Tag Archives: engineering

Can Blockchains Be Insured?

Are blockchains insurable? This question was posed as a topic for presentation by the Center of Insurance Policy and Research, a research arm of the National Association of Insurance Commissioners (CIPR/NAIC).

The trigger appears to be that some insurance companies are being asked to insure the business operations of blockchain enterprises. This same question would apply to legacy businesses that may choose to use or participate in a blockchain, which is basically a shared database managed by software. If one listens to blockchain activists, this issue could apply to everyone in the near future.

The Ingenesist Project volunteered the following opinion to the question: “Are blockchains insurable?”

The article is long and comprehensive, but the implications are staggering. The article begins by describing the landscape of finance and entrepreneurship in terms of insurability. It follows with, in essence, a mathematical proof that blockchains are indeed insurable but that business processes using blockchains may not be.

Luckily, the technology offers sufficient mathematical underpinning to adequately calculate risk and thereby pool risk exposures of its components. However, trouble arises when digital assets can neither be treated as money nor as property. As such, an extralegal condition may exist that would be categorically non-insurable in mainstream finance.

See also: Why Insurers Caught the Blockchain Bug  

“Extralegal” refers to a condition where something is neither legal nor illegal. Economist Hernando De Soto writes about how the extralegal sector in many parts of the world grossly inhibits economic growth because people are unable to secure “title” to property and businesses they create. They are unable to bridge the capitalization gap — that is, the ability to borrow against tangible assets or future returns.

Blockchain technology appears to be languishing in the extralegal domain as courts and governments have few uniform ideas about how and where this tech fits in society — that is, until something goes wrong, such as a major hack where important people lose a lot of money. Only then will some patchwork of blanket legislation likely emerge that favors those of one sector over another. The running joke in crypto-space is that any effort to control blockchain technology would negate any benefits of having it one in the first place.

A Third Option

The CIPR/NAIC article raises the possibility that the pairing of blockchain technology with professional engineers (as the decentralized adjudicators of smart contracts) would achieve a state of insurability and thus bridge the capitalization gap required for mainstream financing of blockchain enterprise. This arrangement applies primarily to basic infrastructure and derivatives of basic infrastructure, which may not actually be a bad thing at all.

See also: What Is and What Isn’t a Blockchain?  

The Critical Path

The Earth is currently an epic case study in deferred maintenance. There are very real and serious global problems that affect every living creature that we need to attend to immediately. Critical path methodology is a technique familiar to all builders as a set of instructions specifying where one action must precede the next for subsequent actions to occur. Millions of business plans that provide basic human needs and protect our natural resources and that are currently unprofitable will suddenly become hugely profitable.

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These outcomes could be accomplished with the recommendations provided within the CIPR/NAIC article. Please read this article and forward it to others who are interested in this technology. There is very real value to be released and money to be made in the next economic paradigm that is currently at our fingertips. All we need to do is align insurance with engineering on a shared database.

A Word With Shefi: Boobier at IBM

This is part of a series of interviews by Shefi Ben Hutta with insurance practitioners who bring an interesting perspective to their work and to the industry as a whole. Here, she speaks with Tony Boobier, the insurance analytics executive for Europe, the Middle East and Africa at IBM, who says, among other things, that he lies awake nights thinking about cognitive analytics and who believes big data can even help identify “unknown unknowns.”

To see more of the “A Word With Shefi” series, visit her thought leader profile. To subscribe to her free newsletter, Insurance Entertainment, click here.

Describe what you do in 50 words or less:

My day job is thinking about insurance analytics on a global basis, especially in the emerging markets. At the moment, I’m spending a lot of time thinking about our business partners, and how they need to transform to become more digital.

You possess a unique combination of qualifications in engineering, insurance and marketing. Do explain:

I originally qualified as a structural engineer but was more interested in why things fell down, which led me to insurance, and my engineering training helped me look at matters including processes forensically. My team collected data in a department nicknamed “The Engine Room,” as even then, 15 years ago, we realized that the insights we were getting could “drive” the insurance business forward. Being able to effectively explain and implement change was also a critical success factor, which took me toward marketing, which is the profession of communication. Fortunately, all three UK professional institutions have awarded me fellowships, which is their highest honor.

You’ve once said, “I lie awake at night thinking about the convergence between insurance and technology.” What emerging technology are you most excited about?

