A Fintech Solution for Climate Risk Assessment

Climate change poses a growing financial risk for businesses across China. But some businesses are adapting to and planning for these risks with more urgency than others. One major Chinese insurance company—People’s Insurance Company of China Property and Casualty (PICC P&C)—is using fintech to deal with some of the impacts of climate change facing the coastal city of Ningbo, from higher sea levels to storm surges to changing hurricane activity. It has developed a new technology platform, the Remote Damage Assessment and Claim Settlement Platform, which helps the company respond to these threats more efficiently and effectively. In a new joint report, the  Paulson Institute Green Finance Center  and the  Research Center for Green Finance Development at Tsinghua University  offer insightful case studies that broaden our understanding of the ways fintech can be applied to the world of green finance. This is the fourth part of a four-part blog series.

How does the Remote Damage Assessment and Claim Settlement Platform work?

For insurance companies, managing climate risk means having the capability to collect and apply accurate, reliable data on potential climate-related losses. For PICC P&C, this meant developing the Remote Damage Assessment and Claim Settlement Platform. It uses big data, modern surveying techniques, and advanced mapping technology to rapidly assess damage after a disaster. The platform’s generated flood maps and comprehensive database of floor elevations in residential buildings that are at higher risk from flooding or natural disasters contribute to the damage assessment and risk evaluation.

Then, using that information, the platform automatically calculates the number of households affected in each village and the expected total amount of claims. The system can expedite processing of claim settlements in as little as four days, with three of those days being for public notice.

What lessons can the insurance industry take away from PICC’s experience?

The insurance industry plays an important role in managing the economic risks of climate change. And as these risks accelerate, the industry will need to develop innovative solutions that minimize the financial consequences of climate-related losses.

PICC P&C’s application of fintech to damage assessment and claim settlement shows the insurance industry that green innovation can help the bottom line. Since the Remote Damage Assessment and Claim Settlement platform launched in Ningbo, it has increased the efficiency of damage assessment and claim settlement and lowered labor cost by one third. It is a useful example of how firms are building resilience into their business models, and how green finance can promote sustainable development in China. 

Next Steps?

Going forward, PICC P&C will continue to explore new ways to apply technology to reduce cost, increase efficiency, achieve business model innovation, and promote the sustainable development of green insurance. Next steps include:

• Conduct additional research on climate disaster risk assessment models.
  • Further promote smart survey and damage assessment for climate catastrophe insurance.
  • Use technology to achieve green insurance product innovation to address climate risks.