Last week, we reported on B3i’s rather quiet demise in our Insurtech News. And that says a lot about the current attitude towards DLT technology in the insurance industry.
It is symptomatic that only the Börsenzeitung dealt with the end of the B3i startup a little more intensively. It is much easier to communicate about new initiatives and start-ups than to describe the end of a start-up. The company actually had the best genetic conditions, as more than 20 renowned international insurers participated in an initiative and the common child B3i.
B3i was the flagship blockchain project
That was 2018: And back then, mentioning the word “blockchain” in a press release was enough to make headlines. The story goes back even further. In 2016, Aegon, Allianz, Munich Re, Swiss Re and Zurich jointly founded a blockchain insurance industry initiative B3i (“Blockchain Insurance Industry Initiative”). All industry leaders who wanted to explore how “shared technologies can be used to create faster, more convenient and more secure services for customers”. In a few months, other insurers joined, until the green light for the first start-up was given in 2018. “Blockchain” or distributed ledger technologies were on everyone’s lips, in particular because of the hype around bitcoin. To this day, a lot is thrown into a pot here. That’s another story though.
The technology indeed promised to save considerable time, especially when dealing with contracts and damage reports that crossed national borders. “Smart Contracts” is the electrifying magic word. What looked very promising on paper turned out to be more difficult in practice. On the one hand, there has been a change in technology, on the other hand, developers may have underestimated the task of building a system that should work with 20 different computer architectures, including many “legacy” applications. “.
What was then put in place was a DLT-based settlement of major elemental damage. What was missing was an expansion of the product line. One can only speculate on the reasons. However, it often happens that the rate of development of a company decreases as much as investors lose interest in it.
Someone may crack the code at some point.
It’s unclear how much money insurers have poured into the business, which started with a lot of praise in advance. In any case, the financiers apparently saw no chance that anything like profitability could ever come from the project. John Dacey, CFO of SwissRE, also commented directly as part of the half-year report. And this makes you think:
“I think it was a very good performance, but ultimately we didn’t reach the volume and demand that would have warranted further investment in this platform. I think the concept continues to be a very exciting opportunity for the company. industry. At some point, someone may crack the code. But at the time of this writing, it doesn’t appear that this platform is profitable.”
There are now examples, and not just among US insurtechs, that DLT technology can work in conjunction with smart contracts, for example in parametric insurance. Allianz also points out that it is already successfully using blockchain technology in car insurance.
B3i may also have put oxen before oxen in the wrong direction. At least this is how one can interpret the statement of Christian Mumenthaler, CEO of Swiss Re: “All insurance companies should create smart contracts. And on this basis, you could of course create a reinsurance contract digital which can then be negotiated. With this you have total end-to-end efficiency and when the claims come in, you automatically pass them on to the reinsurer. This is very visionary because it would mean that all insurers would have to switch all their IT systems and create smart contracts.
From hype to vale of tears?
Blockchain and DLT technologies in the insurance industry may also be in desperate need of a problem they can solve. In any case, the end of B3i will sound for a while. In a survey of executives conducted by Global Data, blockchain now holds at least the top spot among technologies that are just hype but have no practical utility. At least that’s what 20.7% of respondents say. Nearly 37% see the hype, but see a possible benefit that only 21.8% wholeheartedly believe.
Technology will still struggle to take hold.