It’s tricky just to think of one technology, as they are all increasingly converging. The one that most excites me is of course cognitive analytics — but there are lots of other cool things happening in the disruptive technology space. With insurance being heavily dependent on the topic of location, one of my favorites at the moment is what3words.com — a company in the location analytics space. I am also particularly interested in behavioral analytics — why we behave the way we do, and what does it mean for business.

Name a carrier you highly value for its innovative culture:

I’d prefer not to name a single carrier — but is innovation in insurance such a big deal? It’s not like we are astro-geeks discovering a new planet or something. Isn’t it as much about looking outside the insurance industry for new ideas and then taking them into our own business world? Our industry is full of innovative individuals who step out of their comfort zones and do new things, and companies that let them. By the way, IE falls into the innovation category, and that’s why I’ve always been a fan.

You’ve recently published an article on “The Unknowns of the Tianjin Disaster,” where you question whether analytics can give insight into the “unknown unknowns.” Can big data solve big problems? Or is big data best left for those who need a reminder on how often they should brush their teeth (think: Beam Dental)?

Oh, Shefi, I think you’re teasing me! But seriously, overall I think that analytics can reveal “unknown unknowns” by identifying correlations that we hadn’t previously detected and that aren’t apparent using traditional methods. These correlations will give us new insight, which we hadn’t really thought about, and that won’t be a bad thing. It will make us think differently about the world and our industry. If our teeth remain healthy as a by-product, well, probably that’s not a bad thing either.

When you are not working, you are most likely…

I love the arts, in all its forms, and especially to read, write or just think about writing. Last weekend we saw “Bacharach Revisited,” which is a rework of Burt’s greatest songbook. Reminded me that even with the rapid changes happening around us, some of the more experienced guys have still got the best tunes if we choose to listen to them. Take time out to read Tom Peters on “Re-Imagine!” — as fresh as the day it was published in 2003.

You are one of IE’s earliest fans. Which other website do you visit to complement your entertaining insurance tidbits?

Like most of us, I’m bombarded with information. We have a very effective internal company insurance community with 12,600 subscribers, which is active and shares all the relevant market news; it’s a bit like sharing news across the insurance village. But you know, Shefi, that I only have IE’s for you!

Note: Boobier is writing on a personal basis. Opinions are of the interviewee and not of IE.

Is Insurance Ready for Virtual Reality?

Virtual reality (VR) is no longer a technology reserved for the gaming industry. The applications are manifold in industries such as education, engineering, healthcare, insurance, sports and telecommunications. But, unlike other technology disruptions such as telematics, IoT, mobile, digital and cloud, which I have outlined in a previous blog, VR is yet to catch up in terms of adoption by insurers.

However, there are some applications from which the early adopters of this technology have started benefiting and others from which they could soon start benefiting.

Current Enterprise Applications

The Applications: VR simulation of car crashes – Insurers better understand what happens in a car crash for a safety demonstration

The Benefits: Improvement of driving behavior by creating awareness on safety and reducing accident claims

The Early Adopters: Australian insurer NRMA Insurance built a car crash simulation in collaboration with an ad agency and a film production studio and provided the experience to customers through an Oculus Rift headset in a crashed car showroom exhibit.

The Applications: Training – Safety experts and workers in manufacturing plants and warehouses are trained on safety practices and risk handling by creating a virtual world with various scenarios

The Benefits: Immersive and effective training experiences

The Early Adopters: Travelers insurance is working with AppliedVR in developing a VR mobile application aiming at industrial safety

The Applications: Advertising – Ad campaigns in VR gaming and on other platforms

The Benefits: Connecting better with the tech-savvy audience

The Early Adopters: Axa partnered with Google Niantic Lab Ingress to protect the gamers in a virtual real world using Axa Shield.

Ideas Insurers Can Explore

The Applications: Risk Assessment – Underwriters can look at all the possible risk hazards in a building without actually visiting the building.

The Benefits: Cost saving on travel and hiring

The Early Adopters: Insurers can steal ideas from the travel industry and see how they can customize VR for their needs. Marriott Hotels “teleports” guests to places like Hawaiian beaches and downtown London with sensory experiences.

