s Compensation (EMR)

Reinsurance (Premium/Loss

Cessions/Execution of Treaties)

Agent/Broker Licensing

Insurance for transactional purchases

Digital Twinning Certificates of Insurance Fraud Registry Technical Accounting (maintaining/sharing of

financial records)

Sovereign ID (KYC/AML)

Microinsurance Mobile Insurance for Developing Countries

Marine Use Cases Policy Cancellation and Non‐Payment (use of

smart contract to trigger)

Multi‐layer claims settlement

New Forms of Raising Capital (Crowd

Sourcing)

Auto Titles

Peer‐to‐Peer Insurance Creation of a Repository of Truth for Underwriters

Onboarding and Policy Administration/Customer

Service Requests

Marine Claims Management

Multiple Payees Education Licensing

P&C: Blockchain / DLT use Cases Across the Entire Insurance Value Chain

Blockchain Use Cases Across L&A Insurance Value Chain



Policyholder Acquisition & Servicing

Claims ManagementFinance, Payments &

AccountingRegulatory & Compliance

1035 Exchange Creation of Repository of Truth for Underwriters

In‐Good Order Validation

Mortality MonitorCommission Schedules Licensing & Appointment

Product Version & Associated Rider

DataHealth Records

Document Administration,

Servicing & DeliveryFraud Registry Commission Settlement &

ProcessProduct Filing & Certification

Product Ledgers Client On‐boarding In‐Force Transaction Activity

Insurance “Smart Contracts” Additional Policy Payments Tax Reporting


Demo Videos

Demo Video https://vimeo.com/332049645

Reinsurance Marketing Video

https://vimeo.com/329153359

Proof of Insurance Marketing Video


First Notice of Loss Marketing Video


and distributed ledger technologies (dlts) for the ... · tony sasso, head of operations the...

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