CHAPTER 1

INTRODUCTION OF INFORMATION TECHNOLOGY

Chapter: - 1

INTRODUCTION OF INFORMATION TECHNOLOGY

1.1 Risk

A probability or threat of damage, injury, liability, loss, or any

other negative occurrence that is caused by external or internal

vulnerabilities, and that may be avoided through preemptive action.

Risk is the potential of losing something value. Values can be

gained or lost when taking risk resulting from a given action, activity

and/or inaction, foreseen or unforeseen.

1.2 Different risks

Business Risk :-

The term business risk refers to the possibility of inadequate profits or even

losses due to uncertainties e.g., changes in tastes, preferences of customers ,

strikes, increased competition, change in government policy, obsolescence etc.

Every business organization contains various risk elements while doing the

business.

Business risk implies uncertainty in profits or danger of loss and the

events that could pose a risk due to some unforeseen events in future, which

causes business to fail.

Life Risk :-

Personal risk is the exposure to financial loss and/or additional expenses

resulting from premature death or disability.

Financial loss may be incurred as a result of the death or disability of an

income earner, leaving you, your family or your business financially insecure.

Additional expenses may be incurred from the death or disability of a

homemaker, such as the cost of child care which previously wasn’t required.

Insurance is risk management

Today’s lifestyle and elaborate financial world is making us more prone

to risks that were not even assumed to exist in the olden days. The non-life

(general) segment of the insurance sector offers a plethora of options to choose

from to insure a person or his needs from heads-to-toe. However, one must have

an eye to recognize the risk he faces that can be insured but that cannot be

reduced. Insurance is an important element of financial planning. However,

more so as a risk-management tool rather than an investment.

It is in one’s own interest to secure and insure his health, wealth and

property. Tracking back in time for a few years, insurance policy was

considered to be useful to safeguard the revenues in the future. However, in this

day and age, the mounting risk of financial uncertainties makes it necessary to

have an insurance cover. The recognition of insurance cover has helped the

Indian insurance industry bloom in the recent years.

Insurance

Insurance is a contract (policy) in which an individual or entity receives

financial protection or reimbursement against losses from an insurance

company. The company pools clients’ risks to make payment more affordable

for the insured. Insurance is the equitable transfer of the risk of a loss, from one

entity to another in exchange for money. It is a form of risk

management primarily used to hedge against the risk of a contingent, uncertain

loss. An insurer, or insurance carrier, is selling the insurance; the insured, or

policyholder, is the person or entity buying the insurance policy. Insurance in

India refers to the market for insurance in India which covers both the public

and private sector organizations.

Definition:-

Risk-transfer mechanism that ensures full or partial financial

compensation for the loss or damage caused by events beyond the control of the

insured party.

Under an insurance contract, a party (the insurer) indemnifies the other party

(the insured) against a specified amount of loss, occurring from specified

eventualities within a specified amount of period, provided a fee called

Premium is paid.

In general insurance, compensation is normally proportionate to the loss

incurred, whereas in life insurance usually a fixed sum is paid.

Insurance premiums are regular amount of money you pay to your insurer in

order to retain cover under your insurance policy so you can make a claim when

you need.

Types of insurance

Life insurance :-

Life insurance or life assurance, especially in the common wealth, is a

contract between an insurance policy holder and an insurer or assurer, where the

insurer promises to pay a designated beneficiary a sum of money in exchange

for a premium, upon the death of an insured person. Depending on the contract,

other events such as terminal illness or critical illness can also trigger payment.

Life-based contracts tend to fall into two major categories:

Protection policies- designed to provide a benefit, typically a lump sum

payment, in the event of specified event. A common form of a protection

policy design is term insurance.

Investment policies- where the main objective is to facilitate the growth

of capital by regular or single premiums.

General insurance:- Insurance contracts that do not come under the ambit of life insurance are

called general insurance. The different forms of general insurance are fire,

marine, motor, motor, accidents and other miscellaneous non-life insurance.

The tangible assets are susceptible to damages and a need to protect the

economic value of the assets is needed. For this purpose, general insurance,

general insurance products are bought as they provide protection against

unforeseeable contingencies like damages and loss of the asset. Like life

insurance, general insurance products come at a price in the form of premium.  

Importance of insurance

Insurance has evolved as a process of safeguarding the interest of people from

losses and uncertainty. It may be described as a social device to reduce or

eliminate risk of loss to life and property.

Insurance contributes a lot to the general economic growth of the society by

provides stability to the functioning of process. The insurance industries

develop financial institutions and reduce uncertainties by improving financial

resources.

