Everledger and the immutable protection of provenance through the block chain

It was only a quarter of a century ago that Tim Berners-Lee gave us the WorldWideWeb and changed the world forever. It is hard for the millennial generation to contemplate a world without the Internet, social media and an always-on culture. And how on earth could anyone buy or sell goods and services without an online store, let alone businesses trade or simply do the things they need to do.

But before the 1990’s, we wrote letters (email), we sent postcards (twitter), we made photo albums (Facebook). When we wanted to buy something, we wrote a cheque or swiped our credit card through a clunky imprinter device, aka “knuckle buster”, to leave the seller with “proof” that we’d paid using our card.

It is just as hard to believe how the world has changed in such a relatively short period of time as it is to appreciate that in the beginning, not even Berners-Lee could have predicted the impact of his creation.

Which would explain the growing excitement about block chain and the massive potential this emerging technology offers.

As the underlying technology that supports Bitcoin and the other 740 or so cryptocurrencies,block chain is “a distributed data store that maintains a continuously growing list of data records that are hardened against tampering and revision, even by operators of the data store’s nodes.”

The block chain can be used to store information on a decentralized ledger, i.e., not owned or controlled by any one institution or body, and it has four primary characteristics that define it for this purpose.

First, it’s immutable, which means that the records placed on the block chain cannot be changed. Second, it’s secure, which means it can be trusted. Third, it’s fast because it’s automated and digital. And fourth, it’s scalable with no limit to how many records can be stored on it.

The banking industry has been quick to see the potential for massive and wholesale disruption to the global infrastructure. Last week, the Independent reported a quote in BNP Paribas’s magazine that block chain “should be considered as an invention like the steam or combustion engine.”

What about Block chain for the Insurance industry?

I recently Skype’d with Leanne Kemp at her home in Brisbane to learn about her journey as a pioneer in this space. Leanne is CEO of Everledger and a serial entrepreneur with a strong interest in emerging tech. Ten years ago, she invested in a jewelry business and struggled with the traditional bricks and mortar approach to luxury goods and insurance, especially when it comes to diamonds.

The diamond and jewelry market offers a lot of opportunity for fraudsters, thieves and unlawful activity which costs the insurance industry around $50 billion a year. And the problem all comes down to provenance, which is the“chronology or ownership, custody or location” of an object.

For the insurance companies and the law enforcement agencies alike, there is not a central, trusted database to turn to. The traditional approach for insurance firms is to focus on the policyholder, more then the object being insured, when assessing risk. Unlike high volume objects, such as cars that are all registered on central databases, the provenance of diamonds and high end jewelry is all paper based.

And over time, buried in all this paper, provenance gets lost. When reviewing a claim, it is near impossible for an insurer to accurately assess both the quantum and the peril (how many times have I seen this diamond and how come it keeps being stolen?)

Leanne saw that this massive industry problem could be solved with innovative technology. So, with nothing but her backpack, Leanne left Australia and headed to London, the epicenter of the insurance market and a hive of activity for Fintech and technology innovation.

In November last year, Leanne took part in the Aviva hackathon and 48 hours later, Leanne and her team gave the winning pitch to clinch the Aviva Insurance Innovation Award. This led to an approach by Techstars to stay in London and join their accelerator program where she formed her team. Gaurav Rana is an expert in block chain technology and Marc-Antoine Trehin is an expert in data focused on delivering a working platform for industry.

This is how Everledger came into being ! And earlier this month, Leanne presented Everledger at the Barclays Accelerator demo day. You can watch the pitch here.

How it works

Everledger is a digital global ledger that tracks and protects items of value. With the introduction of the ‘op_return’ functionality into block chain, the ability to bind or add data into the block chain ledger was enabled for the purpose of being able to add contract or asset data to a transaction. Everledger are using this functionality and the 40 bytes of arbitrary data that is available to bind transaction data as part of the hash, thereby securing the information into the ledger and making it immutable.

This immediately addresses one of the major issues of document tampering. With Everledger, the record is tamper-free…it is immutable and can therefore be trusted!

Everledger have established relationships with the major certificate houses in the US, Israel, India, and Antwerp. These houses grade and certify each diamond for the market. Everledger take this data and create a digital “DNA” record comprising the 4 “C’s”, 14 meta data reference points and the unique identification code for each stone.

With this information, Everledger knows who owns what diamond and where it is. They can even trace the movement of diamonds on platforms like eBay and Amazon as they are bought and sold. Everledger work with insurance companies when diamonds are reported stolen, and alongside Interpol and Europol where diamonds are crossing borders and entering black markets.

Everledger has recently constructed a consumer app that enables users to add their own diamonds and any other valuable items to the Everledger block chain.

Everledger also provides a Smart Contracts platform to facilitate the transfer of ownership of diamonds to assist insurers in the recovery of items reported as lost and/or stolen. Smart Contracts will also enable a fundamental change in the diamond marketplace and the way they are financed.

The acceleration of Everledger in around 4 months from a fledgling idea to a production platform is astounding. Everledger already have over 300,000 diamonds registered and when you go to their website, you can see the workflow in action, real-time, as batches of 1,000 diamonds at a time are embedded in the block chain.

Barclays have played a large part in this acceleration of Everledger from concept to production. Barclays, as a partner at Techstars, are not usually associated with the insurance industry although they do have an insurance business in South Africa with ABSA. As part of the Techstars program, they facilitated Leanne going to South Africa, the heart of the diamond mining industry, and work with the ABSA to support the build of Everledger.

