On October 16th, Alipay launched a blockchain insurance product called “Mutual Insurance”. (the product does not have an official translation for English yet) After one week, the number of participants exceeded 9 million. In addition to the traffic generated by Alipay, it’s different form from the traditional insurance, and the transparency of information brought about by blockchain technology, are factors that “Mutually Insurance” can cause great concern in a short period of time. Of course, there are doubts along with the concerns. Although the angles of doubts are different, they all focus on one question: can the “Mutual Insurance” be operated well?
Then let's take a look at how “Mutual Insurance” is operated. The official example is that if 5 million people participate in “Mutual Insurance”, they will not have to pay any fees when they participate. The 14th and 28th of each month are the payment date, assuming that on the 14th of the month, 100 people have get diseases within the prescribed range, each person paying 300,000 CNY (the highest amount), then in total 30 million, allocated to 5 million people, that is, 6 yuan (CNY) per person, plus 10% of the management fee, that is 6.6 yuan per person, 13.2 yuan per person per month.
In addition, the official also stated that users will not pay more than 0.1 yuan for a single patient. Of course, it has been calculated that when the number of “Mutual Insurance” participants reaches 3.3 million, this is naturally achievable with the number base; and the official has a statement that if the number of participants is less than 3.3 million after three months, the project will terminate. Therefore, this project was originally set to be self-sufficient for the participants.
I believe that you have already found, how much money the participants have to pay is actually closely related to the incidence rate of severe diseases. In the official case, the incidence rate is 100/5 million, which is 0.002% (half-month rate). If the actual incidence of severe diseases (half-month) is 0.02%, the monthly fee for each person will be 132 yuan, which is obviously too high.
In 2013, the China Insurance Regulatory Commission (CIRC) issued a severe disease rate in China's life insurance industry in 2006-2010. Of course, this incidence rate is directly related to age. The age of participation in “Mutual Insurance” ranges from 3 months to 59 years. According to the data of the CIRC, the age of the lowest incidence of severe diseases is 12 years old, which is 0.03%, lower than the 0.048% (annual) of the Alipay official example.
However, according to the data given by the CIRC, only the annual incidence of severe diseases of people aged 2 to 21 is less than 0.048%. Since the age of 22, the incidence has exceeded 0.05%, and for 59-year-olds, the incidence has reached 1.7%. What’s more, the average incidence will be higher considering the following factors:
• The data of the CIRC is in 2006-2010, and in recent years, the incidence of cancer in China is still rising.
• The severe disease standard of the CIRC includes 25 diseases, and the standard of “Mutual Insurance” includes 100 diseases, with the 25 diseases of CIRC. (Of course, the 25 diseases actually cover more than 95% of the incidence.)
• The age structure of participation will not be the optimal state, and people over the age of 21 may be the main force of participation.
Of course, there are some factors that will lower this number:
• Not every payment will be a maximum of 300,000 yuan. An example is that participants older than 40 can get a max of 100,000 yuan.
• Not every severe disease will eventually result in a final payment. Some may not meet the standards, and some may voluntarily give up for various reasons.
In short, in combination with the above figures and calculations, the cost of participating in “Mutual Insurance” is likely to be higher than the official example. And we may wait and see how much the cost will be.
Some users have said that they chose to participate in “Mutual Insurance” because they like “the mode of helping each other”. This model also seems to reflect the spirit of decentralization. In addition, the person in charge of “Mutual Insurance” also stated that the publicity and expenses of the payment will be on the chain, and the information on the chain cannot be tampered with and can be directly provided to the judicial department as evidence. The page of “Mutual Insurance” also has the logo of the Ant Blockchain (blockchain project of Alipay) .
In fact, there are already some projects in the blockchain & insurance field. Along with precedents for the blockchain projects of mutual insurance. However, compared with the “Mutual Insurance”, most of the compensation for these projects is based on the project’s own tokens. These modes obviously need to be based on the user's high level of trust in the token, and this is not something that can be done overnight, which is undoubtedly a huge limitation for the initial project.
In fact, mutual insurance is not a new thing. In 2014, the global mutual insurance market revenue exceeded 1 trillion dollars, and the US market was the most mature. In Netherlands and Japan, the scale of mutual insurance has exceeded 50% & 40% of the total insurance market. In China, this type of insurance is not mature, CIRC had not issued relevant regulations until 2015.
With a global precedent, we know that mutual insurance is not a dead end that cannot be achieved. Combined with blockchain technology, whether “Mutual Insurance” can open up a path for China's lack of mutual insurance market? We still need to wait and see.