Millennials and Generation Z (GenZ) all have one thing in common – they don’t like the idea of buying insurance. Wait…; maybe this is across all generations? Plus, there are the labels – lazy, entitled, self-centred, disloyal and spoiled, but again is this not all generations at this young age?

Let’s not focus on this, let’s take a closer look at this new (ish) group of young adults, what shines out for me is that they are turning to borrowing, sharing, renting and hiring rather than buying. They want the ‘experience’ not the hassle of ownership. They want the ease. Cake & Arrow have been studying this group and their insights are interesting, not just for insurance but for all of commerce.

Millennials have grown up with a fully functioning computer in their hand and this drives everything.

While not all Millennials/GenZ are alike, there is one term defining their generation most might agree upon – the convenience generation. From on-demand taxi services, to on-demand food delivery and on-demand entertainment, these adults have opted for new levels of convenience unlike any other generation before them. Millennials and GenZ are choosing the convenience of Boxed and Amazon Prime over the prices of Costco and Sam’s Club.

How is this insurance industry responding? We see terms like “digital transformation,” “personalization,” and “on-demand,” these are the chosen jargon of the industry, used in industry events, panels, webinars, and reports across the world in an attempt to set clear objectives and guidelines for companies that want to stay relevant. What’s more, these terms have been portrayed by others as promising opportunities for those willing to embrace the journey.

But is this true? Do we really know that this is what drives a millennial insurance shopper? Or is that just the convenience of the ability to deliver on this in the context of what a company was doing anyway? Let’s make it digital??? This is the easy option, it’s got to mean something. Having a fancy front end, is this enough?

I believe that digital is a step in the journey but it not the end of the journey or even the point of the journey. The journey to me is much more than this, it is about making a difference and bringing out the true qualities of the industry, the fundamental reason for insurance and the difference it can make to those who take it out. These qualities are hidden and pushed way back in the dim past of the industry and the companies that form the industry. It’s the WHY of the industry, yet this seems lost.

For MIC Global, we are going to bring out this WHY. People talk about Peer to Peer insurance, but isn’t this what insurance is anyway? Why do people want insurance, why is it such a good thing? is the only reason you buy insurance is because you are forced to? Let’s look at a bit of the origins of insurance to find out the why it came around in the first place….

The first methods of transferring or distributing risk in a monetary economy, were practiced by Chinese and Babylonian traders in the 3rd and 2nd millennia BC. Chinese merchants traveling treacherous river rapids would redistribute their wares across many vessels to limit the loss due to any single vessel’s capsizing. The Babylonians developed a system and practiced by early Mediterranean sailing merchants. If a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lender’s guarantee to cancel the loan should the shipment be stolen or lost at sea.

It’s about looking at activities, groups and risks and providing cover for them should something go wrong. The whole point of community insurance is to build a community and allow large groups of the members to pay a little (insurance policy) towards the losses (claims) of the few.

This is the thing that seems lost today, users don’t see their part in the community giving benefits to the few. Todays insurance industry has drained all the feeling and warmth from their products. They forget the people paying for the few who claim. They forget to highlight how the easy payments of claims really benefit the ones who have suffered.

Microinsurance is all about the claim. Building in transparency to all customers. Not just the claims but the policies – allowing the communities that are built around our policies to see the claims and see how their money has helped support the community.

GenZ and Millennials want to be part of communities and helping support others and bring sense in to their lives. To grow and be relevant to these generations insurance needs to update itself and be more than digital, it needs to get back to its early existence and be part of the community, for the community.

The USA federal Government under the Trump Presidency shows how countries actions can impose change and disruption for businesses. Not only their threats but actual actions mean companies need to plan and have back up plans particularly if they are part of or rely on an international supply chain, such as with just in time production. Political risk is a real issue.

With campaign promises to build a wall between the Mexico-United States border and continued threats to close Ports of Entry and to impose tariffs on foreign goods, organisations must now evaluate the damage that such events could have on their supply chain.

The efforts that the USA are going to deal with migration has created hours-long waits at the borders. The president’s tougher immigration policy is causing problems not just for immigrants but also has the potential to disrupt cross border trade.

As an example, approximately $177 billion of U.S. exports and $246 billion worth of imports make their way across the Mexico-United States border each year by truck, based on data from the U.S. Bureau of Transportation Statistics. Mexico is the third largest trading partner for the U.S. behind Canada and China. The automotive industry makes up a large portion of that trade. The U.S. also receives more than 40 percent of its fruit and vegetable imports from Mexico, according to a 2017 analysis from the U.S. Department of Agriculture.

