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As distributed ledger technology continues to emerge as a potentially viable tool for the insurance industry, users must come up with a set of common, agreed upon rules for its deployment and use, industry leaders said.
The only way to enable the sharing of information between companies across business practices “is to have a common set of data and information,” said Bijesh Jacob, senior vice president of technology for ACORD, the Association for Cooperative Operations Research and Development, a global organization with offices in New York and London, and ACORD Solutions Group in Pearl River, New York.
Developing standards means deciding “what’s where” on the blockchain, according to Christopher G. McDaniel, president of The Institutes RiskBlock Alliance, based in Malvern, Pennsylvania.
In November 2018, RiskBlock announced it would co-chair ACORD’s new Blockchain Standards Project Group, “which will bring together early blockchain adopters and leaders in insurance blockchain to develop standards for the application of blockchain capabilities by the insurance industry,” according to a statement at the time.
The group’s roughly 100 participants have met several times and have mostly been involved with “level setting,” according to Mr. McDaniel. “To ultimately get where we want to go, we’re going to have to create subgroups,” he said.
“Standards are extremely important,” said Ryan Rugg, global head of insurance at R3CEV in New York, which is developing the CORDA technology platform that has been selected by both RiskBlock and B3i in Zurich, another industry consortium focused on the development of distributed ledger technology.
“A policy can’t be recorded in CORDA until all parties agree on the terms, so you need a set of standards to strengthen this process,” Ms. Rugg said. Such standards include “how the policies are written, how the transactions are going to be conducted.”
One key goal for ACORD is to ensure that such standards are agnostic, “extensible to any technology platform,” said Malou August, vice president for standards and membership for ACORD in Pearl River.
Standards should help enable the movement of data across technologies and platforms, Mr. Jacob said.
Initially, the standards group will be looking at file structures for writing data and policy information onto the blockchain, Mr. McDaniel said. “Can we have a standardized structure everyone can agree on?” he said.
In 2019, the group will begin with policy information, claims information, and reinsurance information if time permits,” Mr. McDaniel said. “Next year, we want to start looking at interface standards,” to standardize the way the blockchain connects to back office systems.
There is a standards development process that engages the insurance industry through ACORD’s membership and involves a technical assessment, a business assessment and a regulatory assessment, Ms. August said.
ACORD standards are used widely in the insurance industry, according to Ms. Rugg. “The majority of insurers use ACORD standards,” she said.
R3 has been working with ACORD since 2017 to implement some basic standards into CORDA, “but for the most part standards are being developed by end users and built into the applications,” Ms. Rugg said.
“I think (standards) will help speed up implementation as well as deployment,” Ms. Rugg said.
One core issue will be to detail which information is actually recorded onto the shared ledger, sources said.
“The only thing that needs to be on the blockchain is data that needs to be shared,” Mr. McDaniel said. The remainder can be brought in from the back office, he added.
Walid Al Saqqaf, founder of InsureBlocks, U.K.-based educational resource for blockchain in the insurance industry, said that blockchain technology will become the foundation for a new way of doing insurance business, Forbes reported. The decentralized nature of blockchain technology allows participants to share data securely and on a confidential basis, which enables customer-centric insurance products and streamlined services that are more efficient and provide greater value to clients.