Hong Kong-based fintech startup Galileo Platforms is in talks with an insurance company and with a distributor of insurance products to pilot the sales of life-insurance products over a blockchain, says co-founder Mark Wales.
“We are using blockchain to transform insurance,” he told DigFin while showing a demo of the platform. “Legacies [systems and business models] are so ingrained, and the products are so complex, that the industry needs out-of-the-box thinking.”
Galileo’s service is meant to enable insurers, reinsurers and distributors (such as banks or insurance brokers) enter new markets cheaply and efficiently. Those could include catering to mobile-savvy millennials, or emerging-market middle classes currently underserved by traditional insurers, Wales says.
He declined to name the companies Galileo is negotiating with.
Rethinking the status quo
Galileo is run by three co-founders, all Asia veterans: Jenny Sutton, whom Wales credits with coming up with the idea, and who most recently ran partnership distribution at Manulife; Annette King, most recently head of consumer experience, brand and marketing at Manulife; and Wales, recently a partner at Deloitte for financial services and I.T.
Although insurance fintechs are emerging across the region, Wales says they ultimately require sales to be conducted traditionally, through agents, powered by paperwork. Galileo’s network puts the entire process on the blockchain, so that two or more counterparties can transmit, authenticate and record transaction information.
Galileo built its system on Quorum, a JPMorgan-led distributed ledger and smart-contract platform; it is a private, permissioned fork of Ethereum (which is public and open to all).
In addition to these commercial features, Quorum allows for faster movement of blocks on the chain, while maintaining encryption around private data.
The startup may yet switch blockchains – R3’s Corda and Ethereum Alliance are quickly developing their own versions, enhancing the speed of building and transmitting blocks – but any such change would have to happen before the end of the year, in anticipation of beta programs with users.
(Right now Galileo can create blocks every four seconds, thanks to the looser consensus rules on Quorum, a far cry from the ten minutes required for the typical new block on Bitcoin’s blockchain…but still far from sub-second activity, which would enable something close to real-time transactions.)
Galileo also hired Microsoft for encryption and off-chain storage of documents that insurers need to access for compliance reasons, but which don’t need to be clogging up the blockchain. I.D. cards, policy documents and generic claim information can be put in cold storage.
Life insurance reassembled
And unlike most fintech efforts in the insurance world, where healthcare has seen lots of attention, Galileo has begun with life insurance. “We began with retail life insurance, but the model is open and generic,” Wales told DigFin.
Users will need to run a node on the blockchain, either in the cloud or on a propriety data center. They won’t need a system to handle administration for policies transacted over Galileo – that’s what a distributed ledger is for – but they will need to integrate it with their own general ledger, as well as their actuarial, customer-management and data-warehouse systems.
“We’ve started building the APIs to do all of this,” Wales said.
He says the main challenge will be convincing large insurance companies to work with a startup, and for them to have faith in blockchain technology.
(Other challenges might be whether an insurer will be keen to make complex but lucrative products transparent, although Wales’s sales pitch is that the platform is an efficient way to crack new markets instead.)
Wales showed DigFin a live demo on Galileo in which an imaginary insurer offered a term life policy via two distributors, who bid for the business, all based on algorithms. The deal when from quotation to offer, then acceptance and confirmation, with a KYC process (yet to be fully sketched out). The platform takes deals all the way to in-force and a payment gateway.
“Ultimately this will enable distributors and insurers to collaborate a lot more on developing products,” Wales says. Eventually. In the short term, he says insurers must find ways to move from legacy systems to a more agile, product-based way of doing business.