In this week’s episode we get an insight into blockchain from the perspective of Swiss Re and hear about the lessons learnt from their projects. Our guest is Jags Rao, Blockchain Workstream Lead, Finance Reinsurance at Swiss Re.  Having started out his career over 22 years ago as a software engineer working on a COBOL system, Jags has seen tremendous changes in technology – today he is a strong proponent of distributed computing and he is betting big on blockchain!

 

What is blockchain?

“(Blockchain is) a platform in which you can validate transactions, and this makes blockchain fascinating!”

According to Jags, blockchain consists of several components - a network, a protocol, and a distributed ledger. From the business perspective, blockchain permits virtual recording of economic transactions i.e. an exchange involving something of value – which could be a will, a deed or even a title license. From the technology perspective, it is an open-ended database which records transactions in an immutable fashion.

 

How did the blockchain journey begin?

Jags introduced blockchain to Swiss Re. However, his personal journey in exploring blockchain began by looking at Bitcoin. Jags realized that the technology underlying Bitcoin could be relevant to the enterprise world as it could solve some of the fundamental problems in the insurance industry.

“The insurance industry has been financially healthy, but operationally less efficient. This is partly due to multiple layers of counterparties in the insurance value chain.”

According to Jags, blockchain brings the promise of creating a common network to allow counterparties to track data driven interactions without needing to maintain their own systems. Blockchain will not help just one company but help the industry as a whole.

 

Blockchain in the insurance industry

Is blockchain a challenge, an opportunity or a threat?

“This (referring to the change driven by blockchain adoption) is a clear business model innovation opportunity for us (Swiss Re.)”

Jags acknowledges that innovation in the insurance industry today is being driven by the end customers of insurance – the change in customer demand makes it easy to bring about change in the industry.

Jags describes Swiss Re as a “risk knowledge company.” The key factors driving profit in insurance today are –

* Risk management

* Global diversification

* Informational asymmetry

Informational asymmetry in the value chain generates profits for participants. However, blockchain provides a common network where participants come together – thus reducing informational asymmetries.

This raises an interesting question – in an environment where blockchain is eliminating informational asymmetry, how should an incumbent react to maintain its leadership position?

Jags views this impact of blockchain as an opportunity to innovate with business models and not as a threat to the existence of (re)insures.

 

The network effect

“Collaboration is key; blockchain is an ecosystem solution.”

Jags asserts that Swiss Re does not consider blockchain as an internal process improvement tool but rather as a mechanism to engage with the ecosystem where a critical mass of players can be achieved. Highlighting that over 60 cooperatives have been formed that are relevant to the insurance business, Jags stresses that there is a need for team spirit and the ecosystem way is the only way forward.

Jags was asked about blockchain solutions in other industries – such as