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After years of excited predictions, at last, we are seeing the emergence of solid blockchain use cases in banking and other industries. Current trends show that greater blockchain use in insurance is on the horizon.

Blockchain, or distributed ledger technology, uses advanced cryptographic techniques to create a secure ledger of information that prevents unauthorized modification, addition or removal of data. Use of blockchain offers significant advantages over other technologies, key among them is data security and the creation of a clear audit trail. As blockchain systems are immutable and do not require oversight by a central authority, use of a distributed ledger also opens up new options for secure collaboration between competitors by removing the need for trust between third-party organizations. The key characteristics are set out below:

Blockchain characteristics

Though blockchain’s capabilities are well-established, insurers are still investigating blockchain’s potential applications within their unique organizations, as well as across the industry at large. Many are starting to recognize that blockchain has significant potential to transform the insurance value chain, creating a more secure, efficient, cost-effective, and customer-friendly experience.

Proof of concept projects and beyond

There are dozens of potential use cases for blockchain technology within any insurance firm. When investigating blockchain integration, the question quickly transforms from, “How can blockchain help?” to “Which specific use cases offer the greatest long-term value and return on investment?”. To some insurers, blockchain also presents an opportunity to challenge long-standing assumptions and rethink existing insurance business models. While most blockchain activity is still in the proof of concept (POC) stage, we are already seeing some more viable applications being tested in the market.

Early adopters have started to explore use cases which leverage the intrinsic properties of blockchain to lower operational costs related to transaction processing and improved data accuracy through increased trust between parties. One area already getting a lot of notice is the use of smart contracts, which execute automatically upon achievement of specific contractual criteria. For example, in 2017 AXA launched fizzy, an automated parametric insurance platform for delayed flights. Fizzy records information on customers’ purchased flight delay insurance using a smart contract, and connects to global air traffic databases to monitor flight statuses. If a policyholder experiences a flight delay of two or more hours as reported by airport information, the smart contract triggers the mechanism for payment upon receipt of flight confirmation by the policyholder and Fizzy automatically pays the customer. Not only does this mean that the customer is spared the hassle of filing out claim forms or speaking to a service assistant, but AXA also avoids the need to spend time processing the claim through independent verification of the claims data. At KPMG we have undertaken a similar POC with the following process flows:

KPMG flight delay claim process

Another use case already gaining traction is that of asset tracking. For insurers that cater to high net worth individuals, blockchain can provide secure and easy tracking of the proof of ownership and value of assets such as high-value collections of art, jewelry or wine.

Enabling industry collaboration

While the majority of blockchain-related activity in insurance to date has focused on internal POC projects, industry players are also coming together to investigate the viability of wider blockchain platforms. One such organization is the EU-based Blockchain Insurance Industry Initiative (B3i). B3i was originally a collaborative effort between major insurers and reinsurers to investigate potential blockchain use cases across the industry and was incorporated in March of 2018 as B3i Services AG with the goal of “[streamlining] the development, testing and commercialization of blockchain solutions” in insurance.

An excellent collaborative blockchain use case is that of fraud detection and prevention. Criminal activity often exploits insurers’ “blind spots,” where fraudulent patterns can only be detected across a wide data set, often across multiple insurers. Legal and competitive challenges have hampered insurers’ attempts to share intelligence on fraudulent activity to date; however, development of a blockchain network could provide a way for competitors to safely and securely share data, gain visibility into criminal patterns, and prevent future losses.

On the claims side, blockchain could also transform responses to catastrophic events. Where today insurers, reinsurers, and brokers need to manage masses of paperwork and electronic forms created by parties such as claims assessors, lawyers, and salvage experts, a blockchain based claims system would make the process of sharing data faster and more efficient, creating significant operational savings for all parties.

The first steps on a long road

Though we can expect to see more POCs and use case development across the insurance industry in coming months, blockchain integration is clearly only one part of the larger move toward a digital-first operating model. As experimentation continues, we should expect to see greater blockchain-related activity especially in areas strong in Fintech and RegTech such as Singapore, where the Monetary Authority of Singapore (MAS) actively encourages innovation through their regulatory sandbox and other initiatives.

For insurers looking to tackle challenges such as poor customer experience, costly manual administrative processes, and privacy and data security risks, blockchain may well be part of the solution.


