Blockchain is expected to reshape China’s insurance industry
26th Feb, Shanghai-Since PingAn Insurance joined in the R3 consortium last year, more and more domestic insurance institutions in China have embraced different kinds of blockchain alliance. However, there is no solid user case to integrate blockchain into the insurance industry. But the landscape may change in 2017.
At the opening ceremony of China Blockchain Application Research Center (Shanghai) On February 26th, Wei Yingning, former vice chairman of China Insurance Regulatory Commission (CIRC, one of the 4 major financial regulatory authorities in China), said that after the combination of modern insurance and the Internet, the original business model was not revolutionized. However, the integration of blockchain technology with insurance may have a disruptive impact.
“The nature of insurance is the loss-sharing mechanism, the cornerstone of which is credit. In modern insurance industry, the cost of auditing accounts for 30% or even 40% of the cost. Even so, the ratio of insurance fraud in China is still not small. Therefore, the insurance industry is watching closely at the blockchain technology. If the data is stored on blockchain and the immutability will save us from contractual conflict. In the case of insurance claim, smart contract will be triggered to execute the provisions. Thus solving the problem of compensation settlement and lower auditing cost. Blockchain can reshape the integrity foundation of insurance, people can not lie and must stay honest and trustworthy. To achieve this goal we still need to explore arduously and hope that block chain can play such a role as soon as possible. “
On the forum held on the same day, Wei Yingning said.
In Wei’s view, since the first year of Internet finance in 2013, there is a booming development of the traditional financial institutions utilizing Internet technology. Internet companies set up numerous P2P lending, third-party payment processor and internet wealth-management companies. It’s also after 2013 that biotin and its underlying blockchain technology attracted public attention.
Wei Yingning pointed out that the cornerstone of the insurance industry is trust. Since the conception of insurance, the mutual aid apportionment model in its early days has shifted to the current indirect apportionment before insurance claim. Insurance in essence is a loss-sharing mechanism. Many people face similar risk factors but only a few actually happen. But once unfortunate thing happens, victims suffered great loss. Therefore via insurance the burden could be shared. The pain spot of insurance is the information asymmetry. Although the law also specifies that code of conduct and insurance fraud are criminal cases, it doesn’t stop people committing frauds. Therefore the insurance sectors hopes that blockchain could serve as a solution.
The application of blockchain in insurance industry could be diversified. One is the use of smart contracts. For example, after the occurrence of incidents, smart contract could be triggered to settle insurance claim without insurer’s applying. Therefore the problem of claim settlement could be solved. The third is the integration of trustless and IOT to monitor the risk of the subject of insurance. As it’s human nature to be selfish, greedy and easy to lie, such defects are difficult to change. Blockchain may serve as a lie-proof mechanism to reshape the integrity foudation of the insurance sectors, which may be a long way to go “
Wei Yingning finally said.
The China Blockchain Application Research Center (Beijing) was founded in 2015 December and the Zhejiang Branch was set up in 2016.