Expert Insights by Timo Dreger: Blockchain and Cryptomania. The Insurance Industry is Ready to Rumble

Blockchain and Cryptomania – The Insurance Industry is Ready to Rumble

You’ve probably heard the terms “blockchain” and “crypto” at some point, but what do they mean? Both words are the “buzzwords” of 2017 and the boom is expected to continue in 2018.

Many experts including bankers from top-tier investment banks are mocking companies like Kodak for creating public excitement and especially steeply rising share prices by adding “crypto” to their names or by starting their own crypto-currency. And at least for some companies, they get it totally wrong.

Where There is Light, There is Darkness

To be fair, there are black sheep, who simply try to use the buzz to create awareness and to rip off investors. But those companies usually are not hard to identify and to avoid. Typical signs are a radical shift of the business model, from something totally else to blockchain, a name change without reason, zero revenues etc. A great example of this is First Bitcoin. Four years ago, the company was an obscure precious metals mining company with more or less worthless gold concessions in Venezuela. Now, it describes itself as a company that develops digital currencies and blockchain technology while operating cryptocurrency exchanges. Before the SEC halted trading back in August of 2017, it had an intraday market cap of nearly $1 billion!

Existing business + Blockchain is the winning formula

But those bad examples should not obfuscate the view on the actual opportunities, which blockchain technology offers to “old economy” or even “old tech” companies. They have realized that unless they are on the forefront of disruption themselves, they will simply be overtaken by blockchain newbies and blockchain Start-ups. Those “old economy” or “old tech” companies have the best chances to create the leading currencies and ecosystems, as they combine an existing business, including all of the experience and substance that comes with it, with a new vision.

Especially the insurance industry is adopting the new technology fast. The greatest example of this is the B3i – The blockchain insurance industry initiative made up of the fifteen members: Achmea, Aegon, Ageas, Allianz, Generali, Hannover Re, Liberty Mutual, Munich Re, RGA, SCOR, Sompo Japan Nipponkoa Insurance, Swiss Re, Tokio Marine Holdings, XL Catlin, and the Zurich Insurance Group.

The goal of this magnificent collaboration is simple: Improving risk data management and reducing processing time and administration efforts. These players follow the slogan “less admin, more insurance”. The whole industry is waiting for the results and use cases to improve the efficiency of transactions in insurance and reinsurance across the whole value chain. One thing however is quite clear: All of these companies are afraid of the upcoming InsurTech’s and instead of rejection they embrace innovation and disruption and have started this alliance to use technology to get better and efficient themselves. Hopefully, this brave move will not end in disaster though, as other ambitious cooperations between corporate dinosaurs have ended in the past due to their biggest weaknesses: internal politics and a lack of decision making.

German JDC Group soars

Another great and most probably more agile example is the German, stock market listed (Bloomberg A8A:GR) company JDC Group. It is the biggest financial sales force for insurance products and mutual funds with 16,000 independent financial advisors and more than 1,4 million retail clients in Europe under its wing.

JDC Group intends to capitalize on the advantages of blockchain technology in order to design innovative insurance and financial products. JDC just announced a whitepaper to be published at the end of January, which means that they are most likely going to issue a crypto currency as well.

JDC is holding all the cards: Over the past three years, they have been transforming their traditional offline financial sales business into a technology powerhouse. One of Google’s top managers joined as a board member. They started a digital insurance wallet, which became the most-used one in Germany. They acquired the leading online comparison platform Embracing blockchain is the next logical step.

Furthermore, JDC already is the largest transaction “machine” for mutual funds and insurance products, with the greatest number of interfaces with product providers and data sources in the German-speaking financial and insurance market.

And there is another possibility at play: JDC has 16,000 brokers and 1.4 million existing clients. If they equip all their clients with a crypto wallet and some JDC coins, they will become the largest wallet provider in Germany over night.

Stock market listed companies offer an easy access to crypto

Stock market listed companies like JDC offer an excellent opportunity to profit from the crypto currency boom especially to those market participants who are either not allowed to buy crypto currencies directly, like mutual funds, or for whom the lengthy process of getting a wallet etc. is too complex and insecure. 

Blockchain is the biggest investment opportunity since the broad-scale introduction of the internet around 20 years ago. In 5 years, we will look back, and there will be success stories like the ones of Google, Amazon and Facebook. And we all have the chance to be a part of it.  

Timo Dreger Innovation, Investment, Start-up, FinTech, InsurTech Professional. 

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