With estimated wait times increasing to cross the border, the financial effect on companies is proving to be very damaging.

“The longer these delays get, the bigger the economic impact can be because businesses have to make monumental decisions.”

Gary Becker, Chief EconomistWashington D.C., based consulting firm Catalyst Partners

When the produce being transported is fruit and vegetables, any disruption in the supply chain can lead to substantial losses because they are perishable goods. In these situations how can businesses know what decisions to make and how to deal with these issues?

Our solution is to use detailed tracking of such perishable goods and other delicate products. We have a developed a tracker in partnership with an IoT company that can provide greater visibility into supply chain operations and allow users to make pro-active decisions relating to the condition of consignments.

When alerts of exceptional events are trigged – such as a shipment location, time at location, being dropped, opened, tilted or in this case, exposed to temperature or humidity outside of defined parameters, the user will be informed via our analytics portal. This auditable data can aid in resolving disputes as it allows everyone to identify the facts behind late and damaged goods.

In some cases, truckers may turn off their engines to save fuel meaning that the power supply to refrigerators will be turned off. Fruit and vegetables will soon expire if exposed to high temperatures for extended periods of time. In situations such as this, our users will be alerted in real-time of the rise in temperature which will give them the option to get in touch with the appropriate party to inform them of the risk being placed on the goods being transported.

Our solution puts shippers in control by enabling them to see what’s really happening and trending within their delivery network. Customer service will also be dramatically improved by enabling shippers and logistics suppliers to identify where delays and issues are happening and report back to customers.

The automotive supply chain is also heavily affected by these border crossings. Car parts tend to be manufactured in one country and then need to be shipped abroad to be matched with other parts. If delays become a common occurrence, organisations will need to start holding larger reserves of parts so they have enough products to keep their factories running. This will then undermine the benefits, and effect decision makers in the supply chain.

For businesses heavily dependent on goods arriving at the right place at the right time, reacting to supply chain failures can be just as important as preventing them. Our tracking solution is enabling those using just in time deliveries, specifically in the automotive sector, to react and be pro-active about failures in real time.

Tracking is part of the answer. Real time data and allows better decision making.

So, there we were, in a planning meeting, thinking about how to implement a parametric insurance product, how to fully secure and automate it….and then someone mentioned Hashgraph! What?????

Just as I was getting tired of hearing “blockchain this…” and “Lemonade that…” we now have “Hashgraph”….

What is Hashgraph? Why was it so important to mention and for insurance?

Distributed ledger space is a huge talking point for insurance – smart contracts, security, cost reduction, trust – it all points to a move on to this tech. BUT blockchains come with limitations by design and are, by their nature, slow. By allowing the ‘community’ to come to agreement and throw away the blocks they don’t agree on speed suffers. In today’s world SPEED is king and this is a huge barrier.

Even in the slow paced world of insurance, how many applications are there that can just do 5 transactions per second? None, I think. Hence blockchains have been all talk, to-date.

Many large companies across sectors are increasingly testing blockchain PoCs, but full adoption is constrained by core limitations such as transaction speed.

The hashgraph algorithm, invented by Leemon Baird, the co-founder and CTO of Swirlds, is a consensus mechanism based on a virtual voting algorithm combined with the gossip protocol to achieve consensus quickly, fairly, efficiently, and securely.

YAY – QUICKLY – speed could be solved, and we can adopt.

“Hashgraph is an alternative to blockchain which is a first generation tech with severe constraints in terms of speed, fairness, cost, and security,” explained Mance Harmon, Co-founder of Swirlds and Hedera.”

For the layman what is Hashgraph? Well if you know what blockchain is (a distributed ledger technology) all about then this is relatively simple – Put simply it’s like Blockchain, but Hashgraph is without the limitations.

Under test, Hashgraph has performed well. Since time is a trade-off between throughput, latency, number of computers, and geographic distribution, the tests demonstrate these trade-offs very well without adding in another trade-off. For example, the results show 30 computers can achieve 50k transactions a second across 8 global regions in 3 seconds, or merely 1.5 seconds across 2k miles, or 0.75 seconds in a single region. This is great news and it could be time to open up PoC’s to this new tech.

These speeds mean that processors such as Visa can think of building it into their current network and transaction speeds.

The Hedera Hashgraph platform is architected to address the market of distributed applications. The vision provides an initial three sets of services as the platform evolves:

1. Cryptocurrency as a service for support for native micropayments.
2. Micro-storage in the form of a distributed file service that apps can use.
3. Contracts.

