Disrupt the Industry, Not the Incumbents

Christoph Mussenbrock participated in a panel at Blockchain Expo 2018 in London and struck a balance in his remarks between disruption and cooperation.

The panel focused on understanding what opportunities, as well as threats, the blockchain technology has in store for the insurance sector. Christoph took the view that parametric insurance from companies like Etherisc is disruptive to the traditional insurance industry in the long term, but should be complementary in the short term.

Noting that Etherisc aims at creating an environment where “people can build their own insurance products,” Christoph affirmed a vision in which “people can act without an intermediary.” He added that “this is a shift of control from insurance companies to customers, and lets customers have a better experience, with more transparency and fairness.”

The advantages of incumbency

The panel was moderated by and populated largely by traditional insurance executives, including representatives from Allianz, Munich Re, and Zurich.

Another panel member, Hugh Karp, recently left Munich Re to join an insurtech startup, and made the most provocative statement of the session: “We are trying to replace the insurance company with code.”

Christoph focused less on such immediate disruption. Taking the long view, he referred to the radical reforms in Germany’s banking systems that took nearly 100 years to evolve. With the insurance industry, he said “decentralized models will take some time and take a transition in thinking. We don’t expect very quick results. (That said), blockchain has the potential for a decentralized economy, and that’s what we should use it for.”

All panelists mentioned the big advantages that traditional insurance incumbents have, including their millions of customers, long-tested processes, and highly regulated environments that are difficult for startups to navigate. The thought emerged that insurtech reformers may find more early success in less regulated markets in parts of Asia, for example, than in the very strict markets in Europe and North America.

The complementary point of view

Christoph tacked from the idea of disruption to the one of complementary interests, highlighting that incumbents are not in competition with startups, as their profiles are quite different.

The fact that incumbents have established processes also means they have problems of internal efficiency,” he said, “where startups are working at the ground level in trying to explore the decentralized space, something that is impossible for a centralized company to do. It’s against their principle.”

Following this logic, he envisioned a “best of all worlds in which Etherisc becomes a successful model. We can help the whole (insurance) ecosystem, whether in a permissioned or permissionless blockchain model, so that everyone tries to build adoption to it.”

Disruption, but not destruction

Thus, the idea is to disrupt the insurance business, with the belief that enlightened incumbents will eventually migrate toward a better, decentralized world. Customers will have more control, and operating efficiencies will increase, as smart contracts on the blockchain automate claims processing, payouts, audits, and other inefficient aspects of the traditional industry.

Christoph urged his fellow panelists and attendees to stay open, follow Steve Jobs’s advice to stay hungry, and above all, think about adjusting the role an insurer should play in a distributed world.

For details, you may check out an audio recording of the panel.