Future of insurance

It has become a good source of investment for some people.

As now FDI investment limit has gone up to 49% from 26% earlier,

hence better growth in terms of investment.

Increase health and self awareness.

There is enough opportunity, but the way has to be discovered. It’s not

that is impossible only insurance companies have to bring their brains

together and find out the way.

Chapter 2

Information technology in insurance

Chapter 2

INFORMATION TECHNOLOGY IN INSURANCE

2.1 Information Technology

Information technology (IT) is the application of computers and telecommunications equipment to store, retrieve, transmit and manipulate data, often in the context of a business or other enterprise.

Information Technology covers a broad spectrum of hardware

and software solutions that enable organizations to gather, organize,

and analyse data that helps them achieve their goals. It also details

technology-based workflow processes that expand the capacity of an

organization to deliver services that generate revenue. The four main

focuses of IT personnel are business computer network and database

management, information security, business software development,

and computer tech support. For a guide on tech fundamentals, check

out some basics on cables and connectors and the here. As the IT

industry evolves to meet the technology demands of today’s

workplace, different challenges are arising and IT professionals are

striving to meet them. Network security is by far the greatest concern

for many companies and they rely on their IT staff to prevent or stop

these system breaches. Read more about the basics of computer

security here. Data overload is becoming an increasingly important

issue since many businesses are processing large amounts of data on a

daily basis, with many of them not have the processing power to do

so. Last, but not least, two of the most essential skills needed from IT

professionals are teamwork and communication skills. Systems are

complex and people are needed to help translate that task. Therefore,

IT professionals are the ones responsible for helping others get their

work done efficiently without the complex jargon of the technology

world. Here are some of the most popular positions for people

interested in Information Technology:

DEFINATION OF INFORMATION TECHNOLOGY

IT Stands for "Information Technology," and is pronounced

"I.T." It refers to anything related to computing technology, such as

networking, hardware, software, the Internet, or the people that work

with these technologies. Many companies now have IT departments

for managing the computers, networks, and other technical areas of

their businesses. IT jobs include computer programming, network

administration, computer engineering, Web development, technical

support, and many other related occupations. Since we live in the

"information age," information technology has become a part of our

everyday lives. That means the term "IT," already highly overused, is

here to stay.

2.2 Information technology in insurance

Insurance, in law and economics, is a form of risk management primarily

used to hedge against the risk of a contingent loss. Insurance is defined as the

equitable transfer of the risk of a loss, from one entity to another, in exchange

for a premium, and can be thought of as a guaranteed small loss to prevent a

large, possibly devastating loss. An insurer is a company selling the insurance;

an insured is the person or entity buying the insurance. The insurance rate is a

factor used to determine the amount to be charged for a certain amount of

insurance coverage, called the premium. Risk management, the practice of

appraising and controlling risk, has evolved as a discrete field of study and

practice.

The developments in IT are the working wonders in all the fields of

activity. It has become possible to send and receive information almost

instantaneously. If circulars do not reach the agents on time or doubts are not

cleared quickly, or the agent does not have details of the new plans announced

in the press, the agent may face awkward situation with the prospects.

These problems can be totally avoided with the use of IT. Insures

traditionally have been quickly to adapt latest advances in the technology. This

is happening in the areas of IT as well.

The extent of IT application will vary between insures. The information

technology has always played a very important role in the operations of every

life insurance company. In fact of all the business organizations in the service

sector, the life insurance companies were the first to adopt

‘MECHANIZATION’ as an inalienable part of their operation all over the

world. This becomes necessary because of two important reasons namely:

1. The nature of services to be rendered to the policyholders.

2. The need to evaluate the liabilities under the policies in vogue at the

time of valuation.

2.3 Important of information technology

Obtaining accurate information as quickly and efficiently as possible

remains an integral component to the framework of the insurance sector.

Unfortunately, the dynamically changing corporate landscape, situated along

side progressively expanding legislation, results in the need for consistently

improving information technology.

2.3.1 Client DataInsurance carriers maintain accurate and updated client data

records. Information technology must be both secure and comprehensive

enough to store multiple names, addresses, telephone numbers, email addresses

and other pertinent details.

2.3.2 Policy DetailsFor those insurance companies providing policies across multiple

lines of insurance, information technology requirements become even more

complex. Details of each insurance policy, ranging from life, home, auto, boat,

liability and business products, need to be accurately recorded and merged with

client data.

