Last week, Coindesk reported that John Hancock is starting to explore development using the blockchain.
While it’s becoming common in financial services overall (as Novarica VP Jeff Goldberg noted in a blog post a few months ago), this represents the first instance of an insurance company per se (excluding USAA, whose work in the area is likely focused more on banking applications) disclosing an exploratory program around blockchain.
As Jeff and I wrote last year in Bitcoin and Insurance: An Overview and Key Issues, adopting blockchain is not just an opportunity for some good press (and a helpful recruiting tool for tech-oriented millennials to boot) but also smart from a long-term strategic perspective. In our brief, which offers an overview of the area and a brief explanation of blockchain’s mechanics, we argued that insurance, as consisting of financial contracts between trusted parties, is a natural domain in which to apply a “trust machine” like blockchain. In areport on the same subject from earlier this year, Ernst & Young discussed the same subject in great detail, pointing to a number of likely use cases, including “micro-insurance”, “cyber liability”, “P2P”, and better distribution of highly personalized/regionalized products.
Naturally, however, the time-to-market for blockchain-based insurance is gated by regulatory issues, as well as by the perfectly reasonable fact that many of the products to which it is likely most suited still have yet to be invented.
John Hancock in its first phase does not appear to be planning to build anything related to insurance. Instead, a small group of their own developers, in partnership with a few startups, are prototyping an internal “employee rewards program”. This lean and iterative approach sounds like a smart way to build institutional knowledge around a potentially revolutionary, raw, and challenging technology. As a database, network, and a currency system all in one, blockchain really is a unicorn, (as many suggest, perhaps most analogous to the web itself in terms of its technical novelty). Therefore, any company that hopes to “fast follow” in this area will need to have a firm foundation of institutional understanding on which to stand.
As Matthew Josefowicz has pointed out before, technological disruption is not unlike that Hemmingway quote about how ones goes bankrupt: “first it happens gradually and then all-at-once”. While we’re still definitely in this gradual phase, it’s reasonable to expect only small dividends from these R&D programs. On the other hand, taking a relaxed “let’s see what happens” approach, of the sort many media companies in 90’s took to the web, may seem ill-advised when reflected upon after an “all-at-once” kind of transition.
We expect to see more carriers launch these sorts of exploratory programs in the coming months.