session 27 panel discussion: insurtech: blockchain and ... · the views expressed by the presenters...

Session 27 PD, InsurTech: Blockchain and Automation in Insurance

Moderator:

Han (Henry) Chen, FSA, ACIA, MAAA

Presenters: Carl Ghiselli, FSA, MAAA Marshal Lin, FSA, MAAA

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2018 Life & AnnuitySymposiumInsurTech: Blockchain andautomation in insurance

May 7, 2018

1 2018 Life & Annuity Symposium | InsurTech: Blockchain and automation in insurance

Agenda

3 Automation

4

Concluding remarks5

1 Introductions

2 The changing actuarial competency profile

Blockchain

6 Q &A

Introduction


Introductions and disclaimer

Marshall LinSenior Manager+1 212 773 [email protected]

► The views expressed by the presenters are not necessarily those of Ernst & Young LLP or other members of the global EY organization.

► These slides are for educational purposes only and are not intended to be relied uponasaccounting, tax, or other professional advice. Please refer to your advisors for specific advice.

Carl GhiselliSenior Manager+1 312 879 [email protected]

mailto:[email protected]

mailto:[email protected]

The changing actuarial competency profile

It seems like everything is changing everywhere

2xThe amount of new technical

information is doubling every 2 years

2billionJobs will be displaced by

2030 as a result of technology advances

50 %of Fortune 500 companies from

2006 no longer exist

3xEmployees more likely to

stay at a purpose-driven company

10-14Number of jobs the average

college senior will have by age 38


Multiple industry trends are impacting insurance


Robotics & automation

Customercentricity

Analytics ineverything

Workerexpectations

Finance, risk and actuarial

convergence

Blockchain

How will the actuarial competency profile change?“Activity processer” to “networked, analytics-focused collaborator”

Actu

arie

sto

day


Increasingly generalist

Virtualized or co-located

Business-connected collaborator

Ecosystem oriented

High technology IQ

Team player

User of information analysis andinsight

Innovative

Strategic mindset

SpecialistGeographically dispersed

Functionally focused

Internally oriented

Administratively burdened

Single contributor

Process driven

Traditional

New

gene

ratio

n

Automation

The insurance industry is embarking a journey towards intelligent automation, building onexisting capabilities and a long-term functional and technical architectural strategy

Tier A

Enterprise enablers Big data Graph databasesCloud technology IoT devices/ InsurTech

Automation operating model/center of excellence

Process AutomationTier B

Intelligent AutomationTier C Tier D

RPA / RDA

BPM

Tier A tech stack

BI

Legacy

Scripting (VBA, Macros)

Deep learning

Advanced analytics

Machine learning

Computer vision

Tier C tech stack


Chatbots

NLP

Next Gen OCR

Digital portal

Tier B tech stack

Case study: typical actuarial reserving process

Play video

Free up valuable resources and focus

on value-add activities

Man

ualp

roce

sses

Clie

ntin

tera

ctio

nD

ata

Ove

rarc

hing

27 h

r pr

oces

ses

(with

RPA

)13

0hr

Reduce manual errors


Fully transparent –each work step is

automatically documented and

auditable

https://vimeo.com/208862138

Actuaries have been automating processes for a long time, and theemerging classes of tools are allowing actuaries to do more

Macros

“Automation in silos”

Excel VBA, MS Access SQL SAS


Programming

“Super actuaries”

R, C#, Python, APL

Actuarial platform enhancements

Data analytics technologies

Robotic process automation(RPA)

Business processmanagement tools

EmergingTraditional

Sample actuarial automation opportunities: reporting process

Data Methodology andAssumptions Modelling ReportingResults

Areas with less automation savings potential Areas for automation savings potentialKey:

1. Inputs to Policy Admin System1 and Claims Handling System1

2. Data validation and grouping

5. Projection/reserving model development and

maintenance

4. Review and approval of assumptions and

methodology

3. Assumption and valuation methodology

setting

8. Review and approval

of results

6. Results production (including retained and

reinsurance)

Capital Results Consolidation

IFRS Results Consolidation

Capital Results Reporting

IFRS Results Reporting

9. Results consolidation

10. Reporting and MI

Forecasting Planning

1 Performed by non-actuarial resources


7. Analysis of results

Automation opportunities often exist for sub-processes instead of the entire end-to-end process

High level actuarial systems architecture

Source/Populate Transform Store Achieve/Delete Output

Scorecards► Finance► Operations► Risk► Strategy

Standard Reports► Limited Drill Down► Canned Reports► Monitor & Compliance

Self Service/Insight► Slice and Dice► Insights► Ad Hoc Querying

Emai

lW

eb/P

orta

lED

ISM

S/Ph

one

Analysis & Reporting Architecture

Risk & Regulatory

Premiums

Financial and Capital

Data Marts

GAAP: UK, IFRS, etc.