Author: Paul Brenchley
Source: KPMG

Insurance fraud is a global problem. In the U.S. alone, insurance carriers lost over $34 billion in 2017 on fraudulent insurance claims. It’s a global problem with a growing number of technological solutions. Big data analysis and large-scale collaboration are key to fighting insurance fraud.

The insurance industry is increasingly focused on preventing fraud through innovative systems, relying on the assistance of specialized vendors to help accomplish the task. The burden of detecting and reducing fraud, therefore, no longer lies with the individual insurer.

The 2018 FRISS Insurance Fraud Survey reached over 150 industry professionals and shows a clear picture of the current awareness and challenges of fraud detection and mitigation.

Key survey findings show:

  • Increased focus on data quality 
    The quality of a carrier’s data has become increasingly important. 45% of insurers report a challenge with the quality of fraud data collected. In 2016, only 30% of insurers saw this as a major challenge. The main reasons noted were that too little information was available and/or poor-quality information disrupted the process of effective and reliable analysis. There is a growing industry awareness that quality information is essential to improving the customer experience. Making use of good data ensures short acceptance and claim processing times resulting in happier customers. This data must be readily available and consistently reliable.
  • Exchange of information between insurers is vital to stop fraud
    Today’s insurance customers are more apt to request quotes and purchase insurance online. It’s easier and more convenient, and many carriers are now actively encouraging it over traditional phone or in-office visits. Focusing on online interactions makes it more important for carriers to have immediate access to quality data to make smart decisions on who to insure. The problem is that most carriers don’t have access to enough of it. Third party companies can, in theory, pool together publicly available data as well as shared data from other insurance carriers. Shared data includes information about false claims, unreliable repair shops, and health professionals, imagery and information about insured assets. Years ago, this was virtually impossible. Old thinking said data sharing would be bad for competition, however, a third of insurers surveyed now believe it’s an important tool in fighting fraud. Fraud data pools allow insurers to detect and prevent fraud quicker and more accurately – a benefit to all carriers with little competitive impact. While fraud data pools are incredibly useful assets to insurers, companies must ensure they are compliant. Many companies say this is a challenge, especially with the introduction of the European General Data Protection Regulation (GDPR) rules.
  • Keeping systems up to date
    Most insurers now realize the only way to effectively fight fraud is by implementing advanced and evolving technologies. Automated fraud detection is becoming more effective every day, and carriers must keep pace in order to decrease loss ratios. Today, over 60% of insurers utilize automated fraud detection software to enable real-time fraud detection. Those who do enjoy lower loss ratios, healthier portfolios, and more efficient claims investigations. While 86% of insurers believe their current systems are up to date, over half have difficulty maintaining their software. They share frustrations that their internal IT departments are not capable of keeping up and/or have other priorities. Of those surveyed, 43% report difficulty with data integration and are affected by too many false positives, leading to delays in the claims process. Engaging with specialized fraud detection companies virtually eliminates these challenges.

Improvement is still needed

Much progress has been made in insurance fraud and risk detection over the past two years, and insurance companies still believe reducing fraud is both socially and economically important. When it comes to fighting fraud company-wide, 30% still struggle with organizational buy-in. Consistently updated systems working with quality data allow carriers to make good decisions quickly. While industry awareness is growing, there are still many opportunities for improvement.


Author: Ruud Van Gerwen
Source: CoverageR

During her career as a leadership consultant, Nicki Roth has seen countless variations on executive teams—both for good and ill. But regardless of organization size and structure, certain questions about group composition keep floating to the surface for the leaders of these teams. As an executive director, how do you ensure you have the right people, in the proper roles, on your team? Roth recently shared some advice with Bridgespan Partner Kirk Kramer.

Kirk Kramer: What are the key hurdles for executive team leaders who are looking to create highly effective teams? 
Nicki Roth: Understandably, executive directors and their boards often focus on strategy, funding, growth, and impact. Their primary goals are to get strong players in specific roles with clear functional expertise. Over-focusing on those goals, however, can lead to selecting the wrong people. Beyond functional skills, you need to know if these people have management experience and the ability to develop talent or that they can be trained to do so. Also, can they be team players who think strategically and holistically about the organization and its future? If the answer is “no” to any of these questions, then you may need to rethink some of these folks, regardless of their functional talents.

