The challenge of data authenticity and data controls in the insurance industry continues to grow at a time when regulators are increasing data security requirements. Regulators do not consistently request data from insurance carriers across all states and may be looking at incorrect, incomplete or outdated data. Carriers only share minimal information because they do not trust that their data is going to stay secure and private, or how it is going to be used once it leaves their data center.
Reporting agencies are becoming subject to more audits that increases their cost of compliance. These challenges are amplified in the highly competitive, anti-trust, and anti-collusion environment that is the property and casualty (P&C) industry. Industry leaders are exploring new techniques to address these issues. In this post, I wanted to share a practical example of how the American Association of Insurance Services (AAIS) partnered with IBM to start solving this problem.
Revolutionize the trust that powers insurance
The American Association of Insurance Services is the only national level not-for-profit advisory services organization that serves the property and casualty insurance industry. AAIS serves more than 700 member carriers for regulatory reporting and product development. ISO Verisk is the other national advisory organization for the P&C industry.
openIDL (the open insurance data link) is the only U.S. P&C insurance industry network that supports insurance ecosystem reporting with built-in data controls and improved security. First and foremost, openIDL is an organization of members who are committed to the secure and efficient exchange of data to meet the needs of conducting business today and in the future — and establishing the standards for the data exchange, in the same way the internet has done for web applications. Based on blockchain technology, openIDL allows insurance data owners to provide access to their data to others in the insurance ecosystem in the context of specific use cases, or better yet insights and answers to questions based upon the data.
Initially funded by AAIS and developed by AAIS and IBM, openIDL is being developed by the industry for the industry. Today, openIDL allows an insurance carrier to provide their statistical agent of choice access to their historical policy and claim events data in the context of responding to a state regulator data call. On top of the data access platform, openIDL supports a number of ecosystem use cases with applications and ecosystem workflows that make use of the data — regulatory reporting, risk modeling and product development.
The image below illustrates these core openIDL elements:
- openIDL members: U.S. P&C insurance industry ecosystem members (for example, insurers, re-insurers, brokers, regulators and advisory organizations)
- openIDL data access platform: Blockchain ledger that allows data owners to provide access to their data in the context of a use case or application
- openIDL applications: Industry use case implementations that use the openIDL data
The first application, regulatory reporting, was built by AAIS and IBM but other applications will be built by ecosystem members. openIDL is focused on analytical use cases (like catastrophe modeling and product development) as opposed to transactional use cases (like quote or bind).
The first application for openIDL is regulatory reporting. Today, regulatory reporting — statistical reporting and data calls — is a mandatory effort that is costly to insurance carriers and provides limited value to regulators. Because there is no data standard or audit trail for the data used in reports, regulators may be looking at incomplete, outdated or inaccurate data. This can lead to increased data calls to insurers or even audits, which are very costly for the industry and, typically, insurers participating in data calls get no immediate value out of the process.
In contrast, regulatory reporting with openIDL offers data controls for insurers, allowing them to control who has access to specific data sets (typically their statistical agent of choice), for what purpose, and for how long. Regulators or others looking at a report can validate its authenticity by accessing an audit trail for the data that has been used to build the report. Insurers get immediate trusted industry insights when the data call concludes. We believe these features are going to lead to a decrease in direct data calls, exams or audits. Early estimates show a five-year $5 million cost reduction in statistical agent fees and full-time equivalent (FTE) cost for a medium size insurance carrier. A highly qualified stat reporting staff can be redeployed to higher value analytics and data management activities.
Beyond the immediate operational efficiencies of regulatory reporting, openIDL provides a harmonized data model for the industry, a practical way for all insurance ecosystem members to participate, and a new opportunity to participate in high value ecosystem processes while having strong controls over one’s own data. We believe that in the medium term, these features are going to allow an insurance company or any other participant to derive valuable insights, become more independent, and have more choices for analytical and data services partners.
Technology and governance
Under the hood, the openIDL network is powered by the The Linux Foundation’s Hyperledger Fabric blockchain technology, which is developed following a proven open source governance model. openIDL supports multi-cloud where your peer (the node in the network that you control) can run in your cloud service provider of choice. Today openIDL has peers in both IBM Cloud and AWS. Finally, openIDL is based on a strong industry model and a set of practical tools and processes for a participant to quickly onboard and get value.
The most important aspect of openIDL is its members, as shown in the above image. openIDL is incorporated as a not-for-profit entity. The openIDL entity operates following proven principles such as the ones followed by the open source community and the Linux Foundation. As a P&C carrier or industry player, you have the opportunity to become an openIDL charter member and shape what openIDL becomes. You can nominate representatives to the openIDL executive and technical steering committees.