Smart Contracts and Fraud Reduction

The other area where I can see smart contracts adding value is in reducing the amount of fraud that exists today in the US healthcare system, which as we know is a paid for system rather than free at the point of use like the UK. There are massive frauds that are conducted in the U.S. Under smart contracts imagine that you have a trusted third party that can validate if this person is ill or some other mechanism that validates the need of more prescription drugs and that the user is actually taking them and not selling them on the black market. There will be ways still to commit fraud but I think there will be ways to use smart contracts and smart devices with trusted third parties to administer the correct dosages safely and more efficiently, which can trigger a prescription renewal, for example.

Why Not the Internet?

So why blockchain and not just use the internet? Well that is where it all comes together because blockchain could not exist without the transportation mechanism that is the internet. Consumers will continue to use the internet but what blockchain and smart contracts bring to the party is the ability for a pharmacy in Middle America to gain access to enough of the drug requirement records of an individual from another city. Imagine someone travelling across America starts off from New York, they arrive at Des Moines or somewhere in Middle America, they are able to go into a small pharmacy to get a top up on their prescription and prove their need without conversations taking place with doctors. The new system creates efficiencies and closes down loopholes in potential areas of fraud.

Flexible Insurance Policies

Last year I attended an insurance technology accelerator where one of the topics being debated was flexible motor insurance with specific reference to ‘in-cockpit’ or vehicle devices that are smart enough to know who is driving. One usage would be to imagine the Uber driver or the Deliveroo driver that uses their car or scooter for 20% leisure but in the evenings they require additional business cover. The policyholder says I am now an Uber driver please activate my Uber policy and automatically suspends their normal policy. Or the smart policy supplements the normal policy so that if our policyholder does have an accident while they are driving as an Uber driver – and say they have a passenger on board - then they have the right level of cover.

Personal to Business Insurance

Another example is that I have business mileage on my car insurance. I drive for business a few thousand miles per year – tops - but I am paying for that all of the time in the same way as anyone else that drives every for their own business every day and they might be driving 20000 miles plus a year. For me currently the policy doesn’t allow me to switch it on or off or say it’s only valid for 2000 miles a year. Why not plug your policy into your calendar to make the switch to a “transportation private vehicle” setting?

Building an Insurance Blockchain

In this exciting new environment it is clear that CIOs working at, say, an insurance company will need advice on the potential benefits of blockchain(s), how these might support the role out of new products and ultimately grow the business.
I believe that blockchain benefits fit into three towers.

IT leadership

CIOs need to know what the blockchain is for and lead on development working in partnership with the business. The CIO will need to strategize and establish how they are going to make use of it. Is it something that is going to make a big change to how their organisation works or is just a change to their method of storing data? If it is the latter then chances are that it won’t be a big IT leadership change, it will be more about the products.
I believe, however, that it will offer more than data storage and it will involve the CEO’s support and interest because blockchain evolution is going to be product led. What new products can we create? Can we develop smart contracts which mean that 80% of our claims can be validated by a trusted third party? OK, we have to validate these third parties on an occasional basis but can we use their feed to validate that the claim has been delayed, for example? So the claims processing goes from 100% human interaction to maybe 80% human interaction. Blockchain is going to be a CEO education piece requiring strong CIO support and leadership.

IT and Business Change Management

The change management tower straddles blockchain development because of the need for implementation, which is going to be change to your business with new products being created. It may also mean there is change to the shaping of the claims team, it may need organisational assistance in that respect and maybe change to the IT team. Potentially it may require a Project Management Office or it may need light touch project management assistance.

IT and Business Resilience

From the resilience side we are going to see major step changes to the business environment. From a CIO perspective you have got to relook at your resilience. It is more likely that resilience is going to be strengthened because blockchain’s distributed ledger capability means that at least part of your data is backed up in numerous locations. The other aspect to that, however, is that the encryption being used is appropriately strong. Now that is something that is not typically an implementation decision, it is more of a security and resiliency decision, but with a block chain implementation it is all part of what is being deployed.
100%?

Blockchain is not 100% full proof. External doors are stronger than internal ones. So the lock depends on the appropriate nature of the security requirement and so it goes with blockchain. WEP encryption used to be considered good enough for Wi-Fi encryption but there are now apps available for smart phones that would allow a WEP Wi-Fi password to be cracked in 15 minutes. Times change and technology moves on but for now, Blockchain encryption is safe, using as it does, modern encryption techniques and approaches. When the days comes to update the level or type of encryption though, the market will move to the new standards likely with legacy support for the older encryption for a period of time…Anyone who doesn’t move to the new encryption in time will find themselves unable to interact (fully) with the blockchain.

Conclusion

One thing is for sure, Blockchain is not going away. The CIO’s response to how to manage blockchain on-boarding will require flexibility and probably an agility that cannot be met from in-house resources alone. An experienced co-sourcing partner like Fifth Step will work collaboratively with you on blockchain; we complement and expand – not replace - your own resources, bringing in additional expertise as and when it’s needed in-house. Fifth Step delivers a flexible, bespoke service tailored entirely to your needs and responsive to the business cycles and changing requirements of your business.