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Insurers and Regulators Jump Into Blockchain With openIDL

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The American Association of Insurance Services, AAIS, identified an opportunity to significantly improve data processing between insurance carriers, advisory organizations, stat agents and regulators. This led to development of the first blockchain network connecting data across the insurance industry: openIDL.

OpenIDL (open Insurance Data Link) is an open blockchain network that streamlines regulatory reporting and provides new insights for insurers while enhancing timeliness, accuracy, and value for regulators. It is the first open blockchain platform to enable the efficient, secure, and permission-based collection and sharing of statistical data.

To get the project off the ground, AAIS partnered with IBM to implement the system.  Through many design thinking sessions involving AAIS, IBM, carriers, and regulators, an architecture emerged based on the Linux Foundation’s Hyperledger Fabric, hosted in the IBM Cloud.  Since one of openIDL’s goals is to distribute data ownership and build trust, the distributed and permissioned nature of Hyperledger Fabric and the trust mechanism of blockchain made this a good fit.

After initial implementation, AAIS was able to successfully execute proof of concept projects with prospective carriers.  Subsequently, IBM transitioned openIDL’s development ownership to AAIS.  Since AAIS is primarily an AWS user, they wanted to move the system to the AWS cloud.  While attempting to do this themselves, they quickly realized they needed more expertise in the following areas:

  • AWS’s complex infrastructure
  • Kubernetes in AWS
  • IBM Blockchain Platform
  • Hyperledger Fabric
  • Node.js and Angular

AAIS identified a project to migrate openIDL from the IBM Cloud to AWS, with the following deliverables:

  • openIDL nodes hosted in AWS
    • AAIS Node
    • Carrier Reference Node
    • Analytics Node
  • Infrastructure as Code (IaC) for all aspects
    • AWS infrastructure
    • Hyperledger Fabric network
    • Applications in Kubernetes
    • Secret Management
  • Reference Implementation that can run on local machine
  • Documentation

AAIS worked with the Linux Foundation to find the appropriate partner.  Chainyard emerged as the company with the extensive experience and solid credentials needed to execute the project.

After undertaking the project, Chainyard’s objective was to successfully facilitate openIDL’s production launch.  To accomplish this, they implemented a multipronged approach, starting with understanding the application’s status quo. This included going through openIDL’s functionality, architecture, cloud services, application topology, test cases, infrastructure provisioning and deployment scripts.

Following this discovery period, the team developed a migration path focusing on design details for the cloud migration, NodeJS upgrade, Angular upgrade, Hyperledger Fabric upgrade, and Infrastructure as Code.  The cloud migration consisted of moving openIDL from the IBM Cloud environment to Amazon Web Services (AWS).  The NodeJS upgrade was from v8 to v14, the Angular upgrade was from v6 to v12, and the Hyperledger Fabric upgrade was from v1.4 to v2.2.  Developing the supporting IaC scripts was done from scratch for the target environment using industry best practices and leveraging Terraform for infrastructure, GitHub actions for CI/CD pipeline, and Helm Charts for Kubernetes containerization.  Security was considered a priority for all these changes and was designed into all activities.

For each upgrade, changes from the existing level to the target level were analyzed to determine impacts on the code.  This helped with both development and testing planning.  The upgrades had no planned feature or functionality changes to take advantage of in the target environment – these enhancements were instead put on the roadmap for a future version of the platform.

The openIDL project utilized an agile methodology during its life cycle, which involved having daily team standups, weekly architecture deep dives and management meetings, and ad hoc sessions to work through obstacles. The project team consisted of AAIS and Chainyard participants, working together to prioritize tasks and set key dates by which the project and sprint objectives had to be defined.

Once the overall project was complete, AAIS accepted these deliverables: an AWS-hosted AAIS Node, Analytics Node, and Carrier-Specific Nodes (each in their own AWS account), Hyperledger Fabric deployed on AWS using Blockchain Automation Framework (BAF), IaC scripts, and supporting documentation.  An additional product created during the project is an openIDL Reference Implementation that runs in the minikube Kubernetes utility. This is disconnected from the AWS Cloud (except for Cognito authentication services) and provides a lightweight way for developers to familiarize themselves with the openIDL solution. The combination of features provided by these openIDL elements ensures AAIS’s insurance regulatory reporting is more effective, faster, and secure than ever before.

