How Blockchain Technology and AI Can Deliver Insurance Innovations

Today's commercial and home security monitoring systems produce an enormous amount of big data designed to alert users after an event has occurred. We believe that no system exists to continuously collect and analyze that data, utilizing it to predict, alert and prevent risky behavior autonomously, and proactively warn of an event that is about to happen.

OneEvent’s patented artificial intelligence (AI) software platform analyzes a multitude of environmental sensor measurements sending instantaneous information and messages to the mobile devices of property owners and managers. The OnePrevent™ system empowers property owners and managers and enables fast and reliable decision making, helping to mitigate property damage and personal injury risk. The system identifies and predicts the onset of fires, water damage, equipment failures, food/medicine spoilage and other catastrophic events. The AI solution creates a paradigm where computer systems can sense what is occurring within an environment, and think, learn and act in response to what they are detecting.

OnePrevent™ environmental sensors are designed to measure a variety of conditions, using a decentralized database to store all the data.. The AI solution analyzes the data to learn the intimate behavior of a building or equipment helping it to understand what is normal, and creating immediate alerts when conditions are not.

We believe the Property and Casualty (“P&C”) industry has much to gain from the widespread adoption of our technology. The OnePrevent™ system can alert property owners to issues before they escalate, helping reduce or even avoid insurance claims. The OnePrevent™ system allows P&C insurers to receive timely and accurate claim loss information, improving claims processing, decreasing processing time and increasing customer satisfaction, all while providing the forensic information desired to reduce fraudulent claims. The OnePrevent™ system provides property risk assessment information helping P&C insurers assign risk to the insured, and allowing for premium adjustments and deductibles during the underwriting process.

A significant opportunity for OneEvent is in the ability to monetize the enormous amount of data continuously collected and analyzed by the OnePrevent™ system. OnePrevent™ is an Internet of Things (IoT) system designed to categorize data as either sensor-based, computational analytics or mobile-derived user. However, providing the underlying contractual assurance that the data is accurate then becomes difficult.

Insurance is an old business built on actuarial tables used to assign new policy customers to a risk category. Adjusting the size of the grouping ensures that the policies are profitable for the company. This approach results in some policyholders paying more than they should due to the basic level of data used to form the original group.

The term “InsurTech” refers to the use of technology innovations designed to squeeze out savings and efficiency from the current insurance industry model. As consumers become increasingly tech-savvy, they demand seamless access to personalized offerings via a choice of channels. Moreover, insurers are facing pressure to optimize costs and improve operational efficiency.

By transitioning to business models which allow easy access to services, InsurTech can also enhance the customer experience, which is top of mind for insurers interested in customer retention and attracting new customers. Adding digital proficiencies to automate processes will increase efficiencies, reduce errors and help detect fraudulent activity.

OneEvent has developed products to help insurers realize business benefits such as reduced risk, improved customer experience, greater underwriting margins through tighter pricing accuracy, trimmed claims leakage and increased forensic information. Examples of OneEvent’s InsurTech include such items as first or instant notice of loss, claims agent UX connect, risk assessment or risk scoring tools, data exchange, and a wealth of forensic tools designed to determine exact time and severity of a reported loss. OneEvent’s data will also be invaluable to insurers as they look to develop more accurate actuarial models or new products, such as usage-based insurance (UBI) models.

The challenge is delivering solutions to support the digital IoT transformation underway in the insurance industry that also overcome resisting adoption of these data-driven technologies due to fears of authenticity, privacy, data errors and false negative/positive results. Building trust through transparent methodologies of using accurate data transactions and data contract agreements when disclosing personal data is key to improving technology adoption. Simply put, “developing a method where people who do not know each other can trust a shared record of events.” [1]

OneEvent™ is exploring how blockchain technology can be used to drive broader adoption of its digital Internet of Things (IoT) innovations to insurers. The use of blockchain has the potential to eliminate faults and errors, as well as detect fraudulent activity associated with falsified sensor data. A blockchain-based system has the capability to facilitate and coordinate machine-to-machine communications between an insurer’s claim submission process and a customer’s mobile devices and sensor networks, increasing customer satisfaction, lowering overall adjuster costs and improving the accuracy of claims.The blockchain is a decentralized digital repository managed by a network of globally distributed computers that independently perform the task of authenticating, validating and relaying each transaction within the network. This type of system lends itself well to providing insurers a credible architecture for quickly differentiating a valid data transaction from a duplicate data transaction, or a data transaction involving suspicious activity.

