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The Provident Bank Now Offers Deposit Services for Crypto-Related Entities

U.S.-based bank The Provident Bank has begun offering deposit services to digital currency-related customers.

American community bank The Provident Bank has begun offering deposit services to digital currency-related customers, according to an announcement published on July 9.

The Provident Bank now offers deposit and other banking services to cryptocurrency issuers, exchangers and investors. The bank deploys Bitfury’s blockchain analytics tool Crystal that maps cryptocurrency transactions and related entities to reveal suspicious funds and parties. Crystal will purportedly ensure that the bank’s new clients are compliant with the anti-money laundering and Know Your Customer procedures.

Additionally, the bank claims to provide full insurance to customers’ deposits because of its affiliation with the Depositors Insurance Fund, wherein deposits could be insured up to $250,000. Dave Mansfield, CEO of The Provident Bank, said:

“The Provident team developed robust measures to ensure our strategy will not only be effective from a regulatory compliance perspective, but will also allow for our clients to have certainty in a long term banking relationship. That’s why we partnered with top U.S. technology companies to work with us on this new venture.”

Last month, news broke that Aon — a leading insurance broker that purports to occupy 50% of the crypto-insurance market — will reportedly provide cryptocurrency custody solutions provider Metaco with crime insurance coverage via a panel of London insurers.

In February, blockchain security firm and crypto wallet service BitGo revealed plans to offer crypto insurance through the well-known insurance firm Lloyd’s of London. BitGo Business Wallet clients are able to acquire insurance for their digital assets held on BitGo’s Business Wallet service and Custodial offering, with assets held by either BitGo or BitGo Trust Company to be insured for up to $100 million.

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Coinbase Looks to Launch a Captive Insurance Company With Aon: Report

Major United States-based cryptocurrency exchange Coinbase is reportedly looking to launch a captive insurance company.

United States’ biggest cryptocurrency exchange, Coinbase, is reportedly looking to launch a captive insurance company, industry news outlet Coindesk reports on July 10.

Per the report, industry sources told the outlet that Coinbase is looking to launch its captive insurance company in partnership with insurance brokerage firm Aon. 

According to accountancy news outlet CPAJournal, “a captive insurance company is a subsidiary formed by a private company to finance its retained losses in a formal structure under the guidance of an appropriate state insurance department.”

Such a solution allows the company to keep the money that would be normally spent on the insurance premium, reportedly nearly all Fortune 500 firms maintain captive insurance companies. CoinDesk reports that Coinbase and Aon see the insurance subsidiary as a potential solution to the alleged shortage of insurance available to cryptocurrency exchanges.

Per the report, crypto exchanges often set aside some crypto assets to cover any asset losses in the event of a hack. Still, this approach lacks a formal structure and allows the firm to access the funds also for any other reason, decreasing the coverage. With a captive insurance firm, on the other hand, the funds are regulated, audited, and segregated.

While neither Aon or Coinbase have allegedly answered to the outlet’s inquiry concerning their collaboration, the insurance giant reportedly revealed that it established the industry’s first insurance captive this year, for an unnamed client. Managing director and the financial institutions practice leader at Aon, Jacqueline Quintal, noted that cryptocurrency exchanges are increasingly considering this solution. Quintal said: 

“There is a lack of capacity and some are uncomfortable with what is available in the marketplace and are looking to alternative solutions. […] I think the path for most will be to buy some amount of traditional insurance first and then to explore alternative structures, potentially including a captive — and we are having more and more of these conversations.”

Previously, in April, it has been reported that Coinbase revealed details of its insurance coverage for its hot wallet crypto holdings, reportedly covering a $255 million limit via a Lloyd’s of London-registered broker.

As Cointelegraph reported last month, Aon will reportedly provide crypto custody solutions provider Metaco with crime insurance coverage via a panel of London insurers.

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Discovering Insuretech: Blockchain Disruption of the Insurance Sector

The insurance sector is riddled with inefficiencies — and distributed ledger technology is on a mission to fix them.

The business of insurance is enormously complex: The process of evaluating and managing a variety of risks that individuals and organizations face every day inevitably involves coordination of the multiple parties’ efforts and reconciliation of extensive records. Both aspects make the insurance sector an appealing ground for blockchain-based optimization — and indeed, distributed ledger technology is a prominent feature of a rising tide of technological innovations, collectively known as insuretech, that seek to bring new efficiencies into the industry.

