After years of hype we may finally be on the brink of blockchain breakthroughs in 2019. Provenance, identity, anonymised data sharing and asset tracking are obvious examples of early successes that are key to many businesses within the insurance industry, from shipping to property, cyber to fraud.
Blockchain is peculiar in that it itself is not a technology. It is a protocol that enables or facilitates other technologies. Accordingly, the protocol is proffered as a solution, often incorrectly to an extraordinarily broad array of challenges. However, there are a number of processes in which blockchain is proving to be effective.The application of Blockchain within these processes presents meaningful opportunities to a number of Insurance businesses and segments of the insurance supply chain. Amongst them we are seeing particularly successful trials in Fraud & Risk Prevention, Claims Management, Reinsurance, Property and Casualty Insurance, Health Insurance and Travel Insurance. Some of these trials are for private blockchains, reducing fraud through increased levels of anonymised data sharing between insurers. Some of them are leveraging smart contracts to expedite the claims management process. And some are shared registrars of ownership for insurable assets.
If Blockchain is mainstream anywhere, it’s China
For the last three years China has led the Blockchain world. It filed the most blockchain patents in 2017 (225), followed by the US (91), and Australia (13) and has more than tripled that figure in 2018 with 790 patents published, followed by the US (762), South Korea (161) and Australia (132). It is Interesting to note that the United Kingdom was the only European nation to make the top 10 with 36 patents published even if some french blockchain start-up like Stratumn are promising. In addition to that, China runs more projects (263 projects, 25% of global total) and mines more crypto currency than anywhere else. It has dedicated massive amounts of resources to maintaining a market lead. If Blockchain is mainstream anywhere, it’s China. The Insurance industry is no exception, as explained by Anton Hristoff, Blockchain & Emerging Tech Strategist:“Insurance is one of the most tangible use cases for Blockchain (...) For example. car Insurance. An accident occurs. You have to call the insurer who needs to liaise with a mechanic, who needs to confirm with the insurer. It can take a long time to get your money back. Blockchain could make payment automatic on approval.” Chinese companies have been distinctively aggressive in their application of blockchain protocols within the industry, often taking more risks than contemporaries in other markets.
What follows is an overview of some of the most prominent Blockchain trials, projects and partnerships in China.
Blockchain is expending on the regulation ground
China Cyberspace Administration has announced a list of 197 approved Blockchain service providers. Chinese authorities approved the first cohort of Blockchain service providers on March 30 2019. The list includes major players like Alibaba, Tencent and JD.com. The chinese government have been very active on blockchain initiatives.
Unity makes strength
Chinese Insurers are collaborating to exploit Blockchain opportunities. Shanghai Insurance Exchange has partnered with 9 insurers to trial different blockchain solutions. The objective seems to have been focused on establishing the security and traceability features of Blockchain. The significance of the announcement is that Chinese Insurers are actively collaborating to identify blockchain opportunities at an industry level. The participant insurers included Meiji Yasuda Life Insurance, AIA Group, Cathay Life Insurance, China Continent Property & Casualty Insurance, and Minsheng Life Insurance.
We can also add the example of State Owned PICC (People Insurance Company of China) which has recently partnered with VeChain in an effort to improve data management systems. VeChain is a Shanghai based blockchain provider specialising in governance and business ecosystems. They have created a tokenised public chain called VeChainThor. The goal of the partnership is to improve claims management by digitalising traditionally paper records on the VeChain blockchain and combining with their IOT competencies to provide “instant compensation”.