There is no doubt in my mind that the block chain technology will, one day, become ubiquitous in insurance as it will across all of financial services. And whilst the use case for Everledger is the provenance of diamonds, the technology that Leanne and the team have built can be applied to many other asset classes in the exactly the same way. Extending Everledger beyond diamonds is an important milestone for the company and she hopes to achieve this before the end of this year. A bold and brave target but surely with the evidence of her already impressive build, this will be a ‘one to watch’.

Twenty-five years ago, nobody really saw the extent to which the WorldWideWeb would change our lives. I wonder how long it will be before we are looking back to this decade and the saying the same about the origins of the block chain?

By Rick Huckstep

Blockchain in Insurance #insurtech

Early stage investors and entrepreneurs make their money when something moves from bleeding edge (lots of technical risk) to leading edge (market and team risk).  Blockchain in Insurance  is currently at this intersection, which is why we see so much interest in the subject. The technical risk is lessening every day (there is always some technical risk) but there is still a lot of market risk. We are seeing a lot of Proof Of Concept (POC) projects and lots of Minimum Viable Products (MVP), but as yet very little Product Market Fit (PMF). There is lots of good theory on why these MVPs should get to PMF, but there is as yet very little actual proof from the market.

Auto Payout Based on a Trustless Smart Contract

This holds out a win/win promise. Customers know that payout is automatic and immediate (no more hassling for payout during the most stressful times when the bad event has actually happened). Insurance companies get two benefits:

• Elimination of fraud. The Insurance company does not rely on the customer’s version of truth. There is independently verified data.

• Elimination of claims processing cost. This is a consequence of elimination of fraud.

For this to work, it has to be binary simplicity. An algo has to make a yes/no decision instantly. Something with complexity (such as who is at fault in an accident or whether a medical procedure is covered) needs human intervention.

One example of where we see that binary result is flight insurance. The flight was either cancelled or it was not. Blockchain systems use external data sources (e.g via the Oraclize service ) to get this proof of what happened. A Proof Of Concept for this flight insurance use case was coded during a weekend at a hackathon using Ethereum – proving that technical risk is not the prime concern.

We expect to see lots of use cases where this binary rule applies where really low cost insurance can be offered (thanks to elimination of fraud and claims processing). This is classic disruption at the edge – where disruption usually gets traction. For example, there are lots of use cases within the sharing economy. These are on demand or just-in-time insurance use cases.

One mainstream use case is Life Insurance. Life or death is pretty binary. Smart Contracts can look at online death registers and make payout to the designated account. Given the stress that grieving relatives are under, this would score high on Net Promoter Scores.

Enforced rules for where to spend the money

In more complex claims processes it is more about enforcing rules on where a customer spends the money. For example, in an auto accident, only go to these garages or in a ski accident, only go to these doctors. This is a win/win as the customer has confidence of getting reimbursement and the insurer gets lower and more predictable claims. Using geo location and smart phones it is pretty simple for the customer to make a decision where to go even in stressful situations and will take this action if there is 100% confidence in auto payout via a Blockchain resident smart contract. Ideally the vendor (garage, doctor etc) gets notification on their phone of incoming customer and notification from the smart contract of what they can charge, so the customer does not have to pay and reclaim later.

The Provenance use case for Blockchain

The use case for Insurance that has been understood for some time is Provenance. This affects assets such as jewelry, art and antiques where it is critical to know that the “asset is what the customer claims it is”. If I am insuring a 1964 Chateau Petrus (currently valued in US$ millions), the Insurance carrier needs 100% confidence that it really is a 1964 Chateau Petrus and not cheap wine with a 1964 Chateau Petrus forged label.

An immutable blockchain database is the obvious solution. You can see all transactions on that 1964 Chateau Petrous dating back to when the farmer sold the grapes in 1964. Ok, that only works for transactions starting now unless there is a conversion of historical data – nobody said this was easy!

An early pioneer in this use case is Everledger (our note on Everledger from July 2015 is here). They focus on jewellery, which is a big niche market.

This is a niche within Property Insurance and one can envisage lower cost insurance offered at the point of sale because a smart contract tied to proven provenance means that many more products can be covered. So this can grow the market.

Blockchain + P2P Insurance = Disruption

P2P Insurance has been suggested by many as the disruptive model for Insurance and we have covered this many times on Daily Fintech. It maybe that P2P is only viable with Blockchain resident smart contracts that can guarantee the payout. For the fundamental theory behind this, read a white paper from Joshua Davis entitled“Peer to Peer Insurance on the Ethereum Blockchain”. The Distributed Autonomous Corporation (DAO) that takes in premiums and makes payouts would be owned and controlled by policyholders who have an affinity (ie part of a cohort with a shared risk profile).

Joshua Davis, who wrote that seminal white paper went on to turn theory into practice by creating Dynamis.  They are not trying to boil the ocean; their niche is supplemental unemployment insurance.

Unbreakable Escrow and Solvency 2 on the Blockchain 

As the WEF report states, Blockhain based smart contract Insurance works through an “unbreakable escrow”. The insurer will pay out before they even know about it. This has dramatic and complex implications on solvency regulation that will take time to play out.

Solvency 2 regulation is designed to ensure that insurance companies have enough capital to pay claims.

The issue is how much capital the investor has to put at risk to enable “unbreakable escrow”. Will it be back to the future where the equivalent of Lloyds Names agree to unlimited liability? Or will Insurance companies have to deposit a far higher % of reserves to guarantee the payout. A P2P DAO owned by the policy holders can afford to do this. A traditional insurance company cannot afford to do this. This is classic disruption.

A Digital Lloyds of London

One of the best visions of what a Blockchain based Insurance marketplace connecting brokers, carriers and reinsurance is from a Blockchain foundry called Chain That. Their video explainer sounds like a back to the future version of the original Lloyds of London – replacing human runners carrying paper between the parties with a shared ledger and smart contracts.

