Tag Archives: Blockchain

Blockchain: the anatomy of a hype

Remember blockchains?

They were going to change the world. Is there a problem or challenge? Consider using a blockchain. Engaged in a business? Consider the blockchain. Thinking about where to get lunch? Again, blockchain.

No industry would be left un-disrupted. Insurance would never be the same again.

And sure, that all might come to pass someday. Very smart people are working on blockchain applications. But right now it seems like the hype bubble is bursting, at least in the public mind.

Here are Google searches for “blockchain” over the past five years in the “finance” category:

Data source: Google Trends

Here is the search for “cryptocurrency”:

Data source: Google Trends

And just for fun, here’s the valuation of bitcoin:

Data source: CoinDesk

I’m not the first person to notice this, of course. The Gartner “Hype Cycle for Emerging Technologies” 2018 report put “blockchains” on the cusp of the dreaded “trough of disillusionment”.

Source: Gartner

Trough of disillusionment. Sounds ominous.

Why the cool down about blockchains? The short answer: expectations have begun to re-align with reality.

There are several reasons why.

Earlier this year I wrote an article for the Actuarial Review about blockchains – and how they might be solutions in search of a problem. In the article, I cited Stephen J. Mildenhall from the School of Risk Management of St. John’s University, who compared a blockchain to a military tank. In theory you could drive your kids to school in a tank. But why would you? Tanks are extremely expensive, slow and inefficient (plus, I’m not sure they’re road-legal). A minivan would be a better solution. Like a minivan, a simple SQL database could probably do most jobs that a blockchain could do, except much more cheaply, quickly and efficiently.

Another big sell of blockchains was that they were theoretically unhackable. As I wrote last year, that’s only kinda-sorta the case. Blockchains themselves might be unhackable (depending on their governance structures), but for a lot of applications they need to connect to that extremely hackable thing called The Internet. Which is why you’re regularly reading about massive cryptocurrency heists.

But just because we’re in the trough of disillusionment (sorry, I just love that phrase), doesn’t spell the end for blockchains. This is a normal process for emerging technologies: a new technology is developed, everyone gets extremely excited, then reality kicks in and the hard (and underreported) work begins of perfecting the technology for real-world use.

I wouldn’t be surprised if blockchains quietly become ubiquitous for some applications in the near future – but how they’re integrated and what kind of real impact they’ll have are anyone’s guess.

In the meantime: beware the hype about any emerging technology.

2017 Magic Ball on Insurance

It’s that time of year when insurance predictions for 2017 are being made, and as we look ahead, it’s clear that these are innovative times for our industry.

First up, Insurance Networking News with 10 Insurance Tech Predictions for 2017, based on a research report by Strategy Meets Action (SMA). Karen Furtado, SMA Partner and co-author of the report explains: “In many cases, the 2017 trends reflect a move by insurers to operationalize strategies that have been in development or early phases in the past couple years.” Predictions include: insurtech remains sizzling hot and 2017 will be pivotal for its future; digital transformation will expand; and telematics starts a new growth phase.

Keeping it hot, next up is The Financial Brand with Top 5 InsurTech Trends for 2017. Check out #1 Micro-Insurance to Handle Usage-Based Needs which highlights the growth of micro-policies covering specific risks for specific durations of time. At #3 Emergence of Blockchain as a Key Driver says smart contracts are emerging as the ideal way to automate claims management and underwriting creating billions of dollars in savings. It tips the B3i partnership between Aegon, Allianz, Munich Re, Swiss Re and Zurich as one to watch in 2017.

Talking of specifics, there’s Fast Company with 5 Fintech Startups To Watch in 2017 and pay-per-mile auto insurer Metromile headlines the list. “Insurance investors say Metromile has become an important proof point for the industry’s hottest topic: Measuring observable behavior in order to get more granular about risk.” Fast Company describes insurance is a “massive opportunity” in fintech in the year ahead.

And as we ring in 2017, CB Insights takes stock with a look back at some of the most notable partnerships, hires and financing rounds in insurance tech in the past year. Of particular note are the 29 startup-insurer partnerships in 2016, a reflection of insurers’ growing participation in the tech startup landscape. Insurance Information Institute’s Insuring California blog writes more on this here.