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Can Distributed Ledgers Accelerate Insurance Workflows?

The years 2018-19 are the banner years for the US$ 5.17 trillion global insurance sector. However double-booking, counterfeiting, and premium diversions through unlicensed brokers still throb insurance companies. And one of the prime reasons for such unethical activities is the lack of tight coupling between stakeholders. A simple solution to these challenges is distributed ledgers- a contemporary technology that ensures transparency. Distributed ledger technology in insurance can create a collaborative environment for handling information, minimizing instances of fraudulent activities. 

How Can Distributed Ledgers Accelerate Insurance Workflows?

Where most insurtech startups and small insurers are looking for “insurance-in-a-box” technology, big players demand bespoke technology to develop distinct capabilities for customer convenience and manage their enterprise workflows. Fortunately, distributed ledger technology solves a major chunk of this problem. 

For startups and small to medium size insurtech firms, cloud-based, customizable workflow management products can simplify the processes and create a collaborative work environment. Large enterprises can, of course, afford time and investment for tailor-made technologies suitable for their overall business requirements.

#Smart Contracts

Smart contracts can automatically determine whether to transfer an asset to the nominee or back to the source, or a combination of both. It does not necessarily create a contract or legal act, but can sure validate a condition. For example, Ethereum provides a prominent smart contract framework. 

Smart contracts allow credible transactions with or without involving third parties (oracles).

For example, Etherisc uses smart contracts concepts for building insurance products. The fundamentals used for Etherisc’s insuring flight delays product is applicable for insurance products like crop insurance, flood, earthquake, etc.

#Claims Management

Cifas reports a 27% rise in false insurance claims across the UK in the past year. Moreover, insurers identify 1 in every 30 claims as fraudulent. Organizations can track records better with distributed ledgers minimizing the illicit instances. 

Blockchain technology allows for automated real-time data collection and analysis. BCG expects Property and Casualty (P&C) insurance has the potential of processing claims up to 3x faster and 5x cheaper than traditional processes. 

It can also enhance customer experience by removing indirections due to various touchpoints between him and the claim settlement manager. Distributed ledgers can overall benefit processing time, automating payments, eliminating trust issues, and fraud reduction.

Traditional Insurance Model vs Distributed Ledger Insurance Model: Distributed Ledger Technology in Insurance

#Reinsurance

Reinsurance (passing a whole or part of insurance liabilities to another company) will simplify the sharing of data like bordereau and claims databases. For the insurance companies not preferring to share their client’s data, access rights can be customized in distributed ledgers.

According to PWC research, the reinsurance industry can save up to $10B by increasing operational efficiencies through distributed ledgers.

#Underwriting

“A shared, distributed ledger lends itself to this need for exchanging transparent, trustworthy data in a standard format in real-time.” 

Stefan Schrijnen: Director, Insurance, EY

Having accurate real-world data can help underwriters reduce paperwork and measure the assets and risks effectively.

Insurwave, a blockchain-enabled insurance platform uses a distributed database with secure access for insuring shipments across the world. Maersk, the world’s leading shipping and logistics company have partnered with Insurwave for insurance renewal of its fleet of 800 container ships. 

In the words of Lars Henneberg, Head of Risk Management at A.P. Moller – Maersk. “A simple dashboard gives us a live overview of how our assets are insured, and our brokers and insurers have access to the same overview. If the location, cargo, or other data about our ships changes, everyone is notified — no delays, no paperwork, no mistakes.” 

#Product Design using Distributed Ledger Technology in Insurance

Instead of all-encompassing insurance policies, consumers look for short, custom-built policies that satisfy their immediate needs. Therefore, to stay competitive, insurance companies (and even e-commerce startups) need to consistently build new and relevant insurance products. Expanding features or building new products on the same fundamentals can be effectively realized with strong and transparent ledgers.

AXA’s smart contract product Fizzy is a next-generation Parametric Insurer, which uses transparency as its USP. It provides travel insurance on flight delays and cancellations. The claims displayed on the website are stored in a blockchain and no one can change the terms after purchase. User can buy the insurance online. When the flight is delayed or canceled, the public databases of plane status information automatically triggers the insurance holder’s compensation. The event confirmation executes and closes the claim process instantly.

Precautions to Take With Distributed Ledgers in Insurance

  1. Enterprises should be cautious about sharing access rights on distributed ledgers.
  2. Blockchain transactions are irreversible, therefore every click from an authorized user should be mindful.
  3. Instead of mimicking a trend, insurance companies can deploy the distributed ledger technology to best suit their business requirements.

Conclusion

MarketsandMarkets expects blockchain technology’s share in the insurance market to reach $1.4 billion by 2023. 

The insurance industry has already deployed distributed ledger components for insuring flight delays, lost baggage claims, and is expanding to shipping, health, and consumer durables domains. 

The future can also witness blockchain, AI, drones, and robotics disrupting the insurance industry together.

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The ‘Cyber Attacks’ Winter is Coming — straight for small firms in India Inc.

5 minutes read

Cyber intrusions and attacks have increased exponentially over the last decade approximately, exposing sensitive information pertaining to people and businesses, thus disrupting critical operations, and imposing huge liabilities on the economy. 

Cybersecurity is a responsibility that employees and leaders across functions must shoulder simply because it is the gospel truth – you cannot protect what you cannot see. As organizations have shifted to the work-from-home model due to the outbreak of the COVID-19 pandemic, it’s increasingly important to keep your company’s data secure. 