Chain That shows how important existing data standards are. They use Accord data -which serves a similar role to the FIX standard in capital markets.

MicroInsurance for the Underbanked using Blockchain

Consuelo (Spanish word for consolation) from a Mexican company called Saldo.mx offers microinsurance for health and life insurance. This is like microfinance – doing something in really small bites at very low cost. Saldo prefer the term non-adjustable insurance, which means replacing the claims process and the claims adjuster.

This fits the Daily Fintech thesis of “first the rest then the west” (that innovation will come from billions emerging into a global middle class because they have greater need and a technological clean slate). What Saldo is referring to is the same Blockchain based smart contracts based on verifiable data from oracles that we described earlier. What is interesting is that this innovation may first get traction among the Underbanked.

Daily Fintech recently described why China and India may define the future of Insurance and InsurTech. At the time we speculated that this innovation could also come from Latin America. It is interesting to see this happening now.

What makes Consuelo particularly interesting is their focus on one of the most critical global networks – diaspora networks. They are focussed on the huge market of Mexican Americans. They call this   “community without borders” in this interview in CoinTelegraph.

Daily Fintech Advisers provide strategic consulting to organizations with business and investment interests in Fintech. Bernard Lunn is a Fintech thought-leader.

Insurance Is The Next Frontier For Fintech

We have entered a golden age for fintech.LendingClub and OnDeck recently exited through massive IPOs, and global investments in the fintech space hit $3 billion last year. This outpouring of innovation and investment has spread across the financial sector, spanning mobile banking, small business lending, financial advisers, credit scoring, savings and more.

Given all the money flowing into fintech, it might seem that the biggest, most glaring problems have been solved. And yet, despite the unbelievable amount of financial innovation and technological progress that have transformed other sectors, there are entire swaths of the financial industry that have not changed. The opportunities are still ripe for the picking.

Insurance represents a huge opportunity that has yet to see real innovation. The U.S. insurance industry is the largest in the world in terms of revenue, with net premiums surpassing $1.2 trillion. At the same time, the major players have some of the lowest Net Promoter Score (NPS) ratings of any industry, meaning the companies do not inspire satisfaction or loyalty in their customers.

People do not like or trust insurance companies. And it’s no wonder why, with headlines like “9/11 Responders With Rare Cancer Denied Insurance Coverage” and “Sandy Homeowners Systematically Denied Insurance Claims.” The industry is notoriously rife with moral hazard and fraud.

Add to all of this the antiquated way insurance products are delivered to consumers in a world where almost anything can be procured with a few taps of a smartphone screen, and it’s no wonder that most Americans are underinsured. Less than half of “middle market consumers” aged 25 to 64 have individual life insurance coverage, and 40 percent of those Americans who do have life insurance coverage think they do not have enough. And, 64 percent of American homes are underinsured.

The insurance industry is begging for disruption.

Challenges And Opportunities

Outside of the Affordable Care Act, next to nothing has changed in the insurance industry for years. Why has it been so slow to change? To start, there are high barriers to entry. The insurance industry is complex and expensive from a regulatory standpoint.

New carriers are required to have unencumbered stores of cash to satisfy the regulators, and have to grow those unencumbered assets in proportion to the amount of risk they have underwritten, which is ever-increasing.

Outside of the Affordable Care Act, next to nothing has changed in the insurance industry for years.

This challenge is far worse in insurance than in lending. In addition, for some lines of insurance, pricing is regulated at the state level, with regulators controlling how much a company charges for a given product. For all these reasons, it is a difficult and slow process to bring a new insurance product to market in the U.S.

Then there is the adverse selection problem — the first people who need a new product often are the highest risk, and thus you run the risk of seeing much higher claims than the industry average once you launch. For a startup, this is just when you are the youngest and most vulnerable.

A few brave souls have taken an early crack at this market and seen success — most notably, Oscar and Metromile. Oscar is “a better kind of health insurance company” that aims to use technology and design to improve the experience. The company is now valued at a whopping $1.5 billion, just a year-and-a-half after its launch. Metromile sells pay-per-mile car insurance, which appeals to the 70 percent of people who drive under 10,000 miles a year, and thus probably overpay for car insurance.

Both companies offer intuitive and accessible (mobile) user interfaces, consumer-friendly business models and greater transparency. This is just the tip of iceberg — every line of insurance needs to be “millennialized,” and I expect we’ll see huge disruption in home, life and P&C, just to name a few.

However, the biggest opportunities for startups will be in four areas: new products for a new economy, better insights from better data, new ways of managing risk and funding regulatory capital and new structures for acquiring customers.

The insurance industry is begging for disruption.

With the rise of Uber, Airbnb and others, our economy is moving away from owning assets to renting them. Existing policies offered by big insurers don’t handle these new use cases and will have to be replaced. But the bigger shift is that in this new world, the concept of insuring an asset over many periods is outdated; instead, we will move to a more transactional consumption model: just-in-time insurance delivered on mobile and underwritten in seconds. One upcoming company in this area is SURE, which is going to deliver consumer-facing insurance products at the push of a button.

There are also reams more data available today than 10 years ago, which means new ways to underwrite risk. For example, Apple watches and FitBits provide information and insight into people’s daily activity that can be extremely useful when making health assessments.

And in the auto industry, a huge risk is how far and through what geography an individual drives to work each day. While accelerometers have been around for years, every cell phone now has a GPS, which provides far more accurate and detailed data.

New insurance companies are tackling the capital requirement challenges in a number of interesting ways. Oscar raised a huge first round of capital, and has continued raising large rounds — driven in part by the need for regulatory capital.

