Blockchain shock wave: opening up the integration and innovation of blockchain and traditional insurance business

With the growing popularity of blockchain technology, domestic insurance companies have begun to integrate blockchain with traditional insurance business.

According to the reporter from 21st Century Business Herald, at present, this kind of business innovation is mainly concentrated in two areas.

The first is the integration at the technical level. For example, due to the technical characteristics of blockchain that data will not be leaked or lost, some insurance companies are studying the storage of policy information, customer information, and claims information on the blockchain to avoid the impact of accidents on data security.

The second is cooperative innovation at the business level, that is, allowing blockchain to play a new role in the scenario expansion process of insurance business. For example, blockchain can introduce shared economy concepts such as points alliance, promote product and service innovation, and strive for greater customer acquisition space.

"Overall, insurance companies' research on the integration of blockchain and business is still in the early exploratory stage." An insurance company official admitted that on the one hand, detailed market research and compliance operation process design are still needed, and on the other hand, the attitude of regulatory authorities will to some extent affect the development ceiling of the integration of the two businesses.

He bluntly stated that most insurance institutions currently have mixed feelings about blockchain. They love the potential for business innovation it brings, but hate the decentralized development characteristics of blockchain, which weakens the position of insurance companies in the industrial chain.

Blockchain's impact on the insurance industry

With the rise of blockchain, insurance companies' industry status has begun to face challenges.

A director of the IT technology department of an insurance company who has studied blockchain told the 21st Century Business Herald reporter that the impact of blockchain on the traditional insurance business operation model may be subversive, and it will have a huge impact on every operation link.

Taking a medical insurance as an example, suppose 200 participants jointly agree that after a 24-month waiting period, one of the participants suddenly suffers from certain diseases, and all participants need to pay a fee of 50 yuan to pay the patient's medical expenses of 10,000 yuan.

Under the blockchain operation mode, the operation mode of this type of medical insurance will undergo three major changes compared with the existing insurance system.

First, there is no threshold for participants to join or withdraw, which reduces the risk of participants losing money due to cancellation of insurance. However, if a participant fails to pay the premiums as agreed, he will be automatically withdrawn from the group by the system and lose the right to mutual insurance.

Second, the organizers will never touch the funds. All payments made by the participants are paid directly to the patients through third-party payment channels, and all payment records can be queried and will not be tampered with, thereby reducing problems such as duplicate claims caused by the insurance company's own operational errors or moral risks.

Third, the entire insurance actuarial model will undergo major changes. In the past, when insurance companies set up actuarial models for risk pricing of a certain insurance product, they needed to include their own profits. However, under the blockchain operation model, every penny paid by participants will be given to members for use, and the system will not take a penny. This makes the insurance actuarial model take into account two points: whether the payment can be fully compensated and whether the interests of the participants can be maximized.

"Based on this change, the challenges facing the traditional insurance business operation model will be enormous." He emphasized that blockchain also has a technical advantage. Since it is considered to be a distributed general ledger database with an extremely high security factor, the world's 25 largest banks are currently studying the use of blockchain technology to achieve global unified standards for cross-border clearing, which may lead to the development of blockchain technology faster than industry expectations.

"Fortunately, current financial regulation still has certain constraints on blockchain insurance business innovation, which may provide insurance companies with a buffer period to cope with the impact." He said, however, that insurance companies can no longer sit idly by. Instead of being disrupted by blockchain, it is better to use the insurance business innovation brought by blockchain to defeat the impact it brings.

Blockchain insurance innovation is advancing in small steps

According to the 21st Century Business Herald's insurance reporters, many insurance companies have invested a lot of resources in researching the integration of blockchain and traditional insurance business.

In the opinion of the above-mentioned insurance company personnel, what most insurance companies do is mainly technical research, that is, how to use the technical characteristics of blockchain such as data will not be leaked or lost, to store policy information, customer information, and claims information on the blockchain to improve data security.

"In fact, this kind of technology integration is not difficult to achieve. The real difficulty lies in the innovation of insurance business based on blockchain." He said. Since blockchain has brought significant changes to insurance business customer acquisition, service experience, and claims settlement methods, it tests the risk pricing ability of insurance companies. Take Internet of Vehicles insurance as an example. Under the blockchain operation mode, insurance companies not only sell insurance, but also integrate other partners to provide a certain amount of points to car owners with good driving habits according to the mileage. These points can not only be exchanged for car maintenance services, but also deduct car insurance premium expenses, etc., so that customers can get more benefits. At the same time, it can expand customer acquisition channels and improve customer experience for insurance companies to maintain their own market competitiveness.

"At present, this type of Internet of Vehicles product may be one of the earliest insurance product services based on blockchain." He believes that its birth is precisely due to the fact that blockchain has a high-security public database, which allows insurance companies to better integrate point rewards for risk pricing.

He also said that based on the unforgeability and non-double consumption of blockchain data, insurance companies can also expand new insurance innovations in certain areas where credit is lacking, such as medical care, auditing, notarization, logistics, etc. By tracing back the data of related items, insurance companies can create many new insurance products.

“Scenario-based applications will allow blockchain and insurance business innovation to be more closely integrated,” he believes. However, this may not necessarily usher in a huge development period for blockchain insurance business innovation. “After all, the attitude of the regulatory authorities determines the upper limit of the development of such business innovation to a certain extent.”