Today at the London Blockchain Expo, several experts from leading insurers and startups discussed the future of insurance and blockchain. Oliver Volk, Blockchain Expert at Allianz Re, articulated the deep-seated fear that insurers initially had about blockchain.
“At the very beginning when blockchain came up, there was the threat that everything between the policyholder and the capital market will be done with the help of blockchain. So there will be the policyholder and some automation in between and then the capital market,” said Volk.
He continued: “That threat is not that big anymore, because reality has shown it’s very complicated. So we’re trying to optimize the processes step by step rather than disrupting the whole system, the whole value chain. But sooner or later there will be major changes affecting the whole value chain.”
His colleague, Alan Cabello of Allianz Global Corporate & Specialty (AGCS) was less concerned about the threat. “For me, the internet democratized content creation and distribution. Blockchain allows us to democratize value creation and distribution. So I see insurance as an example much as we see newspapers. Have newspapers disappeared? No. Many have. But people are still willing to pay for high-quality content. It’s shifted the dynamics of that industry, but they’re still willing to pay for the Financial Times.”
Cabello elaborated “Moving onto how the creation and distribution of value have also shifted. Will that mean the services that we provide disappear? Some of them might. But where we actually add the most value, where we have the expertise, the real knowledge, that’s not going to disappear. Users want it cheaper, better, faster. Centralized, or decentralized I don’t think it makes a difference.”
Cabello is also skeptical about the threat from startups. “The insurance industry and banking industry are long winding roads full of potholes. In the past few years, we’ve seen insurtechs pop up that try to fill in those potholes along the way.”
“I have not yet seen an insuretech or a fintech that builds a highway or a hyperloop. Those roads are still owned by the banks or by the insurance companies. I’m curious to see who comes up with, externally, a completely different highway. So far I have only seen pothole filling in most cases. Yes, it’s complementary. Is it disruptive? I don’t think so. Not yet.”
Hugh Karp, former UK CFO of Munich Re sees a threat to incumbents, but not any time soon. “I believe it has the potential to truly disrupt the industry. It’s the most powerful networking tool, a financially driven networking tool, that we’ve seen. And insurance is all about networks and building risk pools and grouping people together. It’s a fundamental technology to enable that. But we still need to learn a lot first.”
Karp also thinks that senior managers at incumbents have not yet fully committed to blockchain.The actuary’s personal belief in blockchain is so strong that he left Munich Re and is working on a startup Nexus Mutual.
Martin Baier from Zurich had a different perspective. “The regulations are a problem for both (startup and incumbent). I would expect many less developed markets especially Asia, to be leading. We will see some useful implementations here but the real game changers I would expect from countries where the regulations are a lot less tight.”
That echoes the viewpoint expressed a few weeks ago by Hong Kong-based Galileo.
Users don’t care whether there’s a blockchain or not. And they certainly want cheaper, faster and better. Blockchain theoretically could enable all three. The barrier for a startup is regulation and customer acquisition costs. Could an outsider crack the code?