For this episode we were fortuitous to reconnect with Dante Disparte Founder and CEO of Risk Cooperative to look back on how blockchain has evolved in the insurance industry in 2018 and what we can expect for 2019.

 

What is blockchain?

For the insurance industry, Dante describes blockchain as a bordereau or a ledger that exists simultaneously in an exact form across multiple distributed computer systems. From the outset this creates a level of resilience, a level of tamper proofing that you don’t get from existing technologies today.

 

Retrospective of blockchain in the insurance industry in 2018

“Still the beginning”

“Still the beginning” is how Dante would characterise blockchain in the insurance industry. In spite of Bitcoin recently celebrating its 10thanniversary, it’s really only been in 2018 that we started seeing large scale enterprise tinkering with blockchain technology.

In January 2018, Dante penned an article “One Thing Is Clear From Davos, Blockchain Is Out Of Beta” in Forbes, where he stated that at least 50% of the Fortune 500 were embarking in deep experimentation with blockchain. 2018 was the year of orientation, and Dante believes that 2019 will be the year of experimentation at scale. 2020 would see the much broader adoption of the technology across asset classes and across industries.

 

Consortiums and competitive advantage

The most mature and evolved model in the insurance industry are the consortia at B3i and the RiskBlock Alliance. This model allows a risk averse industry, such as insurance, to understand the technology and follow their peers in getting basic POCs and use cases.

Dante’s personal view of the world is that the consortia approach amounts to co-opetition which is tantamount to having Amazon partner with Walmart and JC Penny’s (For the UK: Tesco partner with Sainsbury, Asda and Lidl) in building ecommerce platforms. For Dante there is a genuine opportunity for insurers, brokers and others in this industry to leverage emerging technologies like blockchain and others to get a competitive advantage. Firms that really embrace those technologies, instead of limiting it to back end efficiency plays, will really take a lead over their competitors.

In episode 23 “Blockchain from an Allianz perspective and lessons learnt”  Bob Crozier, Head of Global Blockchain Centre of Competence at Allianz. Pointed out that “B3i is not about getting a competitive advantage. It is for the industry and by the industry and its goal is to use blockchain to address industry pain points, help members reduce their cost base and make customers’ lives easier.”

Whilst Dante agrees that there is value in such consortia his issue is that the strategic challenges the insurance industry faces require competitive dynamics than the consortia model doesn’t allow for. The average expense ratio is between $0.30 and $0.50 on every dollar of risk capital.

If a firm tries to become more efficient to risk allocation and risk pricing but yet everybody in the insurance industry is following the same model in leveraging technology in exactly the same way,