Bernhard Lang, Member of the Board at MSG System, joins us to discuss innovation and blockchain in the insurance industry. In this podcast we discuss the importance for the insurance industry to remain relevant in an ever changing market. How making innovation a corporate discipline and embracing a customer centric approach to remain engaged in customer ecosystems is critical to that objective of relevance.

 What is blockchain?From a non-technical point of view blockchain is a form of digital representation of what we naturally do in real life. We want to be part of social communities within which we communicate, make agreements, state facts, and make promises that are then known to the people within the community as a current status of things or an evolving collective truth.

The technical definition of blockchain is that it’s an immutable and distributed technology that enables the creation of new business scenarios. According to Bernhard, too often blockchain technology is looked at from a technology angle first before a business one. He personally prefers that we start with a business problem and then identify blockchain technology if it is the right one for the business problem.

 About MSGBernhard Lang has been with MSG for the past 25 years. MSG is a German product based system integrator. MSG focuses on 10 different lines of business. Their business strategy is to develop industry specific content, software assets, software solutions, that go very deep into the lines of business along with a consulting services associated with it. The majority of MSG’s business is within insurance but also looks at other industry verticals such as banking, public sector, automotive and others.

In addition, MSG works with startups such as Ritablock (featured on Insureblocks: Ep. 124 – Reinsurance accounting blockchain, Ritablock integrates with B3i’s Fluidity platform) and they have co-developed the SAP FS-RI (financial services reinsurance), which has become the market standard for professional reinsurance companies and for cedents.

Outside of reinsurance, MSG has partnered with Marco Polo, a trade finance blockchain solution, to help them integrate with SAP European Systems.

 Insurers approach to blockchain in comparison to mature platforms like SAPBernhard believes the insurance industry is quite open to blockchain technology however he notes that the materialisation of previous blockchain investments haven’t been that great. Consequently he believes that in the future the insurance industry might be more cautious to making investments in blockchain.

Source: Cookhouse Labs

MSG has an innovation lab in Canada called Cookhouse Lab. In May 2017, they launched a four week design thinking blockchain workshop along with seven insurance companies where they identified 34 uses cases and created three prototypes. Whilst there was a lot if interest at that time, Bernhard would qualify the output as having had a limited impact and not significant enough to be considered a game changer.

Whilst he believes insurers will keep looking at blockchain technology few will expect high returns.

 Evaluating new innovative technologies within the insurance industryBernhard candidly describes the decision making process within insurance companies as being sometimes irrational. To support that statement, he recalls a meeting regarding ACORD standards, which in his opinion represent a huge business case. During that meeting, insurance professionals flew in from around the world, agreed to join forces and create a service organisation. All participants were requested to make a €40,000 investment for this initiative. Unfortunately, they had great difficulties in raising that amount of money. Bernhard asks the question that if it was such an obvious use cases with large saving potentials why was it so difficult to raise such a small amount of money?

For Bernhard the insurance industry sometimes makes irrational d...