Others are taking a page from online lending and adopting peer-to-peer models to try to provide the requisite capital for regulators. We’ve seen a lot of folks take this approach internationally (Friendsurance in Germany, for example) and others are taking the same approach here — I’m interested to see how regulators react in the U.S.

Finally, the insurance industry is begging for new ways to acquire customers. Millennials are shockingly underinsured. This is partly because they simply do not want to talk to someone on the phone. The channels they like to use and those with which they are most comfortable are not the channels on which insurance companies try to reach them. As a result, a huge target demographic is underserved.

PolicyGenius is already showing that they can convert this previously un-convertible population by providing better information and education online.

I am bullish on the future of insurance startups. Yes, there are challenges, but every problem worth solving comes with challenges, and the insurance industry is crying out for change. People were skeptical at first that consumers would ever trust startups, rather than banks, with their financial needs, or that startups would be able to affect change in such a conservative, entrenched and powerful industry. That turned out to be wrong, and incumbent banks are now realizing that they have to innovate to stay alive, making acquisitions and partnerships left and right.

Similarly in the insurance industry, I don’t think the innovation will come from within. I think that startups will create the opportunities, and force insurance companies to turn their slow wheels of change.

Brendan Dickinson for TECRUNCH 

Brendan Dickinson is a principal at Canaan Partners.

INTERNET OF THINGS (IOT) ENABLED SMART CITY

 

Image Credit : www.districtoffuture.eu

Introduction

Prime Minister Narendra Modi’s vision ‘Digital India’, has a plan to build 100 smart cities across the country. To help the Indian Government convert the country into a Digital India, Intel can partner with Government to make India a leader in digitally delivering services in the health, education, banking sectors.

As the Indian Internet populace endures to grow from 60 million in 2009 to 190 million in 2014, it is estimated that the possible growth will be over 550 million users by 2018. The number of Internet users in countryside areas will touch 210 million by 2018, aiding India’s internet consumer base to cross 500 million by 2018.

The Internet class of 2018 will be more rural, older, more gender-equal, more mobile, and more dialect than their equivalents of today. Rural users which will be the Internet populace of the future, is expected to rise from 29 percent in 2013 to between 40 and 50 percent in 2018. Thus, the rural area seems to be grasping up with digital quiet quickly. By 2018, the rural populace will stand on an equal footing with the metropolitan populace in terms of internet tradition and availability.

Hence, the smart city project needs to be planned cleverly, bearing in mind the local populace as the key point. Also, it has to be wary as to not widen the now present abyss between the rural and the urban class. A nation should grow taking all its populaces along, regardless of class differences, and providing to everyone’s need alike.

As much as the idea of smart cities is unbelievable and normal, its execution on India at the given socio-economic condition might be a bit bit difficult. However, as a fast developing economy, India needs to keep up with the worldwide standards. Hence, the accomplishment of this plan could make India take a major leap in the battle of growth. With government looking for private partnership, Intel can partner with Government to foster technology as the enabler for creating a digitized India.

Global Trend towards Urbanization

The 21st century is becoming known as the century of cities as countries move from being primarily agrarian economies to industrial and service sectors leading to urbanization. According to the United Nations, already in July 2007, the urban population surpassed the rural population in the world. Moreover, this proportion is expected to increase dramatically in the coming years to the point that by 2050, almost 70% of the world population will be urban and many cities will have over 10 million inhabitants.  It is estimated that by 2025 in China alone, there will be 221 cities in excess of 10 million inhabitants.  Europe currently has 35 such cities. Currently, cities consume 75% of the world’s resources and energy and generate 80% of greenhouse gases, occupying only 2% of the world’s territory.

The global experience is that a country’s urbanization up-to a 30% level is relatively slow but the pace of urbanization speeds up thereafter, till it reaches about 60-65%. With an urban population of 31%, India is at a point of transition where the pace of urbanization will speed up. It is estimated that by the year 2050, the number of people living in Indian cities will touch 843 million. Government of India has allocated Rs. 70.6 billion (USD 1.2 billion) for Smart Cities in Budget 2014-15. India plans 100 new smart cities and will develop modern satellite towns around existing cities under the smart city program. It is for this reason that we need to plan our urban areas well and cannot wait any longer to do so. The relatively low base allows us to plan our urbanization strategy in the right direction by taking advantage of the latest developments in technology.

Energy Efficient Approach to Urbanization

Countries have adopted an energy intensive approach; others have adopted a more energy efficient growth path. In India, since we are still a developing economy, we have the opportunity to choose the path we want to take. Clearly, we should take the low energy path, especially in view of environmental sustainability as well as in view of the fact that we have to import a major part of our energy requirement, which is very vulnerable to the international political situation. From monitoring air quality, to monitoring the energy consumption of the whole city, the authorities and citizens get a clear and detailed view of the amount of energy required by the different services (public lighting, transportation, traffic lights, control cameras, heating/cooling of public buildings, and so on). In turn, this will make it possible to identify the main energy consumption sources and to set priorities in order to optimize their behavior. In addition, it will also be possible to enhance these services using sustainable approach of using solar energy and photovoltaic panels.

Concept of Smart City

Professor V Srinivas Chary, dean of research, Administrative Staff College of India, defined a ‘smart city’ as follows:

“A smart city can deliver good quality services to all its stakeholders, through the use of ICT, in a cost and resource effective way”.

The key aspects in this definition of a Smart City are as follows:

1. Good quality services – A smart city provides the services, e.g. the Physical and Social infrastructure that is world class, to its residents.
2. To all its stakeholders – This implies that the smart city should be able to provide these services to all stakeholders regardless of where they are and what is their economic or social status. The services should be affordable to all.
3. Through the use of ICT – The usage of the Information Communication and Technology would be a key enabler in providing the services anytime and anywhere.
4. Cost and resource effective way – The technology would enable the efficiency and cost reduction in the provision of the services.

