European Insurance Firms Launch New Blockchain Consortium
Five major #European #insurance and reinsurance companies have partnered on a new #blockchain initiative.
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LASIC InsurTech: The Beginning of Alternative Insurance!
Many of the successful #Fintech companies started as social enterprises in emerging markets and scaled successfully to be a unicorn. Notable examples are Ant Financial in #China and M-PESA in Keyna. Alipay of Ant Financial and M-PESA both exhibit the LASIC (Lee and Teo, 2015) characteristics. Alipay has more than 800m users globally with more than 300m Chinese mobile users and M-PESA accounts is 4 times more than all the traditional bank accounts in aggregate in Kenya. LASIC startups are those with low profit margin business, asset light balance sheet, scalable business, innovative #technology and operate in a compliance light regime. Ant Financial and M-PESA have all the LASIC characteristics.
When it comes to #insurance in China, Zhong An will rank the highest in terms of innovation and valuation given its association with Alipay as a digital (online and mobile) micro insurance provider (Fintech News, 2016). It is not surprising that Zhong An exhibits the LASIC characteristics too. But a new class of LASIC #insurtech model may be emerging in China. These new insurtech business models originated from the concept of Mutual Aid and started operation in the last two years. In organization theory, the term mutual aid is used to describe a voluntary reciprocal exchange of services and resources for mutual benefits. In America, the fraternity societies existed during the Great Depression providing their members with insurance and benefits for health, life and funeral. In the 1930’s, the English “workers clubs” also provided health insurance. But as early as 18th and 19th centuries, forms of mutual aid oragnisations such as the Friendly Societies and medieval craft guilds provided their members with insurance, funeral expenses, pensions, care for sickness, and even dowries for poor girls. The intellectual abstraction has its roots in mutualism, labour insurance system, trade unions, cooperatives and other civil society movements.
Typically, mutual aid is a term used to describe a structure or organisation that everyone is free to join and free to participate. The participants in mutual aids groups and all their activities are voluntary. It emphasizes the open and voluntary cooperation as opposed to induced cooperation (Kropotkin, 2008). The idea of mutual aid flourishes in entities that support participatory, democracy, equality of member status and decentralization of decision making at the structure level. Status of the group is determined or conferred mainly by participation. External societal status is irrelevant within the group.
On the internet, Mutual Aid Platform is seen as a mutual financial assistance and risk sharing platform. It is a class of platforms that members can lower their aid threshold and raise their aid limitation through mutual financial assistance and risk sharing. Members can join a mutual assistance plan with an advance deposit of only RMB10. As a member, one may apply for an aid of up to a maximum of RMB300,000. The maximum deduction from the member’s account for each application is RMB3. The more members there are, the lower the contribution. When there is zero balance in the member’s account, there will be a call for payments. If the member’s account keeps zero balance more than 30 days, he/she will quit the plan automatically. It is estimated that the yearly contribution is between RMB60-90. When there is an application for RMB300,000 as mutual aid amount and if there are 1m participants, each user contributes only RMB0.30 （PR Newswire, 2016）.
The largest mutual aid platforms are listed below.
- Zhongtuobang,众托帮
- Shuidihuzhu,水滴互助
- Quarker,夸克联盟
- eHuzhu,e互助
- Kangaikongshe,抗癌公社
- 17Huzhu,17互助
- Bihuhuzhu,壁虎互助
- Tongxinhuzhu,同心互助
- Mayihubao,蚂蚁互保
10. Banmashe,斑马社
Started in July 2016 with a #Blockchain platform, Shanghai based with RMB100m registered capital Zhongtuobang (ZTB) has reached two million users as at 1 Oct 2016 and it is the first mutual aid company to have a double A rating from the Chinese Internet Association iTrust. On August 19, Shuidihuzhu was the largest with over a million users before being taken over by Zhongtuobang in the second half of 2016. The growth in this sector is exponential. The founders of these platforms have insurance experience and bridge the gap in serving the underserved.
