Digital applications for three traditional insurance processes will become available to member carriers of RiskBlock Alliance in the third quarter of 2018—first notice of loss, subrogation and parametric insurance.
As with the first production application on proof of insurance that became available in April, several insurers and brokerages are collaborating in their development. Farmers Insurance, Liberty Mutual and Marsh are among the members of the alliance engaged in developing the first notice of loss application.
Agents and/or carriers typically receive a text, email or phone call from a policyholder indicating who has been in a car accident. The other policyholder does the same thing. This triggers the first notice of loss—the initial report that some sort of loss, theft or damage has occurred, the first step in the claims process.
What occurs next, says Mike Annison, head of global operations for the claims practice at Marsh, is a case study in inefficiency. “Each carrier contacts the other carrier to exchange information related to the accident, resulting in a back-and-forth process that consumes inordinate time and effort,” Annison says.
Since data on each policyholder is already in the blockchain, the two carriers don’t need to formally exchange their data. “Multiple parties eliminate handoffs,” Annison says.
In a commercial lines insurance context, today’s processes for reporting a first notice of loss slow down the flow of information. “An example is a broker that is not notified at the time of a claim because the insured has excess layers of exposure protection across different insurers,” says Matt Lehman, a managing director in the insurance practice of Accenture, a RiskBlock partner. “By sharing information in the blockchain, all parties to an insurance policy are notified simultaneously of the loss.”
With this first step in the claims process now completed, the next one—subrogation, the financial squaring of the net payment of a claim between two insurers—can occur. Marsh is involved in a RiskBlock use case addressing subrogation with Farmers Insurance, Liberty Mutual and other partners.
“With subrogation, carriers are focused on the net settlement of the claims payment, as it may involve some money coming from one insurer and some money coming from the other,” explains Bennett Neale, an enterprise architecture consultant at Farmers Insurance, a RiskBlock Alliance member. “Today, all these details are negotiated between the carriers over the phone and through emails, and a manual check is cut or a wire transfer made to make up the difference. This eats up a lot of time.”
Since the data on the claim are now in the blockchain via the first notice of loss application, much of the information needed to negotiate the ultimate settlement is already there, reducing the interactive interactions between the carriers. “In cases where both parties quickly agree to the settlement, a payment can be made in real-time funds from one carrier to the other on the platform, or an IOU form of payment could be executed,” Neale says. “More protracted cases would proceed on to arbitration, as they do today.”
The third application in development is parametric insurance, in which payment of a claim is tied to a particular weather-related metric. An example is an outdoor concert that has to be canceled because of rain. An insurance policy can be structured to cover the lost ticket income if rainfall exceeds a particular threshold, such as 10 inches of rain.
Another example is crop insurance that hinges on other parametric triggers like rainfall, temperatures or sunshine. Information provided by third-party organizations like the National Weather Service can be made available to alliance members on the Canopy platform. Additionally, data from internet-enabled sensors measuring rainfall, temperature, humidity and other meteorological conditions also can flow to the platform.
“The value of parametric within the blockchain is that it allows a variety of parametric sources to be aggregated into one source of truth for claims purposes,” says Christopher McDaniel, president of RiskBlock Alliance. “Say you have multiple sources providing flood-level information for a given area. By aggregating and creating one source of truth on the blockchain, there is now a single trusted source that multiple claims processes can rely upon.”