OneEvent Technologies, Inc. · 505 Springdale Street · Mount Horeb, WI 53572 · Tel 608.473.8324 · oneeventtech.com

· Alert · Prevent

How Blockchain Technology and AI Can Deliver Insurance Innovations Date: 2.12.2018 Author: Dan Parent, COO Today's commercial and home security monitoring systems produce an enormous amount of big data designed to alert users after an event has occurred. We believe that no system exists to continuously collect and analyze that data, utilizing it to predict, alert and prevent risky behavior autonomously, and proactively warn of an event that is about to happen.

OneEvent’s patented artificial intelligence (AI) software platform analyzes a multitude of environmental sensor measurements to create information and messages that are sent instantaneously to the mobile devices of property owners and managers. The OnePrevent™ system is empowering and enabling faster and better decision making, and mitigating property damage and personal injury risk. The system identifies and predicts the onset of fires, water damage, equipment failures, food/medicine spoilage and other catastrophic events. The AI solution creates a paradigm where computer systems can sense what’s occurring within an environment, and think, learn and act in response to what they're sensing.

The OnePrevent™ environmental sensors are designed to measure a variety of conditions, storing all the data in a decentralized database. The AI solution analyzes the data to learn the intimate behavior of a building or equipment to understand what is normal, and creates immediate alerts when conditions are not.

We believe the Property and Casualty (“P&C”) industry has much to gain from the widespread adoption of our technology. When the OnePrevent™ system alerts property owners to issues before they escalate, they can reduce or avoid insurance claims. The OnePrevent™ system allows P&C insurers to receive timely and accurate claim loss information, improving claims processing, decreasing processing time and improving customer satisfaction, all while providing the forensic information desired to reduce fraudulent claims. The OnePrevent™ system provides property risk assessment information that helps P&C insurers assign risk to the insured, allowing for the adjustment of premiums and deductibles during the underwriting process.

A significant opportunity for OneEvent is in the ability to monetize the enormous amount of data continuously collected and analyzed by the OnePrevent™ system. The OnePrevent™ is an Internet of Things (IoT) system designed to categorize

OneEvent Technologies, Inc. · 505 Springdale Street · Mount Horeb, WI 53572 · Tel 608.473.8324 · oneeventtech.com

· Alert · Prevent

data as either sensor-based, computational analytics or mobile-derived user. But the problem becomes providing the underlying contractual assurance that the data is accurate.

Insurance is an old business built on actuarial tables used to assign new policy customers to a risk category. The size of the grouping is then adjusted to ensure that the policies are profitable for the company. This approach results in some policyholders paying more than they should due to the basic level of data used to form the original group.

The term “InsurTech” refers to the use of technology innovations designed to squeeze out savings and efficiency from the current insurance industry model. As consumers are becoming increasingly tech-savvy, they demand seamless access to personalized offerings via a choice of channels. Moreover, insurers are facing pressure to optimize costs and improve operational efficiency.

InsurTech can also enhance customer experience, which is top of mind for insurers interested in customer retention and customer attraction. Transitioning to business models allowing easy access to services is important to attracting and keeping customers. Adding digital proficiencies to automate processes will increase efficiencies, reduce errors and help detect fraudulent activity.

OneEvent has developed products to help insurers realize business benefits such as reduced risk, improved customer experience, better underwriting margins through tighter pricing accuracy, trimmed claims leakage and increased forensic information. Examples of OneEvent’s InsurTech include such items as first or instant notice of loss, claims agent UX connect, risk assessment or risk scoring tools, data exchange, and a wealth of forensic tools designed to determine exact time and severity of a reported loss. OneEvent’s data will also be valuable to insurers as they look to develop more accurate actuarial models or new products, such as usage-based insurance (UBI) models.

The challenge is delivering solutions to support the digital IoT transformation underway in the insurance industry that, at the same time, overcome the resistance of adopting the use of these data-driven technologies due to fears of authenticity, privacy, data errors and false negative/positive results. Building trust through transparent methodologies of accurate data transactions and data contract agreements when disclosing personal data is key to improving technology adoption. Or simply put, “developing a method where people who don’t know each other can trust a shared record of events.” [1]

OneEvent is exploring how blockchain technology can be used to support, and subsequently drive, increased use and broader adoption of its digital IoT innovations to insurers. The blockchain has the potential of eliminating faults and errors, as well as detecting fraudulent activity associated with falsified sensor data. A blockchain system also has the potential of facilitating and coordinating machine-to-machine communications between the claim submission process and customer’s mobile devices and sensor networks, which can increase customer satisfaction, lower overall adjuster costs and increase the claim’s accuracy.