2.3.3 Claims ManagementInvestigating, paying and recording claims data is crucial to any

insurance company's financial stability. Information technology plays a vital

role in allowing carriers to record claims details and share data with police,

other carriers, attorneys and beneficiaries. Advanced computer software ensures

important information remains accessible and updated.

2.3.4 BeneficiariesLife insurance companies utilize database technology to record

policy owners' beneficiary designations. Aside from the personal details of the

insured individuals, beneficiary names, addresses, telephone numbers and death

benefit portions are of monumental importance.

2.3.5 Payment InformationPerhaps the most essential area requiring accurate and efficient

information technology is an insurance company's client payment details.

Above all else, billing and invoicing systems generate the necessary revenue to

keep the company in business. Cash flow remains vital to daily operations and

without superior information technology and processing systems, the carrier's

financial stability is at risk.

2.4 CHALLENGES IN INFORMATION TECHNOLOGY

A host of tech accompanies the task of insurance fraud and abuse

detection. An abusive solution to the problem requires a comprehensive

approach enabled by a variety of technologies that addresses these technical

challenges head-on. Some of these design issues include;

2.4.1 On-going reassessment of fraud risk

Because fraud may not exist at the time the claim is submitted, or

because evidence of abuse may not yet be apparent, a system must each claim

over and over on an on-going basis.

2.4.2 Understanding raw data

The starting point is the “raw mountain of data”. A thorough

understanding of this data requires careful analysis and domain expertise.

Furthermore regardless of what technologies are employed, careful engineering

is required to address issues of data being messy. Missing or standardized

2.4.2 Behaviour from on-going transactional data

Characterizing claim activity involves the summarization of all

transactional data (e.g. payments or medical service details). This

summarization must not lose key aspects of activity.

2.4.3 Complex pattern in data

Identifying which claims are most suspicious requires a

comprehensive analysis of many different features characterizing the claim and

its activity. A detection system must be able recognize those patterns of

behaviour most indicative of fraud.

2.4.4 Limited examples of confirmed fraudulent claims

In many cases, only a small number of known examples of fraud

may exist in the historical data. One must be able to handle such situations

when developing the detection system.

2.4.5 Prioritization of suspects

In order to match work level to staffing constraints, which may be

different for different customers and may vary over time, a detection system

must allow for prioritization of suspects. Scoring models provide a rank

ordering of all suspects so that attention can be focused on those deemed most

suspicious.

2.4.6 Effective use of detection results

In order to effectively use the detection system’s results,

explanations for what makes a claim look suspicious should be provided,

strategies for effective workflow assignment should be determined (e.g., match

resources with suspects that are most beneficial to review) and tools to review

the results should be available (these may already exist).

2.4.7 System Maintenance

The system performance must not deteriorate due to changing

patterns of activity overtime. Because neural network models are built from

data and automatically learn complex patterns within the data, they can be

efficiently redeveloped. Indeed, as more examples of abuse become known,

model performance can be expected to improve over time.

2.5 Application of IT

As awareness of quality service began growing among policyholders in

India also, LIC of India had to think of many applications of information

technology. Up gradation of technology was undertaken on a huge scale. All the

2050 branch offices, which were serving centers, were equipped with computer

systems. Training of employees also was organized on a large scale. Several

software packages for different servicing operations were introduced. A cash

module was introduced, operating with, the cashier, while sitting at his desk, is

enable to print and issue official receipts on the spot to the policyholders when

they tender money towards premium, the entire operation take a few minutes. A

new business module was introduced which enable even underwriting

operations to be computerized. It brought a complete integration of all activities

connected with the processing of policy documents Similarly, loans and

surrender value module, policy revival module, claims module were also

introduced. Now revival quotations, a policy quotations or maturity claims

intimation letters are generated on the Computer. All these gave tremendous

boost to the efficiency in rendering service to the policyholders.

2.6 TECHNOLOGIES FOR INSURANCE

There has never been a time when the effective use of information

technology has been more crucial to the success of the insurance industry. The

insurance markets are being revolutionized by technology at a high speed pace.

IT and software solutions, allowing cross-border trade to become electronic and

paperless, are increasingly on offer to importers, exporters, shipping companies

and financial institutions. Following technological advancements can really

enhance the performance of insurance companies.

2.6.1 Database Management Systems

The principles of tracking and measuring responses can pay off for

the conventional insurance industry. To find more clients, insurer needs to

consider many factors, including cash value, medium and competition. But the

need to record and study the characteristics of persistency- the length of time we

retain policies, customers and agents is most important in insurance companies.