About AAIS

Established in 1936, AAIS serves the property casualty insurance industry as the modern, Member-based advisory organization. AAIS delivers custom advisory solutions, including best-in-class forms, rating information and data management capabilities for commercial lines, inland marine, farm & agriculture, commercial auto, personal auto, and homeowners insurers. Its consultative approach, unrivaled customer service and modern technical capabilities underscore a focused commitment to the success of its Members. AAIS’s strategic work and partnerships led to the creation of openIDL, the data and information sharing platform for regulatory reporting built on distributed ledger technology, now a Linux Foundation Project. For more information about AAIS, please visit AAISonline.

About Chainyard

Chainyard is not just a team of Digital Transformation enthusiasts who focus on blockchain, but also a dynamic organization with the people, processes and technology that goes along with developing world-class business and software solutions.

We offer education, technical workshops, architecture assessments, business systems solution design, user interface design, continuous integration and delivery pipelines, operational impact assessments, network support services, consortium building, governance models and other activities critical to enabling a business to participate in a decentralized ecosystem.

To learn more about Chainyard, email Isaac Kunkel at isaac.kunkel@chainyard.com, or visit the website at www.chainyard.com.

Author: Isaac Kunkel, Chainyard

Photo: PIXABAY

Measuring Mitigation: Listening for the Lessons from the Surfside Condo Collapse

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There are a number of axioms that can help us understand the challenges around risk assessment and mitigation efforts that impact the insurance industry. You’ve heard, “If a tree falls in a forest and no one is around to hear it, does it make a sound?” I’ll add a new one to the mix: if risk mitigation activities occur in a community, but none of the relevant stakeholders know about it, did it reduce risk? 

This revision of the classic axiom can help us better understand the tragic Champlain Towers South condo collapse in Surfside, Florida, and how to ensure these sorts of catastrophic losses do not occur again. Not only do we have little insight into where mitigation activities are occurring, we also have little insights into where risk mitigation activities should have occurred, but did not.  

We talk regularly about the need to double down on risk assessment and mitigation activities given the increasing threat posed by various perils—hurricanes, severe convective storms, floods, and wildfires among others. The good news is that many communities are heeding that advice with mitigation efforts being planned, executed, and documented. However, they are typically documented in an endless list of proprietary data formats, locked away in siloed data systems, managed by a range of different stakeholders. So, despite the important mitigation efforts being completed and the significant investments being made, they too often fall silently—like the tree in the forest—with insurers often unaware, and thus unable to account for mitigation activates in their risk selection and pricing processes.    

In the Surfside condo collapse, many of the news reporters asked survivors about their first indication that something was wrong? Survivors understandably focused on the loud noise, the shaking, and the dust, as half of the twelve-story building catastrophically failed. However, the first indications occurred years prior, as spalling, cracks, and water penetration got progressively worse. In preparation for a required 40-year building inspection, the condo association had hired a consulting engineer who highlighted significant structural concerns, substandard workmanship on previous repairs, and the ill effects of decades of delayed maintenance. The condo association and the various owners debated and ultimately delayed action for several years over the significant costs and how to split those costs. 

The extent to which the local building officials knew about, understood, or possibly misrepresented the gravity of the situation will likely be decided in the courts long after the dust settles. Nonetheless, what is clear is that it wasn’t the lack of information that was the problem, but a lack of getting that information into the hands of key decision makers. Calls for additional inspections — conducted more frequently — will have limited impact if that information continues to exist in siloes, unavailable, and effectively unknown. 

This is not a problem confined to Surfside, or even South Florida, it is a national problem. It is also an existential problem in the insurance industry. There is tremendous information collected about the properties we insure and the communities in which those properties reside, but much of that information is tantalizingly out of reach. 

Efforts to standardize the documentation and data collected about different types of risk mitigation efforts, and quantify the impact and benefit of risk mitigation activities outside of laboratory settings, are gaining momentum. And calls for improved data sharing are getting louder. But significant hurdles remain. 

