Bismarck led the creation of a welfare state for a few main reasons:

• Reduce social unrest, and prevent an uprising like the Paris Commune of 1871. Bismarck wanted to reduce worker support for the socialists, and also make sure that the working classes supported the German empire project (which realistically could have dissolved following massive unrest).
• Encourage workers not to emigrate, as many were leaving for the eastern USA, which was industrializing as well
• He combined protectionism with new welfare policies to foster German heavy industry, which many saw to be key to both economic and military success

There had also been welfare policies in place (often dealing with some kind of healthcare or pensions) in some German states, like Saxony, prior to unification, and these had proved to be not a bad thing. The existing models formed the base of the welfare that was provided across the German empire.