The Promise of Blockchain in Insurance

LAGOS (Capital Markets in Africa) – Blockchain has huge potential to enhance insurers’ business model and to improve cooperation between insurance companies but is also being used by digital start-ups to attack it. Hence, the imperative for Incumbents to start exploring this nascent technology.Many have likened the revolutionary possibilities of blockchain technology to those of the internet, such is its perceived capacity to transform the ways in which people and businesses cooperate.

Sensing this, investors put more than $800 million into blockchain-related start- ups between 2014 and 2015. Perhaps even more indicative of its disruptive potential, in late 2016 four European insurance giants, Aegon, Allianz, Munich Re and Swiss-Re set up a combined pilot project known as B3i to explore the nascent technology.

The insurance industry in general, however, lags behind other industries, such as banking, in terms of the interest it has so far expressed. It will have to catch up because as well as demonstrating the potential to enhance insurers current business model, blockchain is being used by digital start-ups to attack it. Blockchain is a shared, public ledger of records or transactions that are open to inspection by every participant but not subject to any form of central control. The Economist newspaper has described it as a machine for building trust.2 In the case of the virtual currency Bitcoin, arguably its most famous application; it tracks transactions and facilitates money transfer, while preventing double- spending, without the need for a bank.

An extract from Africa’s Insurance Markets Uncovered. Please download by clicking: INTO AFRICA PUBLICATION: MAY 2017 EDITION.

Contributors’ Profiles
Johannes-Tobias Lorenz is a Senior Partner in McKinsey & Company‘s Düsseldorf Office. He has 15 years of consulting experience in insurance and banking and supported insurers in Europe and Asia on topics around digital strategy, digital innovation and greenfield business building. He is European leader of Digital Insurance within McKinsey and leads the Firm’s global Customer Experience for Financial Services activities.

Björn Münstermann is a Partner with McKinsey & Company’s Business Technology Office in Munich. He joined the firm in September 2004. Björn leads the Insurance Operations and Technology activities in Europe and is a core leadership member of the IT Performance Management practice. Leads McKinsey’s Horizon360 IT assessment as a board member. He has deep industry expertise in financial institutions with a focus on insurance.

Peter Braad Olesen is an Associate Partner in McKinsey & Company’s Business Technology Office in Copenhagen. Peter has more than 16 years of insurance and technology experience focused on transformational change, innovation, and digital. His current focus is Digital strategy within financial services and InsurTech. He leads McKinsey’s Insurtech service line and oversees the build-up of McKinsey global InsurTech database.