Entities who create, collect, or maintain mitigation data — which are typically outside of the insurance industry — have little incentive to change the format of their data, much less to share it to accommodate the insurance industry’s needs. They must first see a benefit for themselves that outweighs the costs to change. A key incentive for those in the public sector, who control much of this data, is the ability to evaluate and benchmark their performance, which can only come when there is consistency in how these mitigation activities are measured. And finally, developing a proprietary data sharing ecosystem where one for-profit entity is in charge of who gets what information, and for what price, ultimately threatens the whole risk mitigation enterprise. 

How can openIDL make a difference

This is where openIDL can make a difference, as it offers a glimpse of a workable, adaptable, and scalable alternative. openIDL is a Linux Foundation initiative that was developed to address similar challenges in the regulatory data sharing pipeline for insurance data.  Traditional data sharing approaches and pipelines presented more problems than solutions, whereas openIDL turned the traditional data sharing model on its head — sending the query to where the data is securely stored rather than the other way around.  

With mitigation data, we need an approach where those who create and maintain data about mitigation activities maintain control over how their data is shared, who has access, and for what purpose. We need an approach that can break down the barriers that limit data sharing and thus limit the ability to evaluate the impact of mitigation activities to help those local agencies, local community groups, and local property owners demonstrate the value of the equity — be it financial, organizational, or sweat —they put into mitigation efforts. And we need an approach that limits the ability of third parties to monopolize data access while still allowing those with proprietary datasets a collectively beneficial and financially sustainable way to contribute to our detailed understanding of the peril.

To be clear, collapses, catastrophes and individual losses will still happen, but as insurers, our underwriting efforts rely on our ability to differentiate between those taking mitigation seriously and those who are not. openIDL provides the means to help move the needle enabling communities conducting risk mitigation activities to become invested in optimizing risk selection as underwriters. We cannot afford for mitigation be simply a fashionable buzzword. It must be an indispensable part of the whole insurance data ecosystem. If there is a lesson to be learned in hindsight from the Surfside condo collapse it is that the information was there, we just weren’t listening.  

Visit our openIDL wiki to learn more and get involved: wiki.openidl.org

About the author:

Dr. Matt Hinds-Aldrich has led several national initiatives and projects to improve how fire departments across the country and across the globe collect, analyze and use data to focus their efforts, improve their operations, and demonstrate their value. At American Association of Insurance Services (AAIS) he helps lead the development, expansion, and adoption of the FLAMES (Fire Loss and Mitigation Evaluation Score) methodology for insurers to assess local fire protection and mitigation efforts.

Photo by Jeff Finley on Unsplash

Linux Foundation Hosts Collaboration Among World’s Largest Insurance Companies

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openIDL platform provides a standardized data repository streamlining regulatory reporting and enabling the delivery of next-gen risk and insurance applications

San Francisco, Calif., April 12, 2021 – The Linux Foundation, the nonprofit organization enabling mass innovation through open source, and the American Association of Insurance Services (AAIS), today are announcing the launch of OpenIDL, the Open Insurance Data Link platform and project. The platform will reduce the cost of regulatory reporting for insurance carriers, provide a standardized data repository for analytics and a connection point for third parties to deliver new applications to members.

openIDL brings together some of the world’s largest insurance companies, including The Hanover and Selective Insurance Group, along with technology and service providers Chainyard, KatRisk and MOBI to advance a common distributed ledger platform for sharing information and business processes across the insurance ecosystem.

The first use case for the openIDL network is regulatory reporting in the Property and Casualty (P&C) insurance industry. Initially built with guidance from AAIS, a leading insurance advisory organization and statistical reporting agent, openIDL leverages the trust and integrity inherent in distributed ledger networks. The secure platform guarantees to regulators and other insurance industry participants that data is accurate and complete, implemented by a “P&C Reporting Working Group” within the openIDL network.

“From the very beginning, we recognized the enormous transformative potential for openIDL and distributed ledger technology,” said AAIS CEO Ed Kelly. “We are happy to work with the Linux Foundation to help affect meaningful, positive change for the insurance ecosystem.”

Insurance sectors beyond P&C are expected to be supported by openIDL in the coming months, and use cases will expand beyond regulatory. A “Flood Working Group” has already been assembled to develop use case catastrophe modeling in support of insurers and regulators. openIDL is also collaborating on joint software development activities, building upon Hyperledger Fabric, Hadoop, Node.js, MongoDB and other open technologies to implement a “harmonized data store,” enabling data privacy and accountable operations.

