Blockchain in insurance

Applying blockchain privacy to the insurance industry

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Recently, some of my colleagues published an excellent and informative article on the evolution of privacy and confidentiality in networks built on The Linux Foundation’s Hyperledger Fabric. As an industry practitioner, I look to apply that philosophy to insurance business network design. As the article details, “Privacy is frequently achieved by mechanisms that enforce the confidentiality of data and the anonymity of transaction participants.” To that end, privacy can be defined as individuals and organizations are “prevented from accessing data that they are not authorized to access,” while confidentiality being described as the “identities of the participants of the transactions.” In this article, I will illustrate the use of concepts — channels, private transactions and unlinkable transactions — to meet different privacy and confidentiality needs imposed by insurance related scenarios.

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Scenario one: Claims processing

A group insurer offering health insurance has entered into contracts with three large regional hospital networks in the United States, as part of their preferred provider network for one of their medical plans. The insurer wishes to design a hospital claims processing blockchain. Each hospital claim may have multiple service providers such as emergency vehicle operators, triage specialists, attending physicians, surgeons, hospital, medical suppliers and third-party billers. From a privacy perspective, it is desirable to limit claims processing visibility to only regional hospital network members.

To maintain the privacy of hospital claimants, peers and channels are established by an insurer with each regional network. Since the number of regional hospital networks is small and the volume of claims in each network is high enough, claims processing are routed and administered efficiently and accurately.

Scenario two: Supplier contract bidding modernization

One of the regional hospital networks negotiates annual supply contracts with medical suppliers by using a bidding process. An initial request for bids is published on a blockchain by the regional network staff. Medical suppliers provide their bids and also may negotiate terms and conditions. The hospital network may award contracts to multiple suppliers as the outcome. Per policy, all suppliers can see who has submitted bids, but its details, terms and conditions being negotiated will remain private amongst the bid parties.

Siloed channels are not a preferable solution to this problem, since there can be an arbitrary number of suppliers in a contracting process. Private transactions that offer transaction privacy (available as a tech preview in v1.2) are more suitable for this scenario. Bid data is shared only between the hospital network and relevant suppliers — it is maintained in the supplier’s private database and shared with the regional hospital via the gossip data dissemination protocol. Bid details on the blockchain are hashed, so their contents are not visible so competitors know that competing bids have been submitted and processed but are not privy to competitive bid details.

Scenario three: Maintaining bidder privacy

A hospital network is looking to see how the bid process can be carried out, but without revealing bidder identities or bid contents to network members.

IBM Identity Mixer introduced in Hyperledger Fabric 1.2 as a technology preview, leverages zero knowledge proofs, together with zero knowledge asset transfer capabilities that will be introduced in an upcoming release, are an advisable solution for this scenario. In place of using standard X.509 certificates, network participants instead are issued Identity Mixer credentials and single use transaction certificates. Medical suppliers sign their bids using these specialized one time use certificates, making the bids non-linkable to supplier identities. An interesting twist here is that relevant parties with audit or regulatory authority on the chain can still be provisioned for audit or regulatory access to the transactions and thus verify compliance. This is important for insurance, where proving regulatory compliance when challenged is important.

From my perspective, these expanded possibilities raise interesting business network application possibilities for the contract-rich insurance value chain. For further details on these technology developments, Hyperledger Fabric v1.2 documentation is a great place to start. You can also learn more about IBM Blockchain for Insurance here.

How insurance could benefit with IBM Blockchain

Executive Architect - Financial Services Sector, IBM Global Markets

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