Bitcoin, the alternative currency, is changing the way that the world operates. It uses a decentralized system to create a secure and anonymous payment system that can be used nearly anywhere in the world. The currency has not been without its ups and downs and the value of a bitcoin has become immensely volatile with a single coin being worth anything from $200 – $1,000 in the last year alone.

The Blockchain

The blockchain is a database that is shared continuously by every node within a system; it is held in a distributed form which is fully encrypted. There are no requirements for third party checks of the system to validate a transaction or coordinate interactions within that system.

In essence it provides a system which is completely secure and which requires no central authority to work effectively.

Insurers currently provide four functions (from a financial perspective) they check the existence of something to be traded (a policy), they prevent duplication of transaction (e.g. no policy is sold twice to the same person), they handle disputes that arise from transactions and acts as representatives of their clients.

All of these functions could theoretically be duplicated by a blockchain. And insurers will be concerned to learn that the functionality of a blockchain could then provide:

Smart Contracts

A smart contract is a self-administered policy; one which is fully automated and in which the owner of the policy remains fully in control of that policy at all times. They would be able to upgrade and downgrade coverage as needed and without ever consulting the insurer directly.

Decentralized Autonomous Organizations (DAOs)

Bitcoin was the first DAO. It doesn’t necessarily follow that an insurer would be happy with this model of running a business in that the insurance DAO would literally exist outside of the law. A well-developed blockchain which was self-sufficient could provide enough security for people to move to an insurance model beyond traditional regulation. This would deliver new risks for consumers of insurance but substantially reduce the operating costs of an insurance business.

Increased Security in Policy Administration

While it is impossible to say that any technology is completely secure; no-one has yet managed to break the encryption and decentralized architectural approach of a blockchain. That means an identity created within a blockchain would be completely unique and offer a higher level of security that the insured party was who they claim to be and offer a greater sense of online security in general than say authenticating with social media (which requires no such identity development and can easily be faked).

Summary

It appears that the insurance industry could reduce costs and increase reach to any market simply and easily with blockchain technology. However, it remains to be seen whether any current insurer is willing to take the leap of faith required to put this into action. If they do not; it is almost certain that a new breed of insurer will arise to do so. The reduced administration costs and increased levels of security are both major benefits to customers even if they are challenging for the current insurance model to handle.

Bitcoin Insurance

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It’s not a mark of shame to have your data breached; it happens to the biggest companies on earth – cyber-criminals have large amounts of resources to their name and spend a lot of money breaking into other people’s data. That means insurers need to examine their preparations for what should happen when their data is accessed without authorization while still taking every precaution to prevent such a breach in the first place.

Be Proactive

There are numerous tools that analyse the traffic that passes through a network; you need to ensure that you have the right people in place to examine these analytics and identify when a breach may be occurring. The earlier that you can identify an attack; the sooner that you can stop it. It’s not an easy task to identify suspicious behaviours but it must be done to minimize the impact of a breach in security.

Plan for the Day Disaster Strikes

It is vital that your IT team has a plan in place to handle any incidence of data breach. That means having a dedicated response team as soon as any event is detected. It means ensuring that your decision making hierarchy is clear and that the priority is to protect your data at such a time with other operational issues taking a back seat until the breach is sealed. You should also have a clear communication’s strategy in place; how are you going to inform the board, how will you protect your brand image, how are you going to tell anyone that their data has been affected and how will you let the wider world know what happened?

Test Your Plans

The best laid plans have a horrible habit of falling to pieces in an emergency. If you want to ensure that your plans are robust; you need to test them. You can run simulation exercises and find any weaknesses in the plans and fix them.

Keep Up to Date with Technology

A constant source of easy access to networks for hackers is companies that fail to implement manufacturer’s security patches. You want to make certain that you have a strong patch management strategy in place. You may also want to examine ways to beef up password security to prevent breach through employee logons.

In The Event of a Breach – Record Everything Happening on the Network

Those network analytics packages come in handy when a breach occurs too. You can use the data they generate to examine the event once you’ve sealed the breach. If you can identify the behaviours that led to the attack – you can watch for them in the future. If you can see how the attack operated; you can beef up safeguards on the areas of the network that hackers were trying to exploit.

Run a Security Driven Corporate Culture

Time and time again; it is human failures that make it easy for hackers to gain access to networks. It has been repeatedly demonstrated, for example, that people will often handover their work machine passwords in exchange for minor incentives (like a chocolate bar). If you make data security a fundamental part of the business culture you can prevent many of these easy points of entry for hackers.

That means developing training and a management culture that supports employees to make the best decisions when it comes to data security. This needs regular reinforcement – one off events aren’t going to make a long-term difference.

Summary

It’s unlikely that any company in the world of finance is going to remain untargeted by hackers over the coming years. Even the greatest level of security precautions can fail. It is as important to be prepared for a data breach as it is to attempt to prevent such a breach in the first place. A series of simple actions can make your data protection policies much more robust.

Insurance Data Loss

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Arbitrage Constraints and Reinsurance

by Jed GigerJanuary 2, 2015

The concept of reinsurance is a relatively simple one. It enables an insurer to offset some of the risk on an individual policy or group of policies to another insurer. One of the main ways that reinsurers make money is through arbitrage. That’s the idea that you can bring together a group of risks and […]

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2015 – The Year Insurance Goes Mobile

by nickkDecember 29, 2014

The insurance industry is sometimes slow on the uptake when it comes to new technologies; but 2015 is the year when any serious player in the game is going to take advantage of mobile (smartphones and tablet computing) to grab an advantage that not only benefits clients but also the bottom line. If you’re wondering […]

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Ways to Work with Data to Improve Fraud Detection Issues in Insurance

by nickkDecember 22, 2014

Fraud is, sadly, a threat to all insurers. Yet, despite many efforts to the contrary; it remains difficult to detect fraud. Common factors impeding fraud detection include legacy systems which are not fully interoperable with other data management systems and giving vendors too much control over critical data. So, how could data be managed better […]

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Challenge someone to a mince pie showdown now.

by Adam BishopDecember 19, 2014

**To challenge a friend or colleague, visit:      http://www.mincepieshowdown.com   Merry Christmas!

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Will Wearable Technology Lead to Insurance Premium Parity?

by nickkDecember 8, 2014

Wearable technology was the buzzword of 2013. The Google Glass project made the idea that wearables were going to be part of our daily routines seem possible. Sadly, for Google the Glass project appears to be struggling (if it’s not already dead) thanks to the fact that people won’t wear glasses that make them look […]

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What’s the difference between an Estimated Maximum Loss and a Probable Maximum Loss?

by Jed GigerDecember 5, 2014

In some cases these two terms are used interchangeably. They are both designed to give an actuarial measure of the risk that an insurer faces on a policy. They are both commonly used with respect to real estate insurance and in particular to fire risks. Yet they are slightly different and you need to use […]

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Three Uses for Social Media in Insurance

by nickkNovember 24, 2014

OK, we know that by and large insurers seem reluctant to embrace social media wholeheartedly; we think it might be because that there’s too much “fun” in these channels and it’s hard to come up with a comprehensive message for insurance products that doesn’t put a bit of a downer on a Twitter feed. However, […]

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Is it Time to Give Your Insurance Data a Spring Clean?

by nickkNovember 10, 2014

These are the days of big data and thus more data means better risk management and greater sales levels, right? Not always. In fact, one of the nightmares of managing large data sets is working out how to keep that data – relevant. If you don’t keep an eye on the mountains of data you […]

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