Christopher McDaniel is the President at the Institutes’ RiskStream Collaborative. In this podcast he announces the launch of Canopy 3.0 their latest version of their insurance blockchain platform. This new platform, built on Kaleido, supports Corda, Enterprise Ethereum and Hyperledger. Chris also shares with us his plans to launch first notice of loss in production mode on Canopy 3.0 this year.
What is blockchain?
Since the launch of Canopy 1.0 in late 2017, Chris’ view of blockchain has evolved. Back then when they were building Canopy 1.0 their views were that blockchain was fundamentally a sharing mechanism. There weren’t many applications out there so they had to build use cases and applications to demonstrate to the market what is possible.
Now with the launch of Canopy 3.0 things have changed. GDPR, and the right to be forgotten, has had some impact on what you can and can’t do on a blockchain. There are now many parties building out solutions on blockchain compared to back in 2017. Whilst blockchain is still a sharing mechanism there is this realisation that you don’t need to put everything on the blockchain. You can store data off chain and link it to the blockchain via a validated hash. For Chris, blockchain is a great solution for verification, for trust and for facilitating sharing.
The Institute and RiskStream Collaborative
The Institute, parent company of RiskStream Collaborative, is focused on education and certification in the insurance industry. Their flagship certification is the CPCU certification amongst another 20 certifications.
Their reason for starting RiskStream Collaborative, is that the management at the Institute realised that emerging technologies such as blockchain, AI (artificial intelligence) and IoT (internet of things) are going to be key things they will need to teach and certify for insurance professionals in the future. Based on that they created RiskStream.
Prior to creating Canopy 1.0 the Institute organised a working group for 30 insurers who wanted to find out more about blockchain. From that event three to four proof of concepts (PoCs) were set up on a public Ethereum blockchain. Some of the learnings they gained from that event was the need to build on a private blockchain. Canopy 1.0 was launched on a private Ethereum blockchain with proof of insurance as the one use case built on top of it.
One of the key learnings that the team took out of Canopy 1.0 is that members of RiskStream Collaborative weren’t comfortable with the classic version of blockchain where everything is shared with everyone on the network. Whilst the information was encrypted and accessed on a permissioned basis it still had trust issues along with legal and compliance ones as it was shared with everyone.
Chris and his team looked for an alternative solution and identified R3’s Corda as it had a point to point approach instead of everything being shared across the blockchain. This was a critical success factor for the consortium’s members. Purist would argue that Corda isn’t a blockchain but a distributed ledger technology (DLT). Whilst this is true from a technical standpoint, the DLT solution provided the answers to the challenges they were facing.
Canopy 2.0 was launched on a Corda Enterprise License with a number of use cases such as first notice of loss, proof of insurance and a number of other applications within commercial lines, workers compensation, certificates of insurance, surety bonds and a proof of concept for the placement process for reinsurance between brokers and reinsurers.
Canopy 2.0 brought significant learnings including one where a number of customer needs and third-party solutions weren’t a natural fit for Corda and thus couldn’t be integrated into Canopy 2.0.
GDPR along with the California Consumer Privacy Act (CCPA) of 2018 introduced some new challenges for blockchain. Both presume the operation of the traditional data model (ie. a centralised one), which makes them difficult to reconcile with a decentralized or distributed data model. These are issues that Canopy 2.0 couldn’t quite addressed which Canopy 3.0 would.
Canopy 3.0 – Multi-ledger
Chris’ vision with Canopy 3.0 was to make it the universal sharing layer for carriers, brokers and reinsurers to transact. With a large number of Insurtechs requesting different blockchain protocols to integrate with, Canopy 3.0 was built with a multi-ledger approach to act as a hub for Insurtechs and also to enable future capability to build tokenisation incentives. Supported blockchain protocols are Corda, Hyperledger Fabric, Ethereum and Quorum.
With Canopy 3.0, RiskStream Collaborative has taken the approach of not having any data stored directly on the blockchain but instead of having hashes linking to it off chain.
Canopy 3.0 benefits
Under Canopy 2.0, it wasn’t easy setting a node. Members of RiskStream Collaborative had different levels of technology capabilities, but on average it would take 2 weeks to set up a node on Canopy 2.0. Having 40 – 50 insurers on RiskStream Collaborative, the support and resource requirements to set them all up with a node and integrate them would be quite high.
With Canopy 3.0 they can perform what they call a “rapid node setup”. Members only need to go to a website and within half a dozen clicks they can choose their cloud service provider and the flavour of the blockchain they wish to have. This is considerably faster than the previous 2 weeks it would take on Canopy 2.0.
This setup creates a lot flexibility for insurtechs and small carriers, who may not have the technical staff, especially as they also get a safe environment for them to perform tests before going into a production environment.
The increased speed for deployment and the way Canopy 3.0 was architected enables insurers to operate on Canopy 3.0 at a lower cost. The DLT stack uses a growing amount of open source technology and it comes with a certain amount of prebuilt modules.
Canopy 3.0 has partnered with Guidewire to facilitate carrier back office integration with Guidewire version 10.
Plans for 2021
Chris’ number one goal is to have their first notice of loss application on Canopy 3.0 in production. In addition he hopes that a number of third parties will build on canopy 3.0 and take advantage of the sandbox environment they have developed for them to build applications on top of.
This episode is brought to you by our friends and sponsors at R3. In this digital-first world, now more than ever, businesses need to modernize existing processes, systems and models – and enterprise blockchain provides the ideal solution for transacting directly and streamlining business operation.
Developed by R3, Corda is light years ahead of other blockchain platforms in terms of privacy, security, scalability and interoperability. And–because Corda was built to meet the stringent requirements of highly-regulated industries, it can be used by firms of any type or size and in any industry.
Blockchain applications built on Corda can reimagine and increase the potential of existing business networks, enabling direct and trusted transactions that eliminate friction and accelerate growth.
Check out r3.com to find out more.