ZTB main business is in medical mutual aid and lower the barrier entry for micro enterprises and farmers that are deterred from buying insurance of high entry premiums. It is a form of insurance inclusion scheme where the risk is pooled with low contribution. Zhongtuobang has launched multiple mutual aid products including Anti-Cancer & Disease, Travel Accident, Dad & Mom Mutual Aid, Women’s Health and a Students Comprehensive Plan. According to ZTB, the average age of members is 31 and 27 for male and female respectively. To cater to those who are above 55 and not eligible for traditional insurance, ZTB rolled out mutual aid product for those between 51-65 years old. They have launched products specifically designed for medical care personnel and diabetes sufferers. There are plans to launch smart contract insurance products using the Blockchain technology. Blockchain with analytics also has certain features that will minimize false claims and frauds because the data are transparent and permanent. The total investment by Venture Capital into Beijing based Shuidihuzhu is RMB55m by IDG, Tencent, and others. They have launched four programs so far.
There are two Blockchain use cases that we know of in the mutual aid industry in China, ZTB and Tongxinhuzhu. Tonxinhuzhu blockchain (https://www.tongxinclub.com/pc/blockchain/index) has 124,858 members, 90 nodes and around 971,533H/s, equivalent to computing power of 4 MacBook Pro and 2.7GHz Intel Core i5 8G storage. There are 537345 blocks as at 4 Oct 2016. Both cases are using Blockchain for identification and verification purposes for the members.
The advantage of this Blockchain application is that historical information can be obtained for every account at low cost. Given that the information is permanent and public (it prevents the service provider from changing the records), it solves the issues of trust in a mutual aid platform. It is easy to match, execute, monitor with the potential use of smart contracts at low cost as compared to a centralized system. At present, claims are not verified or executed by smart contracts and Blockchain is only utilised to address the issue of trust in the mutual aid industry.
This ZTB use case has demonstrated that mutual aid is scalable by solving the issue of trust among potential subscribers who are strangers to each other. This is scalable to 1.3b population from all over China with potential use of smart contracts. Insurance inclusion is achievable for specialised risk pooling in areas of insatiated demand, especially in rural areas and critical illnesses. With big data, such risk will be better understood and allowing for mass adoption and efficient pricing of insurance services. Network effect of risk sharing will enable mutual aid platforms to scale across a large number of members.
Are these new Mutual Aid business models a form of LASIC InsurTech? This class of business model has low profits margin with no requirement of heavy investment in assets. It has been scaling as seen in the last few months with the help of low premium. Some of them are using Internet with Blockchain as an innovative technology to lower cost and increase trust. There are hardly any compliance rules at this moment for the industry. It remains to see if the use of new technology can detect and reduce fraudulent claims and whether the industry can increase its scope of services to a larger base of sticky customers. Ant Financial has only 1 fraud in 100,000 transactions and like M-PESA, offers services beyond payments of daily purchases and utilities. Users can buy insurance, funds, tickets, movie bonds, obtain loans, and even get a credit rating. The latest innovation Alipay Everywhere is to purchase household services such as cooking and caregiving from neighbours for a fee (Horwitz, 2006 and Jain, 2006). These are all made possible because of data analytic, location services and mobile technology. Big data, smart contract and artificial intelligence risk analytic remains an area that the mutual aid InsurTech industry need to take advantage of. There are LASIC unicorns such as Ant Financial to emulate and if the industry can harness the right technology to serve the masses, mutual aid startups such as Zhongtuobang will become the new unicorns.
References
Biznews, “Mutual Aid Rising in China”, Sep 2016,http://www.biznews.in/article/mutual-aid-rising-in-china
Fintech News, “Top50 Fintechs in China”, Sep 2016,http://fintechnews.sg/5639/fintech/top-50-fintechs-china-kpmg/
Horowitz, Josh, “With Alipay, China’s Most Popular Payments App, You Can Now Ask Total Strangers To Do Anything For A Fee”, Sep 2016, http://qz.com/795732/alipay-everywhere-from-alibaba-and-ant-financial-lets-you-ask-total-strangers-to-do-anything-for-a-fee/
Huzhuzhijia, “互助之家”，http://www.huzhuzj.com/
Jain, Aman, “New Alibaba App Allows You To Ask Strangers Do Anything For A Fee”, Sep 2006, Valuewalk, http://www.valuewalk.com/2016/09/alibaba-app-strangers-anything-fee/
Kropotkin, Peter, “Mutual aid: A Factor of Evolution”, 2008, Forgotten Books, Charleston, SC.
