9 Insurance Firms in China Have Implemented Blockchain Solutions, But Still Face Legal Risks
As blockchain fever continues to grow, at least 9 insurance firms in China have implemented blockchian solutions, according to the state-backed China Securities newspaper.
Insurance companies’ explorations in the blockchain space can be divided into two major types: One is to take advantage of public blockchain technology, putting business data on blockchain to make it available to the public; the other is to seek to establish insurance blockchain consortium.
According to industry data provider 01caijing, China’s big insurance companies started to tap blockchain potential as early as 2016:
In March 2016, Sunshine Insurance became the first insurance company in China to adopt blockchian technology when it launched a platform for customer loyalty points;
In April 2016, China’s second-biggest insurance company, Ping An Group, became the first Chinese member of R3 blockchain consortium;
In July 2016, Sunshine Insurance launched the first blockchian-based insurance card in China;
In July 2016, Yi’an Insurance set up a blockchain lab along with Munich Re to jointly explore the blockchian applications in the insurance sector;
In November 2016, ZhongAn Online established its tech incubator, ZhongAn Technology and helped launch the Shanghai Blockchain Enterprise Development Alliance.In December 2017, the Chinese insurtech giant unveiled a blockchain-based system that aimed to track the whole process of the chicken farming;
In January 2017, Alibaba’s payment arm Ant Financial applied blockchain technology to charitable insurance;
In March 2017, Taikang Life launched a credit management platform based on blockchain technology. In the same month, People’s Insurance Company of China(PICC) applied blockchain to raise cattle;
In September 2017, the Shanghai Insurance Exchange(SHIE) officially launched a consortium blockchain, dubbed “ Insurance Exchange Chain”.
In November 2017,AiXin Life partnered with Tencent to launch a blockchain consortium. In the same month, Allianz created a blockchain prototype for a global captive insurance program.
There are compelling reasons for insurance companies to adopt blockchian-based solutions. “Blockchain technology has the potential to transform the Insurance sector from two dimensions, one is to reshape the traditional insurance industry with blockchain solutions, the other is to leverage blockchain technology to solve the ‘last mile’ problem for insurance innovation, for example, to prevent moral hazard, protect privacy and ensure information security.” said Wang Qiaoyue, an analyst focusing on insurance industry from 01 caijing.
Many problems have plagued the insurance industry at present, such as the consumption misleading, low claims handling efficiency, and the non-sharing of industrial data. And other issues like fraudulent insurance claims and the crisis of trust also trouble the financial services industry.But blockchain’s transparency, decentralization,tamper-proof record and traceability nature enables it to offer ideal solutions.
Blockchain, operating on a peer-to-peer network ,is able to reduce costs of traditional insurance agencies by cutting out the intermediaries. Besides,blockchain’s traceability feature can improve the insurance company’s underwriting capabilities and accuracy, reduce information asymmetry and effectively lower the rate of fraudulent insurance claims.
Although the potential for blockchain technology to disrupt the insurance industry is intriguing, we are still in the early days of its implementation and not close to widescale adoption. Regulatory and compliance uncertainty , as well as legal risks are also challenges for insurance companies that have deployed the blockchain, because various blockchains do not always interact seamlessly with already existing regulations and laws. Thus, companies should figure out the best ways to navigate blockchain’s potential challenges to the realities of the insurance industry.