Enterprise Blockchain within Insurance — Asking the Right Questions to Achieve Success

By Patrick Schmid, RiskStream President 

The first in our series on Enterprise Blockchain within Insurance.

Blockchain technology continues to be a hot topic in the news.  From cryptocurrencies, to enterprise blockchain, to non-fungible tokens (NFTs), blockchain has shown it can work as a means to share value in tumultuous times and generate new methods to track digital ownership. Now it’s starting to show signs of helping with multiparty business processes and the divergent roads of enterprise blockchain and public blockchain are beginning to merge. Blockchain usage in insurance is expected to increase in the next few years and has a bright future.

Increasing operational efficiency is a goal of all companies and the special sauce of enterprise blockchain (also known as private permissioned blockchain). The usage of enterprise blockchain is quite different from cryptocurrency or public blockchain projects in that the underlying protocol is generally not public; it’s a private, permissioned network of organizations (not people).

Commonly with a private permissioned blockchain network there are rules for which parties can set-up a node and be involved in the network’s shared version of the truth associated with decentralized system of data exchange. This is why it’s often referred to as “enterprise blockchain.”

Public Blockchain — are open and permissionless. Any person with internet access can send transactions. Any person with the right hardware can set up a node on a decentralized system. The nodes can then act as a validator (i.e. a participant in execution of the programmed consensus protocol across the network). Most of the public blockchain network protocols offer economic incentives for those nodes that participate. Most cryptocurrency and NFTs leverage public blockchains.

Blockchain Node — What is a node in blockchain? A blockchain node is a device, usually a computer, that participates in a blockchain network. It runs the blockchain protocol's software, allowing it to help validate transactions and keep the network secure. 

Enterprise Blockchain — nodes are private and permissioned. These networks are not public, so it is not possible for ‘any person’ to send transactions or participate as a node in the network. Instead, access to network participation is limited, commonly to a specific group of ‘businesses’. For example, RiskStream’s consortium creates a universe of parties (i.e. insurance carriers, brokers and reinsurers) that can gain access to RiskStream’s Canopy network to participate as a nodes on Canopy’s private permissioned (or Enterprise Blockchain) network.

Blockchain concept of a transparent cube with encryption data code and network.

Enterprise blockchain allows network participants the ability to integrate blockchain nodes to existing core systems; for example, an insurance claims or policy system. The private network ensures only parties relevant to the core mission can be onboarded to the network. The permissioned aspect allows participants the ability to share or verify information from one integrated core system to another in the case of certain events. There are many multiparty business processes within insurance where this can be useful.

RiskStream Apps Across Various Sectors

Auto Sector – The lead use case for the RiskStream network is the RAPID X solution for the First Notice of Loss data sharing within the personal auto sector. This application lays the foundation for others in this space, including use cases improving data sharing for salvage title during total loss, extensions to commercial auto and other areas.

Life/Annuities – Another decentralized application RiskStream is working on is called the Mortality Monitor, which focuses on the Life & Annuities sector. This use case provides the ability for carrier members to share verified and validated information on a policyholder who’s passed away, reducing manual intervention, cycle-time to settle a claim and enabling proactive service to the beneficiary. RiskStream also has use cases on Educational Verification for Product Sales and 1035 Exchange data sharing.

Commercial Lines – Other use cases in commercial lines, like Surety Bonds – Power of Attorney verification and Surety Bonds – Bond Verification, are also making progress with broad international support.

Other – RiskStream leverages a stage-gated Labs process to develop applications. Many other use cases are in the less mature area and there are hundreds in the backlog.

RiskStream is also working with members to see how public blockchain capabilities can work with enterprise blockchains through its platform Canopy. We will discuss these more as the series progresses.

The level of transparency and flexibility within a private permissioned blockchain network are some key areas of consideration to ensure world-class security and privacy, which is paramount for network success.

As with all efforts of great magnitude, there are challenges. But there are also opportunities and tools to overcome those challenges. The challenges in implementing enterprise blockchain are generally related to factors we can put into three large groups:

  • Business Network and Network Operations

  • Enterprise Blockchain Platform

  • Decentralized Apps

An infographic depicting the 3 stages of implementing enterprise blockchain: Business Network & Network Operations, Enterprise Blockchain Platform, and Decentralized Apps

Business Network and Network Operations

When looking at the business network and network operations of enterprise blockchain, it’s important to examine how do the enterprises come together to form  the underlying business network. In order to do so, it is important to ask these questions:

  • Is there a backer institution or investors?

  • If there is a backer or investors, how involved are they and what is their business make-up?

  • If the network is brought together by an institution or business network operator, what’s that institution’s make-up?

  • Is it for-profit or non-profit? Does that institution have a method to fund staff?

  • Does the institution have the ability to interact with the broader industry?

  • Have they done anything similar (bringing competitors together) before?

  • What’s their level of expertise within the industry?

  • Which parties are permitted on the business network?

  • Could this be opened up to other parties in the future?

  • Are there network policies in place?

  • Were governance decisions made by industry parties or others?

Enterprise Blockchain Platform

  • What’s the underlying blockchain or DLT framework?

  • Is this framework complete? If not, who will build it?

  • If it’s not complete, how long will completion of the platform take?

  • Are consultants involved?

  • How much will development assistance cost? Do they have proper experience with t this nascent technology?

  • Who owns the finished platform? What’s their goal?

  • Can you build applications on the platform while completing the platform framework itself?

  • Would a SaaS model work best? Are any available?

  • What are the pros/cons of being associated with only one DLT or blockchain platform?

  • What’s the level of security?

  • Is it SOC 2 and/or ISO certified (with data protection and security)?

  • How does the framework deal with privacy and compliance (GDPR, CCPA, etc.)?

  • Is there potential for the private permissioned blockchain network to interact in any way with public blockchains in the future? Is there a roadmap?

Decentralized Applications

  • Are there a good amount of multiparty business processes within that area sector?

  • Is there a governance method to select use cases based on market interest?

  • Is the application portfolio diverse or in one specific product line? Why?

  • Is there a process to fund applications? If so, what is it?

  • Is there a process to concentrate team resources and industry resources on concepts that have the most support? If so, what is it?

  • Is there a process in place for testing and completing applications?

  • Are there business cases (or ROI reports) available?

  • For apps close to production, is there a run fee concept in place? Is running applications cost efficient?

  • Who owns completed applications?

  • Are early adopter incentives offered for network applications?

An infographic depicting Business Network & Network Operations: Inside a large circle, teal squares representing a universe of businesses. Out side the circle, sit other blue squares that represent those outside the network.

Within the network a universe of businesses that could participate as nodes on the platform. Outside of the direct network, a universe of business that can work with the network, but may have different privileges.

An infographic depicting Enterprise Blockchain Platform: inside a large circle, a group of squares sit representing the universe of businesses. Some are colored green with a chain link representing parties that have decided to stand up nodes.

There are a variety of enterprise blockchain platforms and frameworks. Each has a system where certain parties decide to stand up nodes and act as validators to use applications.

An infographic depicting Decentralized Apps: inside a large circle sit a number of squares representing a universe of businesses. Some are colored green to represent those who have decided to stand up nodes. Two are a golden yellow color and are conn

Decentralized applications are built for business purposes of the network participants on the platform. The goal is often to make multiparty business processes more efficient.

We address these questions in our next post in the series, Enterprise Blockchain within Insurance.