 

A smart city may create the value in the following ways:

1. Public spending is reduced in the long term on the public infrastructure in smart city and buildings with efficient building automation, water and sanitation facilities, electricity and high speed internet connectivity and incident reporting.
2. The efficiency of public services and their quality leads to higher satisfaction quotient in the citizens which in turn leads to effective utilization of services provided.
3. Provides base for better decision making for identification and enhancement of the city boundaries or inclusion of new services/infrastructure requirements in the city limits.
4. Helps to promote social development holistically such as basic education, employment, food and housing security for all strata of society.
5. Real time information availability – enhances citizen awareness about the city they live in by providing information update in real time and equipping them to make informed decisions.
6. Intelligent networks of people, mobiles, sensors and actuators generating data at the rate of more than terabyte per second leading to advanced analytics in real time which helps in disaster management and recover post the disaster.
7. Energy efficient smart cities lead to sustainable management of energy resources in the long run through smart grids, efficient distribution and metering and processing and measuring of other environmental parameters along to synchronize with changing demand patterns.
8. Public and voluntary participation in government and e-government policy making.
9. Increased public safety through efficient management of public emergency systems, civil defence, video surveillance and fire and other hazard prevention and detection.
10. Holistic social development through provision of basic education for all the citizens including e-learning and teleworking, e-tourism and cultural information, e-commerce, etc.

Smart Cities are those that are able to attract investments and experts & professionals. Good quality infrastructure, simple and transparent online business and public services processes that make it easy to establish an enterprise and run it efficiently without any bureaucratic hassles are essential features of an investor-friendly smart city. Adequate availability of the required skills in the labor force is a necessary requirement of a Smart City. Investors, themselves, look for a decent living and so they also look for smart housing, high level of healthcare, entertainment and quality education. Safety and security is a basic need for them as to any other resident. A city that is considered unsafe is not attractive. Besides, an investor needs to be considered as someone who helps a city to prosper rather than someone who only profits from it.

A Smart City needs to identify its comparative or unique advantage and core competence in specific areas of economic activities and promote such activities aggressively, by developing the required institutional, physical, social and economic infrastructures for it and attracting investors and professionals to take up such activities. It also needs to support the required skill development for such activities in a big way. This would help a Smart City in developing the required environment for creation of economic activities and employment opportunities.

Pillars of Smart City

The Physical infrastructure includes the road, transport, electricity and other utility services that a city provides to its residents. The Social infrastructure includes the education, health and other community services that enhances the development of human and social capital of a city.  The Institutional Infrastructure includes Security, Enforcement, Taxation, Environment sustainability etc. The Economic Infrastructureconstitute the Job creation, GDP, livelihood of residents etc.

In the next section, we will discuss how the latest technology e.g. IoT has enabled the concept of smart city using the cases. We will be addressing the issues of social and physical infrastructure

Social Infrastructure using IoT

The social infrastructure includes the components of a smart city that enable the development of the humans and social capital. The following components comprise the social infrastructure:

1. Health – Connected health care and patient monitoring
2. Education – Connected private education
3. Homes – Smart buildings
4. Community – Connected communities
5. Entertainment – Connected gaming and entertainment

Connected Health Care and Patient Monitoring system

With the Internet of Things technology, the remote patient monitoring system would enable the doctors to monitor the patients remotely. This would enable short hospital stays and the care of the patients may be done at their homes. Consequently the same hospital capacity may be used for more critical patients who cannot be treated at home. Some of the examples may be chronic disease patients, old patients, patients recuperating from sickness etc.

Security of the data between the doctor and patient would be the critical factor in realizing such a remote patient monitoring system.

Connected Education

Internet of Things technology would enable the remote delivery of education which is much closer to the real experience. The teachers and students may be outside of the campus, but still all the teacher would be able to share all the in-class resources anywhere. The students would also be able to collaborate on group activities remotely. Such a connected learning experience will enable a much larger and farther reach of the schools. More number of students will benefit and the geographical location would also not be a hindrance.

The current web technologies are quite close to such a connected experience. Some incremental changes in existing web-class room sessions would be able to make the overall experience more class room like.

Smart homes

Internet of Things technology may be used to enable multiple facets of a home. From security to remote controlling of equipment, inventory management, garbage disposal the IoT technology would make the life of the residents easier. Remote video surveillance of homes and automatic notification to police or fire brigade in case of an emergency would give a piece of mind to its owners. Automatic inventory system, garbage disposal system, utility control system would ease the life of the residents. Similarly, remote controlling the cooking/warming of food, enabling the heating/cooling system of the house, cleaning of house, electricity to switch on/off, mood lights/music according to season/time etc would provide a much richer experience to the residents.

Although remote security systems are already available, but controlling different gadgets e.g. microwave, refrigerator, vacuum, dish-washer, laundry, electricity system, inventory system, etc would need some radical innovations to have them all available remotely. The security of such a system would be very important otherwise, someone with malicious intentions may cause safety and security risks.

Connected communities

With the life of the people getting busier, traveling associated with their jobs, people are not able to find time to communicate or collaborate with the other community members. A smart city would allow active communication of its members regardless of their location through a connected community over the Internet. A connected community will allow people to seek other people with the common interests, hobbies, religion/political beliefs to collaborate effectively regardless of their physical location at any time. The people would also be able to make effective decisions by seeking and sharing opinions on topics of common interest over internet. People would be able to express their opinions regardless of their physical location at a time, thus enabling a much better participation of the members. A connected community would also allow members to seek help, opinion, and suggestion on topics of their interest by a click of a button.

