BOK, Korea Insurance Institute to Form Task Force on Digital Currency Index Insurance

The Bank of Korea and the Korea Insurance Institute are moving to develop an insurance model using digital currency, highlighting broader potential applications for digital-asset-based financial technology.

Ha Tae-kyung, head of the Korea Insurance Institute, wrote on Facebook on June 13 that the institute and the BOK had agreed to form a joint task force to develop digital-currency-based index insurance. The cooperation follows the second phase of Project Hangang and forms part of a pilot study to apply digital currency and deposit tokens to real-world financial services.

The two institutions plan to jointly develop a model combining the technical features of digital currency with the structure of index insurance. Index insurance automatically pays out without a separate claims review when a preset benchmark is met, such as extreme heat, heavy rain or transportation delays.

Using digital currency would enable an automatic payment structure based on smart contracts, improving payout speed and efficiency. Eliminating separate review procedures would also cut operating costs and strengthen payment transparency.

The BOK sees the model as a practical use case for digital currency. It also believes immediate payouts in the event of disasters could strengthen the social safety net.

The Korea Insurance Institute also assessed the model as having strong social utility because it allows compensation without complicated procedures. The two institutions plan to launch the joint task force after working-level consultations and then begin developing a detailed pilot model.