Blockchain technology’s potential to transform the insurance industry has been the subject of much talk but, to date, little action. That is set to change with the announcement by a major Chinese insurer, PICC, of its plans to leverage the internet of things (IoT) and blockchain-powered smart contracts to streamline insurance claim management.
VeChain, which is partnering with PICC (short for the People's Insurance Company of China) on the initiative, made the news public on September 1. DNV GL, an accreditation registrar, is also involved in the project.
The information released to date hasn’t described in detail what the solution entails technically, apart from noting that it will use VeChain’s VeChainThor blockchain. It does, however, mention the use of “advanced IoT devices and smart contracts” within the insurance industry in order to deliver “instant compensation.” It also mentions preventing fraud and controlling prices in the industry.
It would seem, then, that what PICC, VeChain and DNV GL have in mind is a platform that uses IoT devices to speed the processing of insurance claims and payments, while also mitigating the risk of fraud.
It’s easy to envision how this might work: IoT devices could monitor insured assets for signs of damage. For example, an IoT device could determine when a car has been in an accident or a tree has fallen on a house. When those devices detect damage, they could then begin an automated claims process that would deliver virtually instantaneous payment to insured parties.
In addition to helping keep clients happy, the process could save money (at least when performed at scale) because it would reduce the need for human staff to manage claims. And it would help prevent PICC’s clients from making fraudulent claims, since the company would rely on IoT devices to report damage.
To be clear, those potential advantages are speculative and based on what PICC and its partners could have in mind. For now, it remains to be seen exactly what their initiative might produce and how exactly it will work in the real world.
It should also be noted that, to date, there hasn’t been proof that IoT devices can do things like determine when a tree has fallen on a house. It seems possible to develop monitors like this based on what does currently exist, but it does not seem that such a solution is currently available to PICC and its partners to grab off the shelf and start plugging into a blockchain. The solution will require some significant development.
Real-World Use Case for Blockchain-Based Insurance
However, there have so far been few real-world examples of either of these ideas in motion (though there has been quite a bit of patent activity related to them) — and no examples of a blockchain and the IoT being used in conjunction within the insurance industry, as PICC is proposing.
That’s part of the reason why the PICC blockchain initiative is so significant. PICC is a large state-owned insurer in China, which provides a range of different insurance products. Although it’s not clear how soon it might begin putting this blockchain and the IoT to use, its concrete plans to do so suggest that blockchain technology within the insurance industry is moving further from theory and closer to practice.
The announcement is also notable as another win for VeChain, which has made other headlines in recent months in areas like vaccine tracing in China (an initiative in which VeChain is also partnering with DNV GL). For those interested in enterprise blockchain applications in the Asia Pacific region, VeChain seems like a blockchain vendor to follow.
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