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The openIDL is an open blockchain network that streamlines burdensome and expensive regulatory reporting, providing new insights for insurance carriers while increasing the timeliness, accuracy, and value of data reports for regulators.
In order to provide insight into the health of the insurance market, U.S. state insurance regulators enacted laws more than 70 years ago to establish the process for collecting statistical data from insurance carriers. Since then, much has changed in the industry. And while the volume of data requested by regulators has increased dramatically, little has changed with regard to the process for collecting it.
Insurers have long since moved from paper-based forms and a scarcity of data, to more automated computer systems that collect a growing abundance of valuable data from stakeholders across the industry and policy lifecycle. At the same time, this data is increasingly governed by cybersecurity laws and best practices in data security, which make the transfer of data from a carrier’s data center to their statistical reporting data center problematic.
The time has come for blockchain in insurance
As an advisory organization and authorized statistical agent, AAIS recognized the potential for emerging technologies to improve the way insurance industry data is collected, managed and reported to regulators. Over the past five years, AAIS invested in a modern infrastructure to support current and future needs of AAIS, its member insurance carriers and regulators. Blockchain technology is the natural evolution in our data management strategy and solves many of the problems with data transfers and reporting for the insurance industry.
The value of blockchain technology lies in its ability to substantially increase the security, transparency and auditability of data shared across the public internet. Not surprisingly, permissionless blockchain networks are not widely used in the business world due to potential data visibility issues and performance concerns that have been uncovered in some network trials. Permissioned blockchain networks, however, provide a viable alternative. They enable network participants to keep their data secure in their own data center, while controlling how it is accessed and shared with higher levels of security.
IBM Blockchain Platform is based upon The Linux Foundation’s open source Hyperledger Fabric, but with a solid management infrastructure around it. That enables customers to get up and running quickly and focus on the network and applications, not blockchain technology. In addition, IBM is recognized as the leading enterprise blockchain provider, working with hundreds of clients across financial services, supply chain, government, retail, media and healthcare. Our partnership with IBM has enabled AAIS to deliver openIDL to our members quickly, leveraging the expertise IBM has to offer, from hosted services to system management, application development and data modeling.
openIDL: A bridge to the future
As a not-for-profit advisory organization serving over 700 property and casualty insurance companies, AAIS needs to develop solutions that fit seamlessly into the IT strategies and data centers for all its members. We developed openIDL to help turn time-consuming, expensive regulatory reporting into one of improved data quality and reporting. Its architecture allows carriers to control their data locally in private data stores while regulators utilize smart contracts to query the secured data so that only the answer is returned in a report or dashboard. The transfer of large blocks of data from one data center to another and the associated security risks are eliminated.
The openIDL is much more than a technology platform. While its foundation is built on regulatory reporting practices that ensure a healthy insurance industry and consumer protections, its potential goes much further. openIDL’s open architecture supports future changes in the insurance business model and a new relationship between carriers, regulators and AAIS as a regulatory reporting agency.
Just like the evolution of the internet, there is no way to predict all the potential uses of blockchain technology, but it’s a safe bet that success will depend upon the same factors that made the Internet and the applications we use today successful: open standards, open source software and common communication protocols. AAIS is committed to this philosophy and is architecting the openIDL network to accommodate new applications as they are built and interoperate with other blockchain networks as they emerge. The high-quality insurance data accessible through openIDL will support real-time insights into the market for regulatory and mission-critical analytics for carriers and regulators. New and exciting commercial applications that leverage or complement this data will also be available to openIDL network members as well.
The open road ahead
As openIDL achieved its goal of streamlining regulatory reporting, it will virtually eliminate the need for AAIS to facilitate statistical reporting, a role AAIS has had for over 70 years. We embrace this disintermediation as a natural evolution of our industry. Rather than protecting outdated practices, we we can deliver more value to our members by providing network governance along with new analytics and services within openIDL.
Looking ahead, we believe that blockchain technology will evolve much the same way other core, open source technologies have, such as Linux, Apache servers, Kubernetes and others. By leveraging the power of open source, AAIS can focus more on building new applications for our members, than building and maintaining the blockchain technology itself — and that’s better for everyone.
From time to time, we invite industry thought leaders, academic experts and partners, to share their opinions and insights on current trends in blockchain to the Blockchain Pulse blog. While the opinions in these blog posts are their own, and do not necessarily reflect the views of IBM, this blog strives to welcome all points of view to the conversation.