Lee, David Kuo Chuen and Ernie Teo, “Emergence of Fintech and the LASIC Principles”, Journal of Financial Perspective, 2015, Vol 3, 3.
PR Newswire, “Mutual Aid Rising in China: Inclusive Aid Catches Up With New Opportunities After the G20 Summit”, Sep 2016, http://en.prnasia.com/story/159264-0.shtml
Acknowledgement
Appreciation to Ge Long, Co-founder, Eric Yu, CTO of Zhongtuobang and James Gong of Chainb.com.
About David LEE Kuo Chuen
David LEE Kuo Chuen, PhD(LSE), Professor (UniSIM), 2015 Fulbright Scholar (Stanford University), is an investor in Blockchain companies and #cryptocurrency. He is also the founder of Dlee Capital Management and various other companies. His award winning book “Digital Currency” was voted as outstanding by the American Library Association. His business and operating experience includes manufacturing, finance, hospitality, real estate, consultancy with 20 years in alternative finance. He is nominated by Internal Consulting Group as the Global Thought Leader for Fintech and Blockchain.by Internal Consulting Group as the Global Thought Leader for Fintech and Blockchain. He is contactable at [email protected].
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Wearables could help to heal Health, Life insurance
Image source Buying #Health & #Life #Insurance today is like filling in a form to tell Netflix what movies we say we like at that moment in time – versus what movies we actually watched recently. You fill in a snapshot report of your health, with blood samples and otherRead More
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Symbiont Showcases Blockchain Catastrophe Swaps to Insurance Execs
#Blockchain startup #Symbiont has demonstrated a self-executing #catastrophe swap smart contract on a platform designed for a wide-range of industries.
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Blockchain catastrophe swaps and the unbundling of Insurance
Image source I struggled with the headline for this post because the news connects to so many different themes we cover on Daily #Fintech: Real use cases for #Blockchain. #Catastrophe #Insurance and Climate Change. Financial Inclusion. Innovation by Incumbent Financial Services. The new global back office. The #unbundling of verticallyRead More
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Hot Insurance Startup Trov to Launch in the U.S.
#Trov, an innovative #insurance #startup from Australia, will #launch in the United States before the end of 2017, the company said yesterday. The U.S. launch is being made possible by a deal announced yesterday with Munich Re, the German reinsurance provider. Trov (pronounced Trove — officially, there is macron on topRead More
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How XBRL Is Being Used for Insurance Solvency 2 Regulatory Reporting
Image source EIOPA (European #Insurance and Occupational Pensions Authority) has issued a mandate for Insurance companies to report their #Solvency 2 status using XBRL and as of January this year the mandate is in place. This is a good example of using XBRL for RegTech, to help regulators find thatRead More
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Insurance Giant MetLife Joins R3 Blockchain Consortium
#MetLife has announced it will join banking #consortium R3CEV.
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PwC Blockchain Project Creates Living Audit for Wholesale Insurance
PwC has released new details about a proof-of-concept focused on #blockchain applications in the #wholesale #insurance market.
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Insurers are the new kids on the blockchain: Everledger, Guardtime and CGSC discuss why
Ensuring cyber security, providing automated services and improving overall customer engagement are all increasing concerns in the dynamic world of #insurance that is changing with the advent of sensory devices and connected services.
#Blockchain however could be the saving grace to unlocking all of these issues. So, where are insurers at in adopting this #technology and what are the benefits?
Read the white paper to gain a clearer perspective on how blockchain in insurance can help you to:
- Improve security and privacy: customer confidentiality and security concerns act as a barrier to insurers, get to grips with the way blockchain circumvent the challenges of security and privacy
- Drive better customer engagement: for years, insurance has been regarded with little trust by customers, discover how blockchain opens the doors to innovative engagement tools in insurance
- Implement automated services: lengthy policy approvals and claims authorizations act as a deterrent to customers and are operationally inefficient, learn how blockchain can support fast and efficient automated services
I hope that you enjoy the read and please let me know if you have any questions.
Kind Regards,
Marsha
[linkedinbadge URL=”https://www.linkedin.com/in/marshairving” connections=”off” mode=”icon” liname=”Marsha Irving”] is Head of Innovation, Insurance Nexus and this post was originally published on linkedin.
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