Solvency II

Data Stewardship

Data Policies

Data Ownership

Data Standards

Data Profiling Data Monitoring

Data Compliance Data TraceabilityBusiness Data Dictionary

Automation Process Flow Reconciliation

Surrogate Keys Error Handling Logging and Time stamping

Accounting, Actuarial and Data Warehouse

Claims

Master Data Master Data

Dat

aQ

ualit

y

Dat

a

Gov

erna

nce

Dat

a

Man

agem

ent

Audit and Change Control

Data Normalisation

Data Integration

Data Quality and ControlsFinancial Consolidation

General Ledger

Sub-Ledger Environment

Calculation Engines

Accounting Events and Rules

Sub-Ledgers

Actuarial Reserving

Population Architecture

Reserves

Policy data

MQ

Serie

s,et

c.Bl

ade

Inpu

tPo

rtal

EUC

Source Systems

Premium

Losses

Investments

Expenses

Claims data

Third Parties & Others

R

R

R R

R

R R RRejection and recycling

R R

R

R

R

R

R

R

Local and Group Data Warehouse(s)

R

RR Robotics can be applied Robotics can be partiallyapplied

Actuarial processes are complicated Business-owned vs. IT-owned automation


Establishing a successful RPA program – understanding the life cycle

2.1 - Opportunityidentification

2.2 - Opportunityprioritization

2.5 - Ongoingoperations

2.4 - Development& deployment

2.3 - Automatedprocess optimization

Plan Build Run


Following the life cycle is essential to realizing sustained business value

Automation life cycle

RPA critical success factors“Start small and agile and build for scale”

It is key to create stakeholder incentives

to automate manual activities

Critical success factors

Stakeholder incentive and engagement

Process prioritization

Robust and agile operating model

Business and IT accountability

Benefit realization


Blockchain

“Everyone Is Getting Hilariously Rich and You’re Not”


Bitcoin

ZCASH

ethereum

Blockchain


Type of distributed ledger that is composed of a chain of cryptographically linked ‘blocks’ containing batched transactions; generally broadcasts all data to all participants in the network.

01 Someone requests a transaction

02 Transaction is broadcastTo the Peer to Peer network consisting of multiple computers, known as nodes

03 ValidationThe network of nodes validates the transaction using known mathematical algorithms

04 Block creationThe transaction is combined with other transactions to create ablock of data for the ledger

05 The new block is added to the chainCurrent block is hashed with the prior block to make it unalterable

Blockchain vs. Status Quo

De-centralized


► One party controls the infrastructure and performs and validates transactions

► Allows others to see pieces of the ledger for their own purposes

► Requires trust from users to central party

► ‘Permissioned ledger’► Control is distributed across a

group of trusted peers► Consensus mechanism is used, but

on a smaller scale► Small network to avoid trust issues

► No party controls the ledger, eachnode has it replicated on their ownserver

► No trust required

Centralized Hybrid

Do we care at all?

1 1

2 2

? 3


invention of the WWW► Standard protocol through lowering of

cost of connections

That’s because blockchain is nota “disruptive” technology, which can attack a traditional businessmodel with a lower cost solution and overtake incumbent firms quickly. Blockchain is a foundational technology: It has the potential to create new foundations for our economic and social systems.

Marco Iansiti andKarim Lakhani, “The Truth AboutBlockchain” – Harvard BusinessReview, January/February 2017.

► No centralized adoption ► No centralized adoption► Non-standard use cases ► Primarily a single use case (ARPA)► Technology iteration and growth ► Technology iteration and

implementation

►

►

Innovative companies begin usingfor internal use casesLimited use cases with external parties

►

►

Localized networksImplanted on some machines forinternal use (Sun)

► Can reduce the cost of transaction ► Adoption accelerated throughthe► Can it become more of a standard?

Blockchain Transmission Control Protocol/Internet Protocol (TCP / IP)

Blockchain is foundational

► Blockchain performs poorly as a query-able database

► Can have data populated fromtheblockchain to a standard database

► Can hold data off-chain, using the chain to perform the transaction, pointing to data elsewhere

Getting Data off the Blockchain

Business processes

Applications

DatabaselayerNetwork

Hardware

► Still requires nearly all of current technology stack► Blockchain is a ledger designed for a specific

purpose with multiple entities, and will feed data to a single entity view


Distributed ledger

Blockchain does not eliminate need for ERP (yet)

Data may or may not reside on the chain

Current Impact of blockchain on insurance

Starting simpleSmart contracts in a self-governing network

Aigang is partnering with aerial imaging company Skyglyph to provide an autonomous crop insurance using drone image data.