The technology required to develop web-portals for collaboration of the members is already available. If a person has access to Internet (s)he may access multi-purpose groups, and participate in community meetings conducting that may be conducted using web technologies.

Connected entertainment

A smart city would enable various methods of entertainment to be available whenever/wherever. Movies, theater shows would not only be allowed to be booked remotely, but may also be delivered over the internet where people may enjoy them in the comfort of their homes. The mall experience may be virtualized over internet. Various kinds of games may be played using online gaming where many people can play together in a virtual gaming environment.

The pieces of technology required to enable such a connected entertainment experience are mostly available. What is needed is just a viable business case.

Physical Infrastructure using IoT

Most city governments have different departments to oversee the services for managing different operations such as electricity department, transport department, water department, sewage department and many more. However, these departments do not fully inter communicate their plans and activities. Hence they services as independent entities. In developing a smart city infrastructure, it is essential to think of cities as multifaceted systems with departments as subsystems sharing all assets and resources.

It is important that cities in future cities share their process information to better co-ordinate their infrastructure issues based on the simple design principles such as modularity, exportability, interoperability, extensibility, and scalability.

Infrastructure, the underlying structures that support our systems, is inherently hidden from us. But without it our current cities couldn’t possibly exist. Without finding ways to improve it, our future cities will struggle to survive. Here are some of the ways Physical infrastructure issues that can be addressed using IOT

a.Electricity

Smart electricity grids can regulate and optimize energy-use based on supply and demand. Smart meters can record the energy usage at homes and businesses helping city planners determine the requirement of electricity. City planners can also know when usage is at its peak for each residence or business, and give back this information to consumers. Appliances which consumer electricity will have sensors which will switch off automatically during non-peak times, thereby decreasing the demand during electricity “rush hours” and thus charges and electricity bills.

b.Water

Water utilities typically consume large energy in a city. This consumption can be shifted to the non-peak hours if water utilities can connect with electric grid or any other electric utility, which communicates with the grid. By coordinating with the electric utility and shifting water pumping to non-peak hours, the water utility can reduce its energy consumption (and ultimately its bill), help the electric utility avoid problems and allow other more critical and less flexible functions (such as hospitals) to maintain uninterrupted supply.

c.Sewage Management

Install a sensor in the sewage collection bins, that is capable of determining the filling level of waste (glass, paper, cardboard, cans, etc.) in the containers. Data is transmitted to the municipality management center through GPRS communication to the municipality.

The city center can have a dashboard that gives it statistics of sewage at different locations and it can appropriately manage the pickup trucks schedule.  In addition, the best routes can be analyzed by the garbage bins based on the updated data to pick up the waste. This way pickup service will become more efficient while reducing costs and CO2 emissions.

d.Transport

–     All vehicles on the road can be deployed with smart meters which keep transmitting back road traffic and other important stats. Central repository can filter out and relay information to drivers for smart driving. For drivers who ignore this signs an Electronic toll system can be deployed were tolls will vary based on traffic i.e. high tolls for high traffic roads.

–  Smart sensors can be fixed in parking spots that can collect the real-time status of municipal and garage metered parking spots. The sensors can track if a spot is engaged, empty, or terminated. It sends this data to a data management system, which links to a mobile application for drivers. Once a person can use an application to find a vacant parking spot, the city can basically change traffic patterns and consumer behavior.  This can minimize traffic congestion, reduce carbon emissions and eliminate labor ineptitudes associated with parking implementation.

e.Disaster Management

Sensors are installed at various places to gather information such as surveillance cameras, water level sensor, rain gauges, and seismometers. When the information gathered crosses a threshold, an alert is sent to cities security system. All moving transport objects such as train, vehicles are stopped so that appropriate action can be taken before it becomes a disaster.

How can India make an IoT enabled smart city?

IoT enabled smart city presents a picture of ubiquitous computing. Thus, IoT can be enabled in a Smart City by using the pervasive and immersive applications of existing and enhanced capabilities of internet technology. Internet connectivity can be realized in almost all the devices by deploying microcontroller in them. However as first step government can start IoT implementation in the devices used in public places such as CCTV cameras, traffic lights, street lights, public transport, public parking sensors, parks, shopping malls etc. In order to make it a valuable offering pervasive algorithms can be used to design services around the data generated.

Implementation phases of IoT enabled smart cities

It is necessary to come up with the ecosystem of IoT in a Smart City. Overarching Framework that may be used to deploy an IoT enabled smart city.

• Prototyping
  • In this phase a proof of concept cities can be picked up for feasibility analysis.
• Service
  • The different services that can be offered in the beginning can be identified.
• Replication
  • Understanding of how multiple smart cities can be developed based on the success of initial phase smart cities

Prototyping

The conceptualization can be done keeping in mind the social and physical infrastructure build up. The feasibility and implementation aspects are discussed below. Prototype cities can be come up with. The US and Singapore are ready to fund the concept of smart city in India.

Service

Urban mobility

The setting up of mobility infrastructure must ensure optimal cost implications on public transport systems usage. Adequate importance need to be given to all modes of transportation i.e. public transport including trains, buses, taxis, metros and private transport which range from pedestrians to cyclists to LMV owners. The rails, roads, footpaths need to be enabled with IoT capabilities such as sensors, routers, avalanches, pervasive computing.

Reliable Utility Services

The intelligent devices must maintain regular supply of water, gas, electricity, sanitation, solid waste management by employing energy efficiency models that can be implemented.

The legislative factors must be clarified so that they don’t cause hurdles in the development.

How these infrastructures can be operationalized. Identify the business aspects in order to make the concept viable for investment and implementation. The bureaucratic forces need to be minimized so that there is optimum usage of resources.