Great – how do we play and pay? It works through a platform coin — when you make an API call to one of these three services, a micro-payment is made to the company.

The Hedera platform’s existing technical framework is capable of anti-money laundering and know your customer compliance which sits well for insurance. Regulatory compliance combined with enhanced security and speed could signal a time to start.

With a secure, fast, public ledger, the future could include micropayments and massive-scale distributed p2p insurance and other new models could be developed. Match distributed ledger technology and AI and the future is bright!

So, what to do now? We are looking at this tech to architecture our insurance models. We have been waiting until now owing to the fundamental issues in existing blockchain processes.

Here at MIC Global we continue to explore blockchain, the world of “a smart contracts”. It is our current belief that ‘smart contracts’ will be the core insurance uses-case for blockchain. Why is this? Because the MAIN thing that people buy when they take out insurance is a contract. Nothing more – insurance is a contract to pay if a set of events occur in the future and is within the bounds of said contract.

Today, there is nothing wrong with the contracts that insurance companies use, well they are wordy and fully of small print, allow for ambiguity and generally need lawyers and administrators to navigate the many escape routes that are built in. So to introduce ‘smart contracts’ into the process takes tech and investment – two things that the insurance industry is slow to do.

Insurance contracts should, on the face of it, be very simple. They should ensure that each party is dealt with fairly and each party receives and gives what they thought when it was signed. There are many instances where insurance companies fight claims and slow down payments. This is where smart contracts can fulfil a need. Welcome to the world of smart contracts, these contracts don’t leave the chance for interpretations. For insurance they enable so many benefits.

The use of these contracts are now linked to the rise of blockchain and a change in technology and process that is still very young for many companies and, in many cases, at a pre-Proof of Concept (POC) stage in insurance companies.

The use of blockchain in insurance is the tech game changer that is needed within the industry to bring straight through processing advantages to insurers and brokers. Smart contracts will, eventually, be used for sharing economy, gig economy, IoT and platform insurance. Making the process very transactional. Making insurance transactional.

The main idea behind the use of ‘smart’ in smart contracts is to use tech coding to determine the relations and obligations between parties and automatically administer these clauses and relationships. The contracts make possible to exchange money, property, shares, or basically anything of value in a transparent and non-conflicting way.

Basically, the smart contracts have the trust built in. Add this to the idea of a decentralized blockchain network and you can start to see the power of these contacts within the insurance industry, especially around parametric and transactional insurance. The conflict of ambiguity is removed. The power of speed and volume enhanced.

The term “smart contract” is widely associated with Ethereum or IBM. Currently the Ethereum smart contracts are the most popular. However, it is possible to create smart contracts on other Blockchain platforms.

In 2018, a US Senate report said: “While smart contracts might sound new, the concept is rooted in basic contract law. Usually, the judicial system adjudicates contractual disputes and enforces terms, but it is also common to have another arbitration method, especially for international transactions. With smart contracts, a program enforces the contract built into the code.”

Other forms of smart contracts are Ricardian contracts. This form of contract maybe be more relevant to the insurance industry. A definition, from its creator, says a Ricardian contract is “a digital contract that defines the terms and conditions of an interaction, between two or more peers, that is cryptographically signed and verified. Importantly it is both human and machine readable and digitally signed”. This definition makes it very usable for insurance where both parties may want to use the contract from time to time.

A Ricardian contract registers a legally valid and digitally connected document to a certain object or value. A Ricardian contract places all information from the legal document in a format that can be executed by software. In this way it is both a legal agreement between parties and a protocol that integrates an agreement offering a high level of security because of cryptographic identification.

With a smart contract, a person could, for instance, have a hurricane insurance policy contract that is encoded in the blockchain in the form of a set of rules.

In case of the hurricane coming, the smart contract could then automatically transfer the claim money to the beneficiary. The Insurer may provide additional constraints, such as enabling the transfer only when the hurricane reaches certain intensity and tracks to a location within certain parameters etc.

Since smart contracts’ conditions are based on data stored in the blockchain, they need only to rely on external services, which take data from the “real” world (e.g. from hurricane tracking and location tech) and push them to the blockchain (or vice versa). These services are referred to as “oracles”. By considering this example, an oracle could inspect the presence of a hurricane’s track and intensity to identify whether the person/company (Insured) is eligible for a pay-out. This eligibility could also test against claims materials instantly read on the blockchain such as invoices or other records. This would then trigger an instant, automatic, payment.