Kramer: Can you give us an example?
Roth: Sure. One of my clients, Dana [not her real name] had been the executive director of a small early childhood education nonprofit for 12 years. As the organization grew, she created an executive team. After seven years, the team had stabilized around three key people. There was Jeffrey, a veteran nine-year leader hired as one of the first 10 people at the organization. Dana also promoted Tony, previously head of a key service area, after six years with the organization. Tony was the first person Dana assessed for leadership skills as part of the selection process. Nailah was the newest hire and had come on board after 12 years as a leader at another organization. Dana wanted her to bring in fresh thinking and leadership experience.

Even though Dana kept the group small, she still struggled with the team dynamics. She observed that every time the team was about to break with the status quo, Jeffrey pushed back and derailed the discussion. It was also apparent that Nailah was a more talented leader, and this skill gap contributed to the team not quite coming together.

Kramer: So what did Dana do to address the situation?
Roth: She started by meeting with Jeffrey to develop his leadership skills. When that didn’t help, she hired a professional coach to work with him. Neither approach improved the situation. Meanwhile, his attitude created tension with Nailah, who wondered why Dana had not fired him. And Tony felt torn down the middle trying to placate all parties.

The dilemma that Dana faced is typical of what I see with most nonprofit executive teams. Rather than a group of equally skilled leaders pulling in one shared direction, there is a loosely connected group of functional heads. To reverse this trend, executive directors, with support from their boards, must address critical team composition issues.

Kramer: What are some of the critical issues you frequently see?
Roth: Often, there isn’t enough forward thinkingLeadership team members are often selected for the present but based on the history of the organization. Just because someone has made valuable contributions doesn’t mean they are a leader.

Also, there’s comfort in maintaining the status quo. If an organization’s strategy hasn’t been revisited in more than five years, organizations can find that they keep the current leaders in place without considering whether or not their undertaking the right activities or have the right capabilities to lead the current organization.

Lastly, organizations need to make conscious decisions to ensure diversity on the leadership team. Members ought to mirror the community being served and provide role models for staff. Additionally, the mix of backgrounds, age, gender, and experience creates more robust and stimulating input that aids organizational advancement.

Kramer: What is a good starting point for considering who should be on your executive team?
Roth: Imagining the future and what organizational capabilities need to be developed is a strong starting point for thinking about the executive team composition. Executive directors should identify the leadership skills the organization needs to achieve its strategy. If there is a new strategy, a growth spurt, a significant shift in funding, or simply stagnation, it is vital to step back and assess what competencies and vantage points the leadership team needs in order to meet the challenge.

Doing this doesn’t come naturally to most nonprofits, but it’s worth the hard work of identifying and learning necessary leadership skills.  A comprehensive discussion and inventory of required leadership traits provides two things: focus on what it will take to achieve the goals and a path for leadership and talent development.

Once you’ve identified the skills the organization needs, you can assess how many and what new leadership roles emerge. Does a new focus on fundraising mean the development director needs to be on the leadership team? Does a slew of new administrative functions mean you need a chief operating officer?

Don’t get stuck on who you currently have or budget constraints or legacy roles. Once you know the roles that you need, you can work with your board to sequence these changes over time to be in sync with long-range plans.

Kramer: What if your current team doesn’t have the right people with the necessary skills to fulfill those roles?
Roth: Looking at the specific individuals on your team and how they might fit those roles comes last. If you have done your analysis, you will form a new outlook on what you need on your team. The team will undoubtedly need to have members who can think systemically, move beyond functional expertise to manage the whole organization, assume greater authority and accountability, engage in broader and more strategic discussions, collaborate effectively with others, represent the organization to external partners, and share the daily challenges of running the place. This clarity will necessitate some tough decisions. Some current team members may no longer be a good fit while others will need to stretch to develop new competencies. As the executive director, it’s your responsibility to meet organizational needs. It may be that you need to take the uncomfortable step of asking someone to leave or create a detailed development plan for someone to build the skills and competencies needed to serve on the executive team.

In the previous example, Dana went through a team composition analysis before she hired Nailah. And when she saw that Jeffrey was remaining an obstacle despite attempts to help him develop necessary skills, Dana had to face the moment she had been avoiding. Jeffrey was not surprised when Dana talked to him about his exit. Even though he was hurt, he said he actually wondered what had taken her so long.


Author: Kirk Kramer
Source: The Bridgespan Group

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