Service models

Firms and government can come up with service models to provide the following features:

1. Interoperability
2. Uniformity
3. Cost effective
4. Upgradable

Some examples of service offerings can be location based services , wearables  enabled with pervasive computing , structural health of buildings , noise monitoring , waste management , traffic congestion , city energy consumption , air quality control city energy consumption check , smart lighting , automation and salubrity of public buildings.

Replication

The concept of IoT, once deployed in initial phase of smart cities, will not be difficult to replicate in other places. Since government spending on the setting up of network and visible infrastructure is aggressive, it will be advisable to start the conceptualization of second phase along with the kick-off of first phase.

There will be many technology companies who will compete for the services. Since Smart cities concept is catalyzed by the government, there will be many takers for such technologies.

Moreover, since there will be a base of standard technologies already available, there will be competition in the services offering. This will not be able to make a clear winner out of the competitors. Each player will have some share of wallet.

Financing

The central government will launch the smart cities project with PPP (public private partnership) model. The model would have viable gap funding by the government as well. It has been estimated that about 7000000 Crores in 20 years which translates 35000 Crores of investment will be required per year.

PPP model is preferred to attract private capital typically by two types of investors:

1. big investors who are capable of providing lump sum capital amount and
2. Small investors who are capable of attracting the critical mass due to their reach.

The funding mechanisms that can be followed by the PPP partners:

• Prototype stage funding of innovations : This stage of financing huge and very difficult to get. However it is very useful in assessing the risk and feasibility of the project at this stage.

Source:http://eu-smartcities.eu/sites/all/files/Guideline%20Financing%20Models%20for%20smart%20cities-january.pdf

As shown in the graph above following strategies of PPP model that will make the complete lifecycle of smart cities feasible:

• The R&D can be financed by grants by government.
• Later prototypes and deployment needs huge capital expenditure which would require bridging of capital investments from different sources. Financial engineering would be required.
• Private venturing and debt financing will be possible soon after the maturity stage has been reached.

Thus, the PPP partnership model can be made feasible by timely contribution of funds from its contributors in the government and private sectors.

The government must provide 3 kinds of necessary arrangements which will boost the participation in PPP model:

1. How to incentivize the private players to collaborate
2. Cost benefit vs risk analysis
3. Investment security mechanisms to protect data

There can be several uptake measures for the market to facilitate financing. The socio-economic benefits are linked with effective energy use. However, the private financers are not attracted much by the economic rate of return of the project if it involves huge investment. The IRR of the project components may be very high due to the limitations of tariff and renewable subsidies.

Stakeholders

The stakeholders involved in the project popularity can be:

1. Promoter bodies :

These bodies promote the SMART cities concept e.g. administrative bodies, national authorities, government agencies.

1. Achieving bodies :

Those who implement the projects i.e. the firms, construction companies.

1. Financial institutions :

Banks, capitals management bodies, foundations, managers of programs.

1. Certification authorities :

This element is very to make the PPP model secure and low risk taking for private financers.

1. Guarantor bodies

The huge investment areas such as infrastructure and energy requires guarantor bodies to drive the costly investments

Smart cities enabling a sustainable model (Green City)

Millions of people are moving to cities, often triggering complications such as unplanned settlements and lack of proper infrastructure to fulfill even basic needs. Cities and transport also play a key role in the climate change. Transport is responsible for 22% of energy-related greenhouse gas emissions worldwide, and these emissions are rising faster than those for any other sector. Cities contribute about 70% of energy-related greenhouse gas (GHG) emissions, despite only accounting for 2% of global land.

The transport sector is already one of greatest sources of greenhouse gas emissions, a situation that will only worsen as exploding transport demand in urban areas continues to be met largely by personal transport (motor vehicles). Efficient and customer-friendly public transport can curb emissions while directly improving living conditions for urban dwellers. Improved public transport planning and better access for passengers depends to a large extent on the availability and quality of data and information. To address this aspect of transport planning and implementation, Smart Cities will focus on opening up and linking data across sectors in the urban development space, and working with a wide group of stakeholders to pursue sustainable planning and improved customer experiences in the area of public transportation.

In addition, below are some of the other smart city ideas that can help build a sustainable city

• Smart grids offer an opportunity of minimizing overall environmental impacts of energy consumption.
• Smart water management through the use of ICT to improve both water and energy footprints, taking into account life cycle assessments
• Energy efficiency of ICT equipment/networks that will emit IoT signals is a key factor to be taken into consideration in the development of smart sustainable cities in order to ensure that the solution implemented will have a minimum impact on the environment and will give a real benefit.
• conservation and effective use of energy and other natural resources such as water using ICT technologies is key to the smart city development

Some of the ideas discussed in the report and in this section are key items for the success of any smart city. A smart city that advances sustainable development practices will be the most successful cities.

Use cases of Smart City in India

Hospitals

Our current hospitals have long waits due to non-availability of beds, since a number of beds are occupied by some chronic / recuperating patients etc, For example: Patients of broken bones, slip disk, post-surgery recovery etc. The model of the proposed smart city would allow for some of these patients to be monitored at home. Although, the in-home patient monitoring system would have some technological cost associated with it, but the savings would be larger since the cost of a hospital bed (room) is generally much higher, and the cost of technology tends to come down with scales.  Also, the hospital bed would now be available for a much needy person, thereby increasing the patient treatment ratio of the hospital. It also has the advantage that the patients would get their home environment, where they tend to get better sooner.

