An Italian Commercial Insurance Blockchain Pilot

Here at Insureblocks we love hearing about interesting real-life insurance blockchain pilots. So we were very excited to hear about the launch of Generali’s quotation process blockchain pilot. To learn more about this pilot we had the great pleasure of having Marco Boni, Group Head of Operational Excellence & Transformation at Generali, who is “genetically in love with technology”, join us for a chat on Insureblocks to take us through the journey they went through in building this Italian commercial insurance blockchain pilot.

2 Minute Definition of Blockchain

Instead of blockchain, Marco preferred to define what is DLT (distributed ledger technology). Small note to remember is that blockchain is a type of DLT. DLT is a technology that allows the storage of information in a distributed way. You can write on this distributed database, in an encrypted immutable way, after reaching a consensus amongst the participants. This technology enables you to increase the trust between all parties within an industry.

As the data is visible, agreed and secure, you can leverage smart contracts, self-executing codes, to automate business rules.

Challenges of the Italian commercial insurance ecosystem

Marco refers to the Italian commercial insurance ecosystem as “Spaghetti Insurance” as it isn’t that evolved. Therefore, the steps for the placement of commercial risk is done through manual activities. Back and forth information flow between carriers and brokers is done by phone and unstructured emails which complicates the matter when you have to draw up a policy based on this kind of unstructured information. This requires you to chase all the relevant parties to try and rebuild the entire negotiation, for the structure of the policy, that is perfectly in line with the needs of the client.

This is a very inefficient process which increases the risk of misalignment when structuring a policy.

Market perspective solution

Generali tackled those challenges by taking a market perspective and a market cooperation approach. They started from a business pain point that wasn’t connected to technology and realised that there existed problems that were shared at a market level.

They started by taking a market perspective approach by identifying the business pain points that were shared at a market level. This type of initiative and desire to solve those common problems together is within itself the biggest innovation they carried out over the last 2.5 years in the Italian market.

The initial founders of this initiative from the carrier side were Generali, AIG and UnipolSai with Zurich Italy recently joining the initiative. From the broker side the original founders were AON and Willis Tower Watson with Assiteca recently joining in.

 

Why was DLT selected over other more traditional technologies and what are the challenges with it?

Once the pain points had been identified in early 2016, the initial approach to resolving those problems was with traditional technologies such as centralised relational databases. However, with so many competitors sitting around the table it was quickly realised that such a solution wouldn’t be viable as it would require building a centralised infrastructure. Towards the end of 2016 they started investigating the power of DLT and its ability to offer competitors the opportunity to work together in a decentralised manner whilst providing the necessary security, confidentiality and privacy they all required.

Marco does point out that whilst the features of DLT were superior to traditional technologies, for their requirements, there were challenges to its adoption. The main complexity with DLT wasn’t necessarily around technology but was related to coopetition (cooperation between competitors), a first in the Italian market. Defining the legal framework on how the participants of this prototype will be working in the future is the biggest challenge they are now facing.

 

Linear journey to the launch of the DLT pilot

1. Business pain point identified within the commercial risk placement.
2. Agreement on the need to define a standard for the exchange of data between broker and carrier for a property risk.
3. Discussion on the use of traditional technology for facilitating this exchange of information between the parties which failed leading them to start exploring the use of DLT. Due to the intrinsic qualities of DLT the participants agreed to use it and signed up CapGemini to help them translate into functionality the identified business requirements.
4. A proof of concept was launched and completed in November 2017.
5. At the present moment they are now working on defining the legal framework of the prototype with a view to launch the first property policy at the beginning of 2019.

 

Features of the DLT pilot

Two use cases were developed for the pilot. The first one is a generic placement of a property risk where the broker is collecting the risk information (e.g. client master data, location details, covers that should be activated, and possibility of exchanging the terms and conditions of the application). Broker is able to upload the minimum set of information onto the system and ask the carriers if there is appetite for this particular risk. Once a carrier, or carriers express interest in proceeding the broker will complete adding the remaining additional information in order for the negotiation to commence around key data points such as deductibles, limits, and activated cover. All back and forth communication on the DLT platform is recorded in a blockchain structure allowing the underwriter and account executive to keep track of all the changes that are done within the negotiation.

A policy is thus built on a secure DLT platform on a commonly agreed set of structured data points.

The second case use case is essentially the same but it is for a co-insurance negotiation where a broker and two or more insurers can negotiate the direct co-insurance of the commercial property.

 

Interoperability, Corda, and B3i

An interesting question that comes up is that as this DLT app is built on Corda, is there opportunities for it to be interoperable with B3i as it’s also built on Corda? Additionally, would it be possible for other insurance carriers and brokers to license out this DLT app and use it in their respective market? Marco believes this is a future that we could be heading towards to but it isn’t one that they have yet started to look at.

 

Your Turn!

Marco shares many other fascinating insights and some top tips for launching a blockchain / DLT solution. If you liked the podcast please do review it on iTunes. If you have any comments, suggestions on how we could make it better please don’t hesitate to add a comment below. If you’d like to ask a question to Marco feel free to add a comment below and will get him over to our site to answer your questions.

Thanks again Marco!