In order to find out profitable combinations of households or

clients, products and agents, a database with five to ten years’ history is of

immense importance. Such historical retention was prohibitively expensive in

the past. But clear advantages of new PC (Personal computer) and RISC

(Reduced Instruction Set Computing) technology gives companies power to

keep tens of millions of policies on a device with thousands of bytes of data per

policy/client/agent. Analyisng a 1O-year database is cost effective.

Reviewing the database provides information on how many clients

have actually migrated not just how many policies have lapsed or surrendered.

Using database technology companies can get a comprehensive, performance,

loyalty, and lost opportunity.

2.6.2 Data Warehouse

Data warehousing technology is based on integrating a number of

information systems into a ‘one stop shopping’ database to achieve vision of

making company national in scope, but regional in focus. Traditionally, the sale

of policies and the claim settlement are two separate areas for the insurance

companies. Data warehousing allows managing by profit levels with an

integrated approach rather than by limiting losses. Data mining can be used as a

means to control costs and increase revenue resulting in enormous earning for

effective users.

2.6.3 Decision Support Systems

The path of business applications of computers, computer based information

systems (CBIS), encompasses many stages including the very early applications

like transactions processing systems (TPS) followed by the management

information systems (MIS). The computer applications like decision support

systems (DSS), expert systems (ES) and executive information systems (EIS)

are still awaited in insurance business. Office automation (OAS) happens to be

a continuously ongoing, dynamic process for any business. Such decision

support systems will provide the insurance managers with a tool for customised

products and services that are more in line with what customers want.

2.6.4 Group Linking Software

Group-linking software enables sharing of information arid

partieular1v suits document heavy insurance business. Tracking of policy

application shows how information that is input and accessed from a number of

locations can increase efficiency.

2.6.5 Imaging and Workflow Technologies

The proposal forms may be scanned into an imaging system.

Data may be extracted for update to computer and for automated underwriting

workflow may be implemented.

2.6.6 Mapping

Insurers to meet different needs, such as identifying loss prone

areas or geographic claim analysis, can use Mapping technology. It helps the

insurer to analyse the extent of its network i.e. the insurer can determine

whether it has too many or too few agency force in a particular area.

2.6.7 Call Centre Technology

Good customer service is a crucial element for gaining,

maintaining and retaining profitable customers. Call centre concept based on

interactive voice response services (IVRS) is gaining importance in this aspect.

2.6.8 Video Linking

A video linking facility between two remote units of an

insurance company or between an insurer and a broker allows underwriters at

one place and brokers at other unit to discuss risk inherent in a proposal face to

face.

2.7 IT APPLICATIONS IN FUNCTIONAL AREAS

Even though the information technology has wide application in all the

spheres of the insurance business, yet following are the most important ones in

respective functional areas:

2.7.1 Marketing

The scope for use of Information Technology in marketing function

is tremendous. It may start from the consumer acquaintance to an insurance

product to claims settlement or further selling of new products or developing

consumers for the products.

Information technology can be integrated with almost all the P’s of

marketing. It may help in formulation and implementation of various marketing

strategies including pricing, promotion and customisation strategies.

2.7.2 Finance

Information technology can be effectively used for internal

management viz. Accounting, treasury management, financial performance

reporting etc. and as well as in resource mobilisation, portfolio management,

investment planning etc.

2.7.3 Human Resource Management

Application of IT in Human Resource Management is obvious. It

can be effectively utilised in: (1) recruitment and selection,

(2) Training,

(3) Performance appraisal,

(4) Promotions, transfers and dismissals,

(5) Valuations etc.

2.7.4 Research and Development

R&D has been made an easy task with the increasing use of IT.

Surveys and research on market potential, analysis of markets, tracking with

international norms and developments are the profound areas of IT applications.

2.7.5 Impact of Technology on Insurers

Any new adoption needs time to get acquainted with the users until

they gain enough confidence & knowledge in that system. Recent studies reveal

that consumers lack passion for insurance because of its complexity, but despite

these push backs, a growing number of insurers are intrigued by the significant

cost saving & customer-retention benefits to be gained through online self-

service. Although carriers think that by encouraging insurers to do transactions

by online services, which would reduce operational costs vastly, they are very

cynical of investing in web technology with dot-corn collapse.

Role of it in shaping the future of the Indian insurance industry

The insurance sector as we all are aware is crucial for the country’s

economic development. India serves as a huge market due to its significant

untapped potential.

With the Government’s recently announced 12-point action plan for

Insurance, the benefits to the company and policyholders will make Insurance

more