The blockchain is a decentralized digital repository managed by a network of globally distributed computers that independently perform the task of authenticating, validating and relaying each transaction within the network. This type of system lends itself well to providing insurers a credible architecture for quickly differentiating a valid data transaction from a duplicate data transaction, or a data transaction involving suspicious activity.

But the blockchain structure has inherent inefficiencies, as exemplified in the use of this technology in cryptocurrency bitcoin. As previously stated, a distributed network manages blockchain, but the underlying blockchain principles do not provide distributed computations; in fact, the nodes that maintain the blockchain perform identical tasks on the same

OneEvent Technologies, Inc. · 505 Springdale Street · Mount Horeb, WI 53572 · Tel 608.473.8324 · oneeventtech.com

· Alert · Prevent

transactions by the same rules and perform identical operations to record the same things into a blockchain. The blockchain structure also dictates that large chunks of data be stored and moved about the network for every transaction.

The scalability of the blockchain network is a fundamental question that has been causing major rifts in the community since early in the summary of 2017 after realizing the Bitcoin blockchain network could only handle about seven transactions per second worldwide.[2] The inability to scale is a major concern when applying the technology to an IoT platform, where the data collected by connected devices and objects will exponentially increase the number of machine to machine transactions.

Several solutions have been proposed to address the current network inefficiencies, including Lightning Network (LN). LN is a bi-directional payment channel designed to perform the bulk of the transactions off chain. The basis for the protocol is a transaction made up of two users, each of which starts by contributing funds to the channel. The protocol records the initial contribution, and all following transactions between the two users increment the off-chain channel state. The channel closes, and each user gets their funds allocated once they have completed their transactions. All routing nodes associated with the payment channel transaction then receive their associated transaction fees. Because LN is a more centralized network, much of the LN transaction activity occurs off chain, making it incredibly efficient and economical when compared to standard blockchain transactions.

The drawback to the LN for use with IoT systems is the concept of transaction fees for transactions of any value. In LN, transaction fees are the incentive for the creators of blocks. It is also one of the main tools used to determine the efficiency of the transfer, making it difficult to remove fees from the blockchain infrastructure.[3] But a single IoT data transaction could be as small as one packet of information describing one door-open event. The blockchain transaction fee would dwarf the data’s minute monetary value.

Another solution to solve the fee-based transaction problem is IOTA. IOTA is a scalable distributed ledger architecture that has no transaction fees and can run in the IoT environment, making it possible to lower the minimum payment threshold to levels at which LN money transfer become inexpedient.

IOTA has a similar approach to LN, where the bulk of the transactions are made off chain through flash channels. A flash channel is an off-chain or off-Tangle payment channel to enable instantaneous, high-throughput transactions. Flash channels rely on an equal incentive for parties to participate in the channel in good faith.

The power of IOTA is in its network, as it scales horizontally with the number of network participants transacting with each other. There is also no separate “mining” in IOTA. A single transaction validates two additional transactions. Thus, the network speed increased by users taking part in the network. As a result, the network views each user as an independent “miner.”

IOTA distribute and tamper-proof the IoT data, establishing new trust in data that would allow our system to provide a "pay per event" price models while additionally providing the mechanism to sell the data through open marketplaces securely. Although these projects are new and not ready for mainstream deployment, they are suitable to begin early planning and development, allowing the company to create an 18-month plan of expansion.

OneEvent Technologies, Inc. · 505 Springdale Street · Mount Horeb, WI 53572 · Tel 608.473.8324 · oneeventtech.com

· Alert · Prevent

References

[1] A blockchain definition provide by the Bank of England

[2] The Lightning Network – Brooks Boyd

[3] The Tangle – Serguei Popov

Other Sources

https://blog.iota.org/iota-ecosystem-fund-2-million-f6ade6a4d8ba

https://iota.org

https://www.forbes.com/sites/laurashin/2016/05/10/looking-to-integrate-blockchain-into-your-business-heres-how/#561726c41a15

https://data.iota.org/

https://blog.iota.org/iota-ecosystem-fund-2-million-f6ade6a4d8ba

http://www.ey.com/Publication/vwLUAssets/EY-blockhain-in-insurance/$FILE/EY-blockhain-in-insurance.pdf

https://www.kaspersky.com/blog/bitcoin-blockchain-issues/18019/

https://www.kaspersky.com/blog/mining-easy-explanation/17768/

https://blockgeeks.com/guides/what-is-blockchain-technology/

https://help.wirexapp.com/hc/en-us/articles/212638865-What-is-the-blockchain-fee-

https://bitcoin.stackexchange.com/questions/62303/how-come-the-lightning-network-creators-believe-the-fees-will-be-zero