fizzy is AXA’s latest parametric insurance offering that leverages blockchain technology, and promises to automatically compensate policyholders whose flights are delayed more than two hours. Mr Laurent Benichou, Director of Research and Development for AXA Next, elaborates on how fizzy works, the challenges faced during its development and when it will be rolled out.
By Dawn Sit
Q. In a nutshell, how does fizzy work?
Mr Laurent Benichou: When you buy flight delay insurance on the fizzy platform, we record the purchase in a tamper-proof network, the Ethereum blockchain, making the insurance contract essentially tamper-proof.
This smart contract is connected to global air traffic databases, so as soon as a delay of more than two hours is observed, the compensation is triggered automatically. With fizzy, there is no need to report the claim – the compensation is automatic and immediate. In this way, AXA has delegated the compensation decision to an independent network, strengthening the trust that customers can have in AXA.
Another advantage of this is that the coverage is completely transparent: you know in advance how much you will be reimbursed if your flight is delayed. fizzy provides additional trust to the customer as AXA publicly posts its commitment of indemnity in a public blockchain.
Q. When can a full roll-out be expected? Particularly, when will this be introduced in Asia and which market(s) first?
Mr Benichou: We are currently analysing new routes to complement the initial routes of fizzy (between Paris’ Charles de Gaulle airport and the US). We hope to issue those new destinations from 4Q 2017 to 1Q 2018 with routes between Europe and Asia, and potentially intra-Asia routes. As we are currently collecting and analysing data, I cannot confirm precisely which markets and routes we will launch yet.
Q. What challenges do you expect to encounter in bringing the product to various markets? What are the regulatory implications, if any?
Mr Benichou: In Europe, there is already a regulation (EC 261) requiring airlines with large delays or flight cancellations to indemnify passengers. This removes some of fizzy’s value-add. However, in countries where this regulation does not exist, fizzy provides much more value.
Other challenges unrelated to fizzy that might take place include the availability of an AXA insurance licence in the markets we want to enter, and whether the business model is sufficiently cost-effective for multiple stakeholders: fronting insurer, broker, reinsurer, fizzy team, distribution partner, etc.
Q. How much improvement does AXA expect to see in claims efficiency and operations? (Possible to gauge by man-hours, dollar costs?)
Mr Benichou: We expect to see much more improvement for this particular type of claims as there will be a fully automated indemnification process triggered by smart contract instead of being handled by the insurer. This also allows more transparency for the customer.
Q. In what other areas of the insurance business do you foresee blockchain tech to be leveraged?
Mr Benichou: fizzy can be applied to other use cases, including train, bus, and weather insurance. Additionally, blockchain can help with other insurance businesses, including anti-multi-insurance fraud, digital proof of insurance, and certified claims process, among others. A