As Cointelegraph previously reported, research firm MarketsandMarkets in 2018 projected that the value of blockchain components in the insurance market will see a compound annual growth rate of 84.9%, reaching $1.4 billion by the end of 2023. A 2019 insuretech-specific report by KPMG noted that blockchain was not a “buzzword” or “future innovation” for the insurance space but that it is already operational in flight delay and lost baggage claims systems and is expected to improve other risk domains such as shipping and, somewhat more remotely, health care.

A 2018 World Insuretech Report put together by a consulting firm Capgemini and fintech industry association Efma named blockchain one of the technologies set to disrupt the insurance business, alongside artificial intelligence (AI), drones, wearables and robotic process automation. The document cited enhanced information exchange, increased trust and efficiency of smart contracts as major improvements that the technology offers.

Hartford’s Insuretech Trends report observed that insurance companies already utilize blockchain technology to “streamline processes, provide transparency, and enhance security,” as well as for data management and protection, reducing administrative costs and boosting consumer trust and loyalty. All in all, there seems to be a host of actual and potential improvements associated with blockchain implementation in the insurance industry. Here is a more detailed look at some of the major areas of optimization.

Automating processes

Verifying the authenticity of claims is a huge part of an insurance company’s workflow. Legacy systems that rely on standalone databases and paper records are slow and expensive: Manual approval of a claim may drag for days and even weeks, and the process still leaves room for error or abuse. Making these procedures fully automated — through a combination of a tamper-proof ledger and self-executing smart contracts — could dramatically lower insurers’ operational costs, resulting in lower premiums for their customers.

One example of such optimization, reported by Cointelegraph in late May 2019, is a pilot blockchain-based platform that the United States insurance powerhouse State Farm is jointly testing with the United Services Automobile Association (USAA), a military-affiliated financial services group. The solution is designed to speed up the auto claims subrogation — the last stage of a claim’s processing when the insurer retrieves the costs it had paid to its wronged customer from the at-fault party’s insurer.

Another successful optimization case is openIDL, an IBM blockchain-based network maintained by the American Association of Insurance Services (AAIS). Because insurance companies are subject to tight regulatory oversight, the paperwork related to compliance eats up a good share of companies’ resources. OpenIDL helps automate regulatory reporting, making things easier for both insurers and authorities.

Fraud prevention

Insurance fraud, facilitated by the lack of interoperability between the industry participants’ databases and general complexity of paperwork that accompanies claim settlement, is very common in developed countries. In the U.S. alone, estimates of aggregate losses from this type of offence is estimated at anywhere between $40 billion and $80 billion every year. While it is insurance companies that sustain direct losses, the burden ultimately gets equally shared between all the households that use their services, in the form of increased premiums.

According to the analysts from CB Insights, the fundamental improvement that blockchain technology could bring to the area of combating fraud lies in the potential consolidation of insurers’ databases. When all claims are stored on a distributed ledger, wrongdoers are left with a very slim chance to, for example, file multiple claims on a single insured event with different companies. A unified transparent database of claims would also enable interested parties to track claimants’ suspicious behavior and identify patterns that might suggest abuse.

While the vision of a universal distributed database accessible to everyone in the industry remains a somewhat distant one, standalone blockchain verification systems are already getting rolling. One example is the global insurance broker Marsh, which is reportedly poised to unveil its Hyperledger-based proof of insurance platform. Recently, fintech startup BlockClaim has procured 500,000 British pounds ($627,000) of venture capital toward its blockchain/AI solution designed to automate the processing of insurance claims. The firm reports faster settlements, reduced claim costs and successful implementation of AI-based features for fraud detection.

Health care

One particular domain in which the arrival of operational blockchain solutions will change the game entirely is health care insurance. Right now, efficiently managing and coordinating patient data between doctors and medical institutions while preserving patients’ confidentiality is a major stumbling block for the sector. According to a CB Insights report, sparsity of data often leads to claim denials, costing medical care providers some $262 billion each year.

Related: How Blockchain Improves Daily Health Care Routine, Explained

One of blockchain’s great promises is its potential to enable actors to exchange data securely while precisely customizing who is allowed access to which information. Once such a comprehensive distributed medical database is up and running, patients will be empowered to decide which parts of their medical history to share with a certain doctor or clinic. In turn, medical professionals and administrators will see a major efficiency boost from having instant access to their customers’ blockchain-verified health records.

Although creating a universal ledger of medical records is an enormous task that will require industry-wide cooperation, there are viable transitionary solutions capable of optimizing industry record-keeping in the short run. One of them is MedRec, an MIT Media Lab project. The Ethereum-based system is designed to store not the records themselves but hosts smart contract-enabled permissions that nodes on the network — i.e., patients or medical institutions — can configure to authorize other participants’ access to the database.