While the pandemic has led to near or complete digitalization of operations amongst financial institutions, it’s also increased the potential for cyberattacks that lead to adverse financial, reputational, and/or regulatory implications for organizations. 

According to Accenture, cybercrime is said to cost businesses $5.2 trillion worldwide within five years. “With 43% of online attacks now aimed at small businesses, a favorite target of high-tech villains, yet only 14% prepared to defend themselves, owners increasingly need to start making high-tech security a top priority,” the report continues.

A recent McAfee study shows global cybercrime costs crossed US$1 trillion dollars in 2020, up almost 50% from 2018.

India too saw an exponential rise in cybersecurity incidents amid the coronavirus pandemic. Information tracked by the Indian Computer Emergency Response Team (CERT-In) showed that cybersecurity attacks saw a four-fold jump in 2018, and recorded an 89 percent growth in 2019.

The government has set up a Cyber Crisis Management Plan for countering cyber-attacks effectively, while also operating the Cyber Swachhta Kendra (Botnet Cleaning and Malware Analysis Centre).

Banks and Financial Institutions (FIs) are some of the highest targeted market sectors. An analysis by FitchRatings in collaboration with SecurityScorecard reveals that banks with higher credit ratings exhibited better cybersecurity scores than banks with lower credit ratings. 

Bharti Airtel’s chief executive officer for India, Gopal Vittal, in a letter to the telco’s 307.9 million subscribers, detailed out how Airtel is carrying out home delivery of SIM cards and cautioned subscribers from falling prey to cyber frauds. He cautioned them against the rapid rise in cyber frauds, highly likely via digital payments. “There has been a massive increase in cyber frauds. And as usual, fraudsters are always finding new ways to trick you,” he added in the letter. 

Barcelona-based Glovo, valued at over $1 billion, that delivers everything from food to household supplies to some 10 million users across 20 countries, came under attack recently when the “hacker gained access to a system on April 29 via an old administrator platform but was ejected as soon as the intrusion was detected”, according to the company.

The attack came less than a month after Glovo raised 450 million euros ($541 million) in funding. 

According to Kaspersky’s telemetry, close on the heels of coronavirus-led pandemic and subsequent lockdown in March 2020, saw a total number of meticulously planned attacks against remote desktop protocol (RDP) jumped from 93.1 million worldwide in February 2020 to 277.4 million 2020 in March — a whopping 197 percent increase. In India, the numbers went from 1.3 million in February 2020 to 3.3 million in March 2020. In July 2020, India recorded its highest number of cyberattacks at 4.5 million.

The recent data breach at the payment firm Mobikwik, affected 3.5 million users, exposing Know Your Customer (KYC) documents such as addresses, phone numbers, Aadhaar card details, PAN card numbers, and so on. The company, however, still maintains that there was no such data breach. It was only after the Reserve Bank of India’s intervention that Mobikwik got a forensic audit conducted immediately by a CERT-IN empaneled auditor and submitted the report. 

Security experts have observed a 500% rise in the number of cyber attacks and security breaches and a 3 to 4 times rise in the number of phishing attacks from March until June 2020.

These attacks, however, are not just pertaining to the BFSI sector, but also the healthcare sector, and the education sector.

Image Source: BusinessStandard.com

What motivates hackers to target SMBs? 

Hackers essentially target SMBs because it’s a source of easy money. From inadequate cyber defenses to lower budgets and/or resources, smaller businesses often lack strong security policies, cybersecurity education programs, and more, making them soft targets. 

SMBs can also be a ‘gateway’ to larger organizations. As many SMBs are usually connected electronically to the IT systems of larger partner organizations, it becomes an inroad to the bigger organizations and their data. 

How can companies shield themselves from a potential cyberattack: 

As a response to the rising number of attacks in cyberspace, the Home Ministry of India issued an advisory with suggestions on the prevention of cyber thefts, especially for the large number of people working from home. Organizations and key decision-makers in a company can also create an effective cybersecurity strategy that’s flexible for adaptation in a changing climate too. Here are a few use cases: 

  • CERT-In conducted ‘Black Swan – Cyber Security Breach Tabletop Exercise’, in order to deal with cyber crisis and incidents emerging amid the COVID-19 pandemic, resulting from lowered security controls. 
  • To counter fraudulent behavior in the finance sector, the government is also considering setting up a Computer Emergency Response Team for the Financial Sector or CERT-Fin.
  • Several tech companies have come forth to address cybersecurity threats by building secure systems and software to mitigate issues like these in the foreseeable future. For example, IBM Security has collaborated with HCL Technologies to streamline threat management for clients through a modernized security operation center (SOC) platform called HCL’s Cybersecurity Fusion Centres. 

Some of the ways through which companies can mitigate potential risks include: 

  • Informing users of hacker tactics and possible attacks
  • Establish security rules, create policies, and an incident response plan to cover the entire gamut of their operations
  • Basic security measures such as regularly updating applications and systems
  • Following a two-factor authentication method for accounts and more

While these measures are some of the ways to be on top of your game in the cybersecurity space, they will also help in sound threat detection while helping gain better insights into attacks and prioritizing security alerts so that India is better prepared for an oncoming attack and battling any unforeseen circumstance that might result in huge loss of data, resources and more. 

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