Smart Education

In our country a lot of kids cannot go to the schools because of unavailability of schools/teachers.  The smart education can be impactful in such a scenario. A smart school may have the class lectures be attended when someone is at home. If the cost of a computer and internet connection required to deliver such education can be made affordable or borne by the government, then the problem of lack of teacher / school space may be solved to a great degree.

Transportation

No one enjoys clogged cities with overcrowded vehicular population (with its attendant pollution), or with metro or local train systems bursting at the seams. For example:

• Mumbai suburban railways carry 7.5 million commuters per day, which is the highest passenger density, and most intensively utilized system in the world
• Delhi Metro has an average daily ridership of 2.5 million commuters
• New Delhi has the largest vehicular population in the country, with more than 7.5 million registered cars, and 1,400 new cars added to city roads every day.

Urban transportation is an important element for smart cities. Hence, the need to review city Traffic management in smart city (including metros, BRT’s, monorail, trams, waterways, walkways, bicycle tracks, etc.), to provide updates on roads and other routes closed for any purpose leading to

• Let the citizens take better informed decisions for last mile connectivity for using public transport management system
• Community carpooling among citizens of smart city leading to reduced transport-related greenhouse gas emissions
• Reduced personal mode of travel by use of online systems including lesser work related travel to work or staggered travel times for flexible working hours
• Lower fuel and power consumption by vehicles and infrastructure, leading to improved local air quality and related environmental conditions.

Smart Grid

A smart grid and a smart city can manage checking and control of the city’s power demand and energy consumption to either reduce the utility’s peak power demand and/or schedule it during times when the utility’s rates are lowest.  For example A smart city served by a smart grid can associate traffic light checking to determine which traffic lights (or other critical facilities) are unworkable due to a utility power outage or vice versa. Another instance is the communication between smart grid and consumers so that power can be appropriately distributed as and when needed only.

Disaster Management System

Smart Cities definitely will focus on building up systems that are resilience to natural disasters, such as extreme weather, flooding, heat and water stress, caused by climate change. Confronted by a natural disaster, smart cities can use sophisticated ICT infrastructure and analytical capabilities to enhance and coordinate the information flow between multiple public agencies, such as transport authorities, emergency services and energy providers, and citizens. With the help of networks that are connected in a smart city, a city municipality can reach the majority of its citizens at short notice.

For example a disaster resilience solution will involves observation systems, information gathering capabilities, data analysis and decision making aids, together with an intelligent warning system, all linked together in an interoperable manner. When the observation crosses a certain threshold level, a  alert is issued. This alert is then circulated to the municipality office.

Traffic Management System

The urban public  transport management system would lead to reductions in congestion and traveler frustration a more streamlined, efficient and cost effective system leading to greater affordability for transport providers and travelers. Mobility demand in cities is highly variable over time, leading to a continual disparity between the levels of service supply and demand. A holistic response will look at both the supply of and demand for mobility services, by:

• Actively managing capacity over time to make the most efficient use of existing physical infrastructure (operational efficiency)
• Distributing reliable information to travelers about the relative costs and benefits of different travel options, thereby promoting behavior change.

Smart solutions can facilitate both of these objectives, especially when supported by wider policy measures that promote changes in traveler’s behavior (such as flexible or staggered working hours). Integrated management takes advantage of multiple transport modes, including automobiles, buses, light rail, and even walking, to manage the movement of people more efficiently across modes. Information from all modes is consolidated through data analytics and a single platform, to maximize the total flow of people over time. This relies on a wide range of data collected from sensors along the roadway and rapid transit systems, smartphone Global Positioning Systems (GPS), and real-time information feeds about road closures, maintenance works and weather conditions. By assimilating these data feeds, commuters can be provided with instant information about the optimal route to their destination, whether by car, another mode, or a combination. This testifies to the huge economic, environmental and social benefits that can be reaped through improved use of digital solutions.

Challenges of Smart City:

Accommodation for lower strata of population

As discussed above, the usage of technology would improve the quality of life of citizens in a positive manner thereby making the smart city a place where people would aspire to live. The better quality of life would attract a premium to live there and hence the property prices in a smart city would be higher. The higher prices would make the living of lower strata of population un-affordable. The middle-income and high income population is dependent on lower strata of population for many things e.g. maids, drivers, cleaners, laborers etc. This would cause the problems that our existing cities are facing today, for example development of unauthorized dwelling e.g. Jhuggi-Jhopri clusters. In order to avoid such a situation, the government needs to look at the accommodation of such strata in the blue print of smart city from the beginning.

Up-gradation of existing cities

Apart from looking into new cities, the government should also look at how satellite towns near mega cities, existing cities/villages can be integrated with smart cities along with construction of settlements along industrial corridors will be undertaken. In some interviews the government officials seem to be looking at upgrading the role of urban local bodies (ULB). But the inability of ULB has been reflecting in the existing cities and various issues.

So the government will have to work on upgrading either the skillsets/capacity of ULB or setting up a nodal body, which can work on looking into up-gradation of new cities. Otherwise a new divide between old and new city will get created in the future.

References:

1. http://www.publicpolicy.telefonica.com/blogs/blog/2012/11/12/why-do-we-need-smart-cities/
2. http://ieeexplore.ieee.org/stamp/stamp.jsp?arnumber=6740844
3. http://www.smartcitiesindia.com/smartcitiesindia.pdf
4. http://www.publicpolicy.telefonica.com/blogs/blog/2012/11/12/why-do-we-need-smart-cities/
5. http://indiansmartcities.in/downloads/CONCEPT_NOTE_-.12.2014__REVISED_AND_LATEST_.pdf
6. http://internetofeverything.cisco.com/sites/default/files/docs/en/ioe_public_sector_vas_white%20paper_121913final.pdf
7. http://www.iamwire.com/2015/02/smart-cities-india-what/110303

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