Life insurance

Health records also play a significant part in determining the premiums that holders of life insurance policies have to pay. Once all patients have their medical histories moved onto a secure medical database running on a blockchain, it will become possible for life insurers to calculate premiums and issue policies automatically.

According to Ignite Outsourcing, finding a beneficiary upon the insured’s death is sometimes problematic due to both family dynamics and flaws in record-keeping. The practical effect is that, currently, $7.4 billion of unclaimed life insurance money is sitting in carriers’ bank accounts. With smart contracts triggered automatically in the event of a policyholder’s death, this may become much less of an issue — given that the order of potential beneficiaries is spelled out clearly in the policy.

The authors of the report also note a little-known fact that nothing prevents the owners of life insurance policies from selling them to third parties. Whereas such deals are quite uncommon now, they could become more convenient when policies run on a blockchain. A startup called fidentiaX, branding itself as a marketplace for tradable insurance policies, seeks to expand this niche by offering a platform for buying and selling tokenized insurance contracts.

Property titles

Title insurance is a $15 billion market that is projected to keep growing steadily over the next few years. This type of contract is different from most “traditional” insurance areas in that it protects not from future losses but against claims on something that had allegedly happened in the past — for example, a previous owner’s tax lien. A title policy will come into play if a challenge arises to the legality of the new owner’s or lender’s property right.

Insuring title rights requires the ability to verify that these rights are well-substantiated by the appropriate records. In this sense, the disruption that blockchain will bring to the title insurance business is just another facet of a more general disruption of the entire title record-keeping process. Storing titles on an immutable ledger will minimize the risks associated with loss or forgery of records, allowing legitimate property owners to easily prove the validity of their claims.

Several months ago, two major players in the U.S. market, First American Financial and Old Republic Title Insurance, joined forces to create a blockchain-based network of title insurance underwriters designed to enable industry participants to exchange previous insurance records.

Reinsurance

Insurers also need their risks hedged. If a major disaster occurs, a company may get flooded with claims that will drain its reserves too quickly and threaten its solvency. To guard against dire scenarios like this one, insurers purchase coverage from reinsurers or participate in consortium-style intra-industry agreements.

Currently, underwriting reinsurance and negotiating policy conditions is an inefficient and lengthy process. Insurance firms typically rely on several reinsurers at once, creating the need for multiparty data exchange — fertile soil for blockchain to step in and streamline the complex web of interactions.

In October 2016, five major European insurers teamed up to form the Blockchain Insurance Industry Initiative, or B3i. They have since been joined by an additional dozen of big industry players representing Europe, Asia and North America. The global consortium has since been at work developing and testing a shared smart contract system that provides reinsurance for natural disaster insurance. The system, whose working prototype was rolled out in 2017, is capable of automatically processing data from the affected parties and determining the size of payouts. The arrival of the fully operational system is expected in 2019.

Peer-to-Peer Insurance

Peer-to-peer (P2P) insurance is a model that predates blockchain, although it is remarkably consonant with the ideology of decentralization that permeates the crypto space. The idea is that, instead of relying on a central insurer and an underwriter, a group of individuals pool their resources together to create a safety net for whoever from their ranks incurs a loss as a result of an unforeseen event. Participating in such an arrangement, usually comprised of the people whom one knows personally, is generally more affordable than purchasing a corporate-sourced policy — and arguably offers a more pleasant experience.

However, for all the transparency and convenience of such friend pools, they can only scale up to a certain point before the need for professional, centralized management arises. Here enters  blockchain to save the day. The whole P2P transactional structure of these “horizontal” risk pools closely resembles a decentralized autonomous organization (DAO). As PwC analysts have it, DAOs are known for their “capacity to manage complex rules among a significant number of stakeholders,” which is a perfect recipe for projecting the peer-to-peer insurance model to a new level of efficiency and scalability.

Going forward

With all the potential efficiencies blockchain is set to bring to the table, many of the most impressive insurance-related use cases are still aspirational. The bulk of the technology’s disruptive promise resides in the domain of coordination enhancement. In order to fully capitalize on this potential, the industry will have to rally behind the idea of aligning standards of information exchange, shared data pools and broad cooperation. Initiatives like B3i will have to encompass the majority of industry stakeholders, which is a gargantuan task, given the sector’s size and inertia.

Regulation also remains a potential impediment for blockchain’s explosive expansion. Insurance companies are subject to heightened regulatory scrutiny and so is distributed ledger technology. Bringing both together will require cutting through a lot of red tape, as well as the creation of new rules to guide the symbiosis.

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MetLife’s LumenLab Using Blockchain to Automate Life Insurance Claims

Bereaved families who place an obituary for a loved one in a newspaper will now be able to instantly trigger searches for a matching life insurance policy.

