POLICY - May 2019

POL I CY The Israeli Insurance , Pension&FinanceNewspaper 18 Tel Aviv Re 2019 Blockchain Technology allows data to be stored and exchanged on a peer-to-peer basis, and unlike traditional database systems, its records are distributed and maintained on many different computers at the same time, thus allowing participants access to a full copy of the ledger, with full transparency. When information is added, a new “block” of information is “chained” to the previous one in a permanent, unbreakable sequence using advanced cryptography. Blockchain technology, which was originally developed by activists as thebackbone for bank-independent cryptocurrencies such as Bitcoin, holds potential that reaches far beyond digital currencies. Quite i r o n i c a l l y , b l o c k c h a i n is now being embraced by gove rnmen t s and financial s e r v i c e corporations that are eager to explore its potential. Amongst them, the insurance industry is slowly but surely discovering its benefits. Insurers and Reinsurers are increasingly incorporating blockchain solutions which are often coupled with AI and machine learning technologies. These developments stand at the forefront of the InsureTech industry, implementing innovative technology into the insurance industry in order to improve user interface and claim handling as well as to introduce solutions for some major problems traditionally dealt with by the industry, such as fraud prevention. In late 2016, a collaboration of world leading insurers and re-insurers formed B3i - The Blockchain Insurance Industry Initiative. The following year, B3i successfully completed its first product, a blockchain prototype for Property Cat XoL reinsurance contracts. While its short term focus is on handling reinsurance contracts, B3i aspires to build an efficient world-wide industry platform for market participants in order to more easily cede, handle and trade risks. Blockchain can be used for fraud prevention and detection. In asset protection insurance or in the case of an accident, photographs of a certain insured event are stored in a distributed, time-stamped, irreversible ledger. Therefore, damage that occurred on a certain occasion could not be attributed to a later event, and any such attempt will be recognized by the database system and prevented. Fraudulent transactions could be prevented through Blockchain technology, as ownership or the lack-of ownership will be impossible to conceal or argue upon. An example for such a fraud prevention method is blockchain- based diamond tracking. In 2018, key players in the diamond industry suchGIA, ChowTai Fook and Signet joined pilot programs for tracking platforms powered by blockchain and AI. These end-to-end platforms track the diamond’s journey from mine to retail, creating an immutable digital trail preventing scammers from forging the diamond’s ID and battling blood diamonds and frauds. Using this technology would have prevented the acts of fraud revealed in the case of Kishoot vs. Menora I n s u r a n c e C o m p a n y ( CA 28744- 09-10 Pollack et al. v. Allianz versicherungs-AG et a l) and its reinsurer Allianz. In this case, the diamond trader changed the catalogue numbers of hundreds of diamonds in his inventory and obtained a new gemological certificate for them. He then sold the diamond under their new identity while claiming the same diamonds had been stolen from him during a robbery in Hong Kong. Another example comes from Ethiopia. In May 2018 the Ethiopian Ministry of Science and Technology Continued on the next page By Adv. Peggy Sharon Levitan, Sharon and Co. How Blockchain and Artificial Intelligence can help the Insurance Industry