The Applications: Analytics – Data scientists can analyze and visualize large dynamic datasets in VR, and executives can interact with the dashboards and take decisions

The Benefits: Quick and informed decision-making, scenario analysis

The Early Adopters: Insurance industry can draw inspiration from solutions developed for power, oil and gas and logistics industries. Space-Time Insight has recently demonstrated the capability of big data analytics and VR for power substation maintenance using Oculus Rift.

As an array of companies such as Google, Facebook, Samsung and Sony beef up their investments in VR and the number of enterprise applications spread across industries, the technology will soon prove to be disruptive for the insurance industry. Though customer experience, product demos and employee engagement are the key applications for the insurance industry, the ideas could be limitless as the technology matures. The day when we will compare the insurance product, take a driving test, purchase by interacting with an agent and talk to the customer care executive for claims, all through VR, is not too far away.

Atlanta: The Ripening Silicon Peach

When evaluating the beginnings of established tech markets in the U.S., there are several similarities about their regional characteristics that can serve as indicators for their tech trajectory. Consider Palo Alto, New York and Seattle, also known as the centers of Silicon Valley, Silicon Alley and Silicon Forest, respectively. Each has unique advantages with its geographies, easy access to Millennial tech talent, attractive quality-of-life benefits and specialized technology roots.

The same pattern is beginning to emerge in Atlanta. Atlanta’s combination of low cost of doing business, educational institutions and growing population of Fortune 1,000 companies is making it one of the fastest-growing tech hubs in the country. This year, Atlanta was ranked among the top 10 tech talent markets with a 21% growth in tech jobs since 2010, according to the latest CBRE report.

One driver in Atlanta’s recent economic and tech growth is the infiltration of insurance. The insurance industry is undergoing a tech transformation of its own, and of late several of the industry’s leading insurance companies have set up shop in the region.

Let’s take a look at how we got here.

Tech Market Drivers

In addition to a prominent business ecosystem – Georgia is home to 20 Fortune 500 headquarters and 33 Fortune 1,000 companies – Atlanta’s tech surge is largely fueled by its world-class universities, which emphasize technology specialization and diversity, and its reputation as an attractive work-life destination.

Like Silicon Valley’s beginnings with tech recruits from local Stanford University, Atlanta’s midtown is walking distance from two respected universities, Georgia Institute of Technology and Georgia State. Georgia Tech is currently ranked seventh in the nation among public universities, and its college of engineering is consistently ranked in the nation’s top five. Georgia State is ranked fifth in the nation for its risk management and insurance program. The vast pool of graduate talent each year is a huge attraction for start-ups and Fortune 1,000 companies alike.

Atlanta’s universities are also known for their emphasis on diversity. Georgia Tech is consistently rated among the top universities with high graduation rates of underrepresented minorities in engineering, computer science and mathematics. This has transcended the universities into the region’s broader tech community — Atlanta is ranked as one of the top five states for women-owned businesses, with a 132% growth rate from 1997 to 2015, according to the U.S. Census Bureau.

As far as work-life attractiveness, Atlanta has been named the “top city people are moving to” by Penske for the last five years, because of the range of job opportunities, low cost of living and appealingly warm weather. Similarly, according to the job website Glassdoor, Atlanta was named one of the top 10 cities for someone to be a software engineer.

Insurance Intersect

The insurance industry is one of the key drivers of economic growth in the country — and it is establishing major roots in the Atlanta region. Just in the last few years, Atlanta has seen a number of insurance companies relocate their head offices to the south. Recently, State Farm announced the addition of 3,000 jobs over the next 10 years, and MetLife just announced a significant investment in Midtown, choosing this area for its proximity to rapid transport and the international airport. Where Atlanta is situated, travelers can reach 90% of the U.S. in fewer than three hours.

Insurance growth in the region is also likely linked to the density and size of insurance claims on the East Coast, with the largest insurance providers located along the corridor from Boston down to Miami. The 10 most costly hurricanes in the U.S. history have hit the East Coast, and four have greatly affected Georgia.

2015 and Beyond

Looking ahead, I expect the majority of insurance companies to increase their visibility in Atlanta, as they’ll find a wider pool of insurance experts and other advantages that cater to the industry’s growth. Similar to the tech hubs ahead of it, Atlanta will continue taking advantage of its geography, access to talent and cultural ideals to not only build its tech community but to also push the insurance industry forward. The U.S. will soon have another major tech hub to be proud of.