MetLife subsidiary LumenLab is using blockchain technology to automate life insurance claims, according to a news release published on June 17.

Known as “Lifechain,” the collaboration with Singapore Press Holdings and NTUC Income will enable bereaved families who place obituaries in a local newspaper to instantly trigger searches to see whether their loved one had a life insurance policy.

This month, 1,000 Income policyholders will be randomly selected to take part in a pilot scheme.

The technology works by submitting the deceased’s National Registration Identity Card to Lifechain as hashed data once consent from the family has been obtained. Families are notified within one business day when a matching policy is found, and a notification is automatically sent to the insurer so the claims process can commence.

Julian Tan, the chief of digital business at Singapore Press Holdings (SPH,) said:

“SPH hopes to expand Lifechain to include more insurers in time to come to bring greater convenience to family members attending to the deceased’s administrative matters securely.”

Insurance companies are increasingly turning to blockchain technology. Earlier this week, tech firm BlockClaim received $627,000 in funding for a platform that uses blockchain to automate car insurance claims.

Meanwhile, British insurance agency Legal & General recently announced it has teamed up with Amazon to create a blockchain system for managing pension deals.

At the Synchronize Europe conference in London on June 18, attended by a Cointelegraph correspondent, Accenture managing director Sarah Hazzledine said there were “huge opportunities for digitization” in the paper-based sector. She also confirmed that the global accounting giant is part of an insurance consortium building a distributed ledger (DLT) platform with two use cases that are scheduled to launch within the next six to 12 months.

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Insurtech Platform to Apply Blockchain to Auto Claims With New Funding

A blockchain/AI platform for insurance claims by BlockClaim has received about $627,000 in seed funding.

Insurance tech firm BlockClaim has recently received £500,000 ($627,000) in funding for its blockchain-based claims solution, according to an official blog post on June 17.

The firm raised the funds from venture capital firm Amadeus Capital Partners and software firm Pragmatica, in addition to other angel investors.

According to the announcement, BlockClaim uses blockchain technology to automate its claims process. Furthermore, the company says the product reduces claim costs by 20% and results in faster settlements.

As per its website, BlockClaim uses a private blockchain to streamline the claims process:

“Leveraging the power of a private blockchain helps to keep data clean, speeds up processing time and increase claim auditibility in the ecosystem.”

The product also reportedly makes use of artificial intelligence (AI) in order to provide fraud detection. For instance, the post says the BlockClaim system can make use of a type of image recognition AI module, in order to verify that images submitted in vehicle collision claims are accurately depicting the damaged vehicle in question.

The blockchain/AI system as a whole reportedly includes features such as intelligent claims-routing and self-learning fraud detection.

As previously reported by Cointelegraph, the United Kingdom-based insurance agency Legal & General is using Amazon Managed Blockchain to create a blockchain system for corporate pension takeovers.

Legal & General reportedly chose to use a blockchain solution due to the need for a secure ledger of transactions that could last a long time. CEO of Legal & General Reinsurance Thomas Olunloyo remarked on the fittingness of blockchain for this goal, saying:

“… it allows data and transactions to be signed, recorded and maintained in a permanent and secure nature over the lifetime of these contracts, which can span over 50 years.”

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Legal & General Partners With Amazon to Use Blockchain for Pension Deals

Amazon partners with insurance agency Legal & General to make a bulk annuities transactions using blockchain technology

Online retail giant Amazon has partnered with United Kingdom-based insurance agency Legal & General to create a blockchain system for managing corporate pension deals, according to a report by Reuters on June 11.

Legal & General will reportedly make use of the Amazon Managed Blockchain for its bulk annuity transactions, which happen when companies transfer their pension schemes to Legal & General for insurance.

According to an article by the Financial Times, companies make bulk annuity transactions to insurers like this so that they are not ultimately responsible for personally paying their employees’ pensions.

CEO of Legal & General Reinsurance Thomas Olunloyo commented on how a blockchain solution is fitting given the longevity of annuities:

“… it allows data and transactions to be signed, recorded and maintained in a permanent and secure nature over the lifetime of these contracts, which can span over 50 years.”

As previously reported by Cointelegraph, Amazon released its managed blockchain service in April through its subsidiary Amazon Web Services. This blockchain-as-a-service (BaaS) allows users to more easily create and maintain blockchains on the Ethereum and Hyperledger networks by automating certain aspects of blockchain management.

According to Rahul Pathak, the general manager of Amazon Managed Blockchain, the service “… takes care of provisioning nodes, setting up the network, managing certificates and security, and scaling the network.”