ICS, Agrics, Achmea, Swiss Re, EARS (satellite company) and Kenyan insurer UAP have joined forces to test a blockhain concept in 2018. It is meant to reduce cost of insurance and allow smallholdersaccess.

AXA is using similar technology on their ‘Fizzy’ flight insurance producthttp://insureth.mkvd.net/


Reinsurance prototype is built in Hyperledger, andhosted by IBM.

Expect to see 30% reduction in cost of administrationof reinsurance.

Insureth Crop Insurance

B3i

http://insureth.mkvd.net/

Decentralized autonomous organizations (DAO)


A DAO is a business or organization whose decisions are made either electronically (automatically) or through a vote of its members. It is at its core a system of hardcoded rules that define which actions a company will take.All cryptocurrencies on a public blockchain are DAOs; modern DAOs are smart contracts that sit on top of a blockchain

► Removes human intermediaries:► Reduced transaction cost► Elimination of errors

► May or may not use the current legal system► Open, transparent and incorruptible► Higher degree of auditability

► Public records: marriage certificates, birth certificates,deeds, mortgages, titles

► Taxi companies► Dropbox► Kickstarter

► (Lack of) participation by shareholders► Rigidity of the code – nearly impossible to change

► Almost no ability to debug► Legal status is uncertain

http://www.dynamisapp.com/index.html

Advantages

Use cases

Potential problems

DYNAMISThe DAO

Teambrella

http://www.dynamisapp.com/index.html

Impact on Life and Annuities

Finance Function is Exploring


Every piece of the value chain is impacted

Product mgmt


Marketing

Sales &distribution

Underwriting

Policy acq& service

Claims management

Finance and

accounts

New product venturesDAO and P2P insurance

Decentralized marketplaces (eliminateintermediaries)

Multi-signature contracts easier Improved sales processes

Facilitates independent agent process

Automated underwriting data capture, review and release

Improved KYC (Know Your Customer), auditable premium trails Seamless beneficiary trail

Automated claims processing

Elimination of intermediaries Immutable intercompany risk transfer

Impactful use cases

► Automated underwriting► Verifiable (immutable) data requires less verification► More data shared in an easier fashion

► More customer friendly► More accurate rating and underwriting

► Policyholder or applicant can permission data to beviewed by the company

► Can be re-hashed and removed from calculationengines. “Forgotten”

► General Data Protection Regulation (EU)

Company risk and

sales Medical data blockchain

Underwriting data

blockchain

► Always looking to decrease time to close – blockchainis immediate► Potentially remove standard reporting cycles

► Reconciliation processes are timely and costly (50-100 days/month lost). With one ledger, reduce reconciliations

► Auditability and transparency is increased► Regulators can be added to the process for seamless

integration, and reduced reporting► Reorganizations are reflected immediately

Company ledger

Regulator


Internal or external companies

Underwriting and data (GDPR) Financial reporting and regulators

Blockchain suitability

Are there multiple parties in the transaction cycle?1

Would the parties and transactionsbenefit from improved transparency?2

Do the transactions require a high levelof resources and time for reconciliation/ verification between parties?

3

Are there costly or slow intermediaries within the transaction ecosystem?4

Is it critical to have a tamperproof permanent record of transactions?5

Is it important to establish provenanceor traceability of an asset?6


Blockchain has started to move from hype to reality, but it still isn’t clear where it can be applied in its most useful state.

There are 6 points to consider that have a strong impact into which processes would be good for blockchain solutions:

Concluding remarks

Optimization andinnovation

Analytics in everything

High levels of automation

Exceptional human challenges

1 Work will look different

2 New organizational capabilities will beemphasized

3 The competency profile for an actuary will change

4 Leadership will be redefined

5 Talent management investments will differentiallyincrease

6 Actuarial strategy will include distinctiveassociate experience


The future of work in

actuarial

It is an exciting time to be an actuarial leader

Better questions to think about future of work in actuarial

How will you reduce the manual processing activities that actuaries currently perform?

How will data scientists impact actuaries? Will they compete or complement? How will actuaries meet the needs for these new competencies?

How will you leverage highly compensated and big thinking actuaries to be focused on value-added, strategic topics?

How will you update our approach to the actuarial career path and workforce to meet the changing demographics?

How will you gain efficiencies by centralizing process and people? What are potential low cost locations?

How will junior actuaries be trained on key actuarial concepts and learn the fundamental economics of the business?

How will you make yourselves more attractive to recruit and retain millennials?

How will the next generation of actuaries learn if they aren’t doing the hands-on modeling work?

How will you centralize the actuarial team, but stillprovide a flexible work environment include virtualand remote locations?


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session 27 panel discussion: insurtech: blockchain and ... · the views expressed by the presenters...

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