The combined packaging of this software is called an “openIDL Node,” approved and certified by developers working on this project, and every member of the network will be running that software in order to participate in the openIDL network. Additional joint software development for analytics and reporting are also included in the openIDL Linux Foundation network.

“We’re delighted to join openIDL with AAIS and the Linux Foundation. It is strategically important for Selective to be part of industry efforts to innovate our regulatory reporting and use distributed ledgers,” said Michael H. Lanza, executive vice president, general counsel & chief compliance officer of Selective Insurance Group, Inc.

openIDL is a Linux Foundation “Open Governance Network.” These networks comprise nodes run by many different organizations, bound by a shared distributed ledger that provides an industry utility platform for recording transactions and automating business processes. It leverages open source code and community governance for objective transparency and accountability among participants. The network and the node software are built using open source development practices and principles managed by the Linux Foundation in a manner that enterprises can trust.

“AAIS, and the insurance industry in general, are trailblazers in their contribution and collaboration to these technologies,” said Mike Dolan, senior vice president and general manager of Projects at the Linux Foundation. “Open governance networks like openIDL can now accelerate innovation and development of new product and service offerings for insurance providers and their customers. We’re excited to host this work.”

As an open source project, all software source code developed will be licensed under an OSI-approved open source license, and all interface specifications developed will be published under an open specification license. And all technical discussions between participants will take place publicly, further enhancing the ability to expand the network to include other participants. As with an openly accessible network, organizations can develop their own proprietary applications and infrastructure integrations.

Additional Members & Partner Statements

 

Chainyard

Chainyard is pleased to join the OpenIDL initiative as an infrastructure member,” said Isaac Kunkel, Chainyard SVP Consulting Services. “Blockchain is a team sport and with the openIDL platform, companies, regulators and vendors are forming an ecosystem to collaborate on common issues for the betterment of the insurance industry. The entire industry will benefit through more accurate data and better decision making.”

KatRisk

“The openIDL platform will serve to increase access to state of the art catastrophe modelling data from KatRisk and others, serving to reduce the friction required to house and run said models. KatRisk expects all parties, from direct insurance entities to regulators, to see an increase in data quality, reliability and ease of access as catastrophe modelling output is effectively streamed across OpenIDL nodes to generate automated reports and add to or create internal business intelligence databases. If catastrophe models are about owning your own risk, then the OpenIDL platform is an effective tool to better understand and manage that risk,” said Brandon Katz, executive vice president, member, KatRisk.

MOBI

“The Mobility Open Blockchain Initiative (MOBI) is delighted to join with the Linux Foundation, AAIS, and insurance industry leaders in founding OpenIDL.  Data sharing and digital collaboration in business ecosystems via industry consortium ledgers like OpenIDL will drive competitive advantage for many years to come,” said Chris Ballinger, founder and CEO, MOBI.

For more information, please visit www.openidl.org

About the Linux Foundation

Founded in 2000, the Linux Foundation is supported by more than 1,000 members and is the world’s leading home for collaboration on open source software, open standards, open data, and open hardware. Linux Foundation’s projects are critical to the world’s infrastructure including Linux, Kubernetes, Node.js, and more. The Linux Foundation’s methodology focuses on leveraging best practices and addressing the needs of contributors, users and solution providers to create sustainable models for open collaboration. For more information, please visit us at linuxfoundation.org.

ABOUT AAIS

Established in 1936, AAIS serves the property casualty insurance industry as the modern, Member-based advisory organization. AAIS delivers custom advisory solutions, including best-in-class forms, rating information and data management capabilities for commercial lines, inland marine, farm & agriculture, commercial auto, personal auto, and homeowners insurers. Its consultative approach, unrivaled customer service and modern technical capabilities underscore a focused commitment to the success of its Members. For more information about AAIS, please visit www.AAISonline.com.

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The Linux Foundation has registered trademarks and uses trademarks. For a list of trademarks of The Linux Foundation, please see its trademark usage page: www.linuxfoundation.org/trademark-usage. Linux is a registered trademark of Linus Torvalds.


Media Contact

Jennifer Cloer for Linux Foundation
503-867-2304
jennifer@storychangesculture.com