The Insurance Industry, Reimagined

The Insurance Industry, Reimagined

By Truman Esmond, VP-Solutions & Partnerships


Storm after storm, year after year, the insurance industry must be resilient, protecting citizens and corporations against risks old and new—even those not yet anticipated. For decades, the overseer of this security has been a state-based regulatory system, with guiding principles through the National Association of Insurance Commissioner’s (NAIC) Property and Casualty Model Rating Law, which allows sharing of carrier-provided statistical data to monitor the long-term solvency and fairness of individual insurance markets and the overall industry. While the mission of the regulatory environment remains constant, the means of compliance and potential return on this “regulatory investment” are changing. For carriers, regulators, and policyholders alike, that’s a good thing … with far-reaching implications.

Technology is rapidly and fundamentally changing the world of risk and the business of insurance. For starters, consider the Internet of Things, telematics, artificial intelligence, and machine learning. Who used to worry about drones crashing into crowds, or hackers shutting down the electrical grid? Insurance regulators and carriers now do. To brace America for future catastrophes and nascent exposures while building industry resilience, regulators now must cull ever more data on risk trends, policies, losses, and rates.

For insurers, this means more frequent calls for data from regulators, with requests for increasingly granular data. The more detail requested, the greater the prospect of closing in on private or carrier-specific competitive data. Data security threats are omnipresent.

Regulators’ growing demands for data are valid and essential, but the collection process itself is antiquated, relying on data streams from insurer legacy systems, even sometimes reverting to paper. For insurers, providing data has become increasingly disruptive and burdensome, both financially and operationally. And the burden falls disproportionately on larger carriers that receive little value in return for their efforts.

The process also is increasingly inadequate for regulators. Data provided is often inconsistent and sometimes unreliable. Calls for data may stall at the state level, while data from smaller carriers may be overlooked altogether. These are missed opportunities to spot trends and spur product innovation for the overall industry and for risks unique to specific jurisdictions.

Time for change

At AAIS, we understand the time and resources all parties invest in monitoring insurance market strength and rates. American Association of Insurance Services (AAIS) is the only national, nonprofit advisory organization and statistical agent. We’ve been working with insurers and regulators for 85 years to aggregate, summarize, and interpret industry data.

Fast-moving changes in risk and insurance point to a different future for our industry: one in which providing regulatory data is not a burden but a trusted and transparent collaboration that delivers real value to insurers, regulators, policyholders, and the industry overall. Blockchain is the logical next step to support data sharing on a “need to know” and value-creating basis. After modernizing our own operations, we turned to IBM, and together we created openIDL (open Insurance Data Link), the first open blockchain network connecting data across the insurance industry.

Turning data into real value

As an open distributed ledger, openIDL is designed to provide a trusted and transparent ecosystem for sharing and leveraging data among regulators, insurers, and other contributors. Immediately it has been a clear win for those on both sides of the insurance regulatory equation.

For insurers, openIDL streamlines regulatory reporting, enhances operational efficiency, and illuminates new insights while allowing the safe storage of increasingly detailed private and protected information. It’s permission-based, so insurers can share their data with only those they choose, without releasing control or worrying about replication.

Regulators now can aggregate data more quickly and transparently and use data to generate greater value and timelier insights. They can pinpoint the right questions to ask and collaborate effectively and efficiently with carriers while relieving insurers of data collection burdens. Ad hoc reporting is suddenly simple.

This is only the beginning. AAIS’s NAIC-chartered and nonprofit status enable us to provide unique, unbiased governance of our industry’s “genesis blockchain.” Like AAIS, openIDL is devoted solely to the betterment of the insurance industry.

With enhancements coming quarterly, openIDL will not only ease and elevate data sharing and value creation, it also will open doors to entirely new insurance solutions and facilitate the integration of insurance and risk management into all aspects of consumers’ lives and American businesses. That’s a good thing for agents and brokers as well.

It’s time to put the laborious, burdensome requirements of insurance regulation in the rear-view mirror. There’s a new world of exposures on the horizon. With openIDL, the insurance industry is poised to manage them in ways that create unprecedented value for all stakeholders.


Learn more about openIDL


As seen in Rough Notes