Whether it is identity authentication, increasing the speed of cross-border payments, supply chain optimization or transportation logistics, blockchain technology has been providing solutions to a variety of industries. Blockchain can also become the answer to the problems encountered by bancassurance.
The Issues Bancassurance Faces Now, and How Blockchain Can Help
First of all, bancassurance is often a slow process, as it relies on the exchange of highly confidential information. Most if not all bancassurance practices are primarily paper-based. This means that names, dates, addresses, social security numbers, health information, etc. move within the insurance and banking chain through documents and forms. The higher the number of hands these documents are passed through, along with the number of alterations made, the higher the odds of human-related error. Currently, there is no linking system between these the two parties involved (banks and insurance companies) that allows for quick and smooth information exchange. This means forms can often get caught in the mail or perhaps even lie on the banker’s desk until they are looked at and approved. Such outdated systems are prone to an abundance of problems. The fact that they are paper-based means that they can easily be altered. Forgeries and fraud are common because they are so easy to commit when there are only paper-based documents in place, without a proper and securely stored digital form. At the same time, blockchain requires a unified agreement in order for changes to be made. Say, a banking agent tries to change information regarding a customer. This change must be accepted by a majority of the members of the blockchain — and this is how fraud and even just simple human error can be prevented. The use of blockchain technology in insurance will increase the speed in which insurance policies can be carried out and pave the way for a more secure and transparent system. According to a study by Deloitte, implementing blockchain in bancassurance can reduce required efforts up to 75%, with 52.6% in productivity gain. Moreover, insurance companies benefit from the blockchain solution even more, with up to 86% reduction in effort, the same states.
How Blockchain Can Decrease Bancassurance Processing Times
Bancassurance has been highly successful in Asia. Unlike the U.S., most banks in Asian countries are permitted to offer different types of insurance plans, such as life insurance, home insurance, and car insurance (in the U.S., for instance, life insurance is excluded from the bancassurance system). Yet, despite the popularity of bancassurance in Asia, it is still prone to very slow processing times. The issue became so concerning that the major market player, China Construction Bank, has come forward in order to offer a solution. IBM and China Construction Bank (CCB) have successfully developed and deployed their first blockchain-enabled bancassurance platform in Hong Kong in September 2017. IBM and CCB’s blockchain solution solves the issue of slow information exchange between banks and insurance companies. By placing all information required for a policy check on a blockchain, the deployment times of bancassurance policies have been significantly reduced.
How Blockchain Made This Possible
Bancassurance relies on highly personal information. This is why most bancassurance-related business has been traditionally conducted through either paper or separate business databases which seemed like the most secure methods of data storage. Separate databases basically refer to privatized databases, meaning banking institutions keep their customer data in their data storage system, and insurance companies keep their customer data in their data storage system. This way, the banking institutions do not have access to the insurance institution’s data and vice versa. Handing over the keys to this kind of information increases the risk of it being spread and mishandled. At the same time, the fact of having that much-connected information stored in two separate databases has also brought a lot of issues over the years, including incredibly slow processing and approval times, along with a high risk of fraud and human error. This is why IBM and CCB developed a blockchain that was built with the purpose of providing a shared database between banking institutions and insurance institutions. Rather than sharing their entire databases with each other, which is completely out of the question, the blockchain allows the pair to securely exchange only the necessary information, concerning potential and current bancassurance participants. Blockchain solutions can instantly and quickly transfer and share large amounts of data. In the case of bancassurance, as soon as new customer information becomes available, it becomes immediately viewable to all relevant parties. This greatly reduces the time it takes to approve an insurance policy for a new customer. Information can be added to the blockchain instantaneously, and once it is, the necessary steps can be taken immediately in order to develop and grant an insurance policy.
What This Means for the Future of Bancassurance
Implementing blockchain technology, banks can significantly increase efficiency in bancassurance practices. Plagued by inefficient, mostly paper-based systems, bancassurance practices have stayed outdated for far too long. Blockchain has been able to make bancassurance more secure, fast, and convenient. Ultimately, if adopting blockchain, banks and insurance companies will be able to expand and increase their market share along with the services they offer to their customers.