Supply Chain Efficacy
In the Health space, Hong Kong Insurer Blue Cross recently adopted blockchain to speed up claims. Indeed, the Hong Kong Government has launched an initiative to encourage residents to buy private health insurance by providing a tax rebate of approx. $1,000 per year leading to a rash of new consumer innovations in the Hong Kong Market. This, inevitably, has resulted in the word “Blockchain” being used with increasing frequency. Using permission-based, Hyperledger technology, health insurer Blue Cross (owned by Bank of East Asia) believe that they can reduce the cost of claims management by reconciling multi-party medical data. If effective, this may make the closed network more attractive to medical providers interested in working with BlueCross over time. When asking Dr Wei Cui why private chains are the preferred solution, the eminent researcher answered : “the insurance data involves very sensitive privacy of consumers and should not be tracible on public chains (...) and because Consortium Blockchain provides an efficient way for improving the collaboration efficiency of different parties.”
As data is new oil, Blockchain can manage it in a safe way. Zhong An - the insurer owned by Tencent, Ping An and AliBaba - has announced a deal that will see it partner with 100 hospitals to share medical data. The partnership allows Zhong An to provide data infrastructure to participating hospitals that will allow them to securely access patient medical data. The real significance of the deal is that it may result in a shift away from hospital or medical professionals holding patient data to an environment where the insurer held it for safekeeping and charged the medical providers a fee to access it. The benefit to the hospitals and medical providers is that they can mitigate the cyber risk and cost of being hacked.
Technology cross collaboration
Ping An, the world’s largest insurance company, has partnered with Blockchain AI start-up, SingularityNet, to explore opportunities across their business. Ping An have had a long history of spinning off successful fintech ventures and this could be an instance where the parent is looking to augment internal resource capacity through new partnerships. The idea of decentralised AI is somewhat distinctive. SingularityNet also provides access to a marketplace of algorithms and AI services including optical character recognition (OCR) and model training.
Joint Reinsurance Platform emerging in China
China Re, Hannover Re, GenRe, and Zhong An have recently published a Reinsurance Blockchain Whitepaper. The intention is to validate the need and use case for a joint reinsurance blockchain platform. The project was undertaken principally because reinsurers believe that they are at an information disadvantage over primary insurers which results in higher levels of operational risk and consequently higher premiums. They believe this excess can be mitigated through access to transaction data. A PoC has already been created by China Re and Zhong An. The PoC was wide-ranging, covering negotiation and contracting, reinsurance, document exchange, claims processing, and integration into a multi-chain trading ecosystem.
China has a fundamental need to develop insurance capacity for a rapidly emerging and endowed, underinsured middle class. But traditional insurers are broadly unsophisticated in their approach, relying heavily on analogue systems and ineffective risk models. This has resulted in a cohort of new digital insurers with commercial links to both product manufacturers and sellers, who rely heavily on aggregated scoring data and integrated application platforms (e.g. Wechat) to provide their services.
Blockchain plays a role within the system in that it can provide certain efficiencies when it comes to asset provenance and data aggregation. The Chinese government's desire to manage the dissemination of new technology through vetted channels has meant that only private, permission-based blockchains have seen significant adoption. There is a notable absence of public ledger initiatives.
Chinese Blockchain efforts within the Insurance industry should be viewed within the parameters of Chinese objectives for technological supremacy. The “Made in China 2025” plan is state enabled effort to make Chinese companies the leaders in emerging infrastructural technology from AI, to BlockChain to 5G. This plan relies on massive amounts of state funding and coordination and consequently China’s efforts within different fields of technological endevour are typically coordinated.
Consequently, it remains unclear as to just how much the western world can glean from the success of China’s Insurers Blockchain initiatives. In some instances, it is apparent that existing database technologies in Europe and the US can outperform China’s Blockchain efforts. But it is increasingly likely that China’s approach to accumulating citizen and commercial data will provide opportunities for amalgam technologies, e.g. permission based neural-nets with quantum computing capacity, to create value that western societies will resist due to privacy and democracy concerns.
Startup elected "Fintech of the year 2018", Stratumn establishes automation and reliability via their innovative solution using blockchain. Stratumn is a software company that delivers traceability, transparency and data integrity in processes involving multiple stakeholders. Stratumn is also a BNPParibasCardif’ C Entrepreneurs portfolio start-up.