However, the blockchain structure has inherent inefficiencies, as exemplified when using this technology in cryptocurrency bitcoin. As previously stated, a distributed network manages blockchain, but the underlying blockchain principles do not provide distributed computations; in fact, the nodes that maintain the blockchain perform identical tasks on the same transactions by the same rules and perform identical operations to record the same things into a blockchain. The blockchain structure is also dictating large chunks of data be stored and moved about the network for every transaction.

Scalability of the blockchain network, due to inherent bottlenecks, is a fundamental question that has caused major rifts in the community since early summer of 2017. Currently, the Bitcoin blockchain network can only handle about seven transactions per second worldwide. The inability to scale is a significant concern when applying this technology to an IoT platform, where the data collected by connected devices and objects will exponentially increase the number of machine to machine transactions.

Several solutions have been proposed to address current network inefficiencies, including Lightning Network (LN), a bi-directional payment channel designed to perform the bulk of the transactions off-chain. The basis for the protocol is a single transaction comprised of two users, each of whom starts by contributing funds to the channel. The protocol records the initial contribution, and all subsequent transactions between the two users increment the off-chain channel state. Once the channel closes, each user has their funds allocated when their transactions are complete. All routing nodes associated with the payment channel transaction then receive their associated transaction fees. Because LN is a more centralized network, much of the LN transaction activity occurs off-chain, making it incredibly efficient and economical when compared to standard blockchain transactions.

The drawback to using the LN with IoT systems is the concept of transaction fees for transactions of any value. In LN, transaction fees are the incentive for the block creators. It is also one of the primary tools used to determine transfer efficiency, making it difficult to remove fees from the blockchain infrastructure.

Another solution to solve the fee-based transaction problem is IOTA. IOTA, a scalable distributed ledger architecture, with no transaction fees, can run in the IoT environment, making it possible to lower the minimum payment threshold to levels at which LN cannot achieve. At its core, IOTA utilizes a data structure called a ‘Tangle’ rather than a conventional blockchain.

IOTA has a similar approach to LN, using Flash channels to make the bulk of the off-Tangle transactions. A Flash channel enables instantaneous, high-throughput payment transactions. Flash channels provide an equal incentive to each party to participate in the channel.

The power of IOTA is in its network, which scales horizontally with the number of network participants transacting with each other. There is also no block “mining” in IOTA. A single transaction is created by validating two past transactions, thus increasing network speed when users take part in the network. As a result, the network views each user as an independent “miner.”

IOTA can distribute and tamper-proof IoT data, establishing new trust in data that would allow our system to provide a "pay per event" price model. Additionally, it can provide the mechanism to securely sell the data in an open marketplace. Although these projects are new and not ready for mainstream deployment, early planning and development can commence, allowing the company to create an 18-month plan of expansion.

References

[1] A blockchain definition provide by the Bank of England

[2] The Lightning Network – Brooks Boyd

[3] The Tangle – Serguei Popov

Other Sources

https://blog.iota.org/iota-ecosystem-fund-2-million-f6ade6a4d8ba

https://iota.org

https://www.forbes.com/sites/laurashin/2016/05/10/looking-to-integrate-blockchain-into-your-business-heres-how/#561726c41a15

https://data.iota.org/

https://blog.iota.org/iota-ecosystem-fund-2-million-f6ade6a4d8ba

http://www.ey.com/Publication/vwLUAssets/EY-blockhain-in-insurance/$FILE/EY-blockhain-in-insurance.pdf

https://www.kaspersky.com/blog/bitcoin-blockchain-issues/18019/

https://www.kaspersky.com/blog/mining-easy-explanation/17768/

https://blockgeeks.com/guides/what-is-blockchain-technology/

https://help.wirexapp.com/hc/en-us/articles/212638865-What-is-the-blockchain-fee-

https://bitcoin.stackexchange.com/questions/62303/how-come-the-lightning-network-creators-believe-the-fees-will-be-zero