Part 1: Managing the Standard Formula SCR
This paper addresses how hedgers can manage Solvency Capital Requirements, given the details of the proposed changes communicated by EIOPA in its consultation document.
With the Dubai Blockchain Strategy, the United Arab Emirates (UAE) aims to be the first blockchain-powered government by 2020.1 This goal was set with the intention of establishing Dubai as the happiest city in the world as well as an international leader in integrating disruptive technology to create innovative platforms a decade ahead of the world.2 Programs are already being piloted for migrating key government processes, including healthcare records, to the blockchain.3
Healthcare actuaries and stakeholders need to understand the downstream effects of a blockchain-powered government. A health blockchain platform could have a far-reaching effect on the work of health actuaries in the UAE and around the globe.
A blockchain is a distributed, permissioned, and secured ledger. Transactions are recorded in chronological order. Modifications cannot be made to existing records (blocks), and new information is appended at the end of the ledger (chain). A blockchain can be codified to suit different needs; a well-known application is the cryptocurrency bitcoin. Blockchain technology has the potential to be a disruptive force in any industry composed of multiple key players, each with fragmented data, and inefficient and insecure information sharing among stakeholders.
In the past few years, Dubai has invested significantly in transforming its healthcare infrastructure, including building an entire city centered on world-class healthcare, introducing mandatory health insurance for all citizens and expatriates, and implementing an Emirates-wide electronic health record (EHR) system. Transitioning to a standardized Emirates-wide EHR database will advance Dubai to a level of industry sophistication comparable with that of leading nations. While this will be a significant advancement, the current approach to EHRs has shortcomings that a blockchain can help overcome.
The blockchain is the catalyst set to overhaul the current healthcare system. While Dubai’s goal is to increase efficiency, create new industries, and emerge as a leader in technology development, using the blockchain also has the potential to control medical costs, improve quality of care, and enhance the overall health and happiness of Dubai’s residents. Once implemented, lessons from the Dubai Blockchain Strategy can also be extrapolated globally to create a more efficient worldwide healthcare economy. There are three key blockchain features that should enable healthcare stakeholders to overcome challenges of the current system. They are the distributed, permissioned, and secured properties.
Each node in the blockchain network maintains a copy of the ledger. It eschews the traditional role of a central entity as the sole manager of records. When new transactions are added, each node updates its own copy of the ledger instantly. In healthcare, this distributed model would enable each patient’s medical record to be on a blockchain specific to the patient. Providers and payers may maintain their own nodes. Implications of distributed ledgers may include:
The blockchain is protected with an encryption program so that only those with proper permission can read and store data. Even users with read-write access cannot tamper with the blockchain because the only edit allowed is adding entries to the end of the chain. Data on the blockchain is further divided into modules, which may be granted to users on a need-to-know basis. Implications of the permissioned feature of a blockchain may include:
The blockchain is secure in that past data is immutable, all relevant parties must agree to a new ledger before it can be added, the identity of a patient can be securely confirmed, and data is stored on multiple nodes. Key parties, including the patient and caregiver, should be in consensus with the medical codes and records to be added. To write to a blockchain, the patient must unlock the blockchain through a public key, which is generated by a private key unique to the individual. Public keys are unique, time-sensitive codes mathematically derived from the permanent private key. This verification ensures trust among patients, payers, and providers. Implications of the additional security blockchain provides may include:
Health actuaries in the UAE have an exciting opportunity to shape standards and advance actuarial techniques as a result of the emerging blockchain technology. Integrating the blockchain with existing technology, such as artificial intelligence and machine learning, may lead to insightful breakthroughs that may fundamentally change perspectives on healthcare. Furthermore, the blockchain may vastly improve healthcare industry practices through:
There is an incredible wealth of new data with the potential to disrupt current practices, and even more curiously, to solve questions previously unanswerable. A blockchain may increase efficiency, create new industries, and solidify Dubai as a leader in technology. It also has the potential to control medical costs, improve quality of care, and enhance the overall happiness of Dubai’s population. Actuaries need to closely monitor the environment as blockchain EHRs come to fruition. Actuaries also offer a unique technical perspective to help Dubai find potentially disruptive new applications to ensure all public sectors are at least a decade ahead of the rest of the world.
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The contents of this paper present hypothetical situations in which blockchain-enabled technology may transform healthcare and further actuarial practices. The actual implications may differ and are contingent on a number of external forces, including but not limited to regulations imposed by Dubai Health Authority or Health Authority of Abu Dhabi, the type of blockchain implemented, the speed of network transactions, how information is stored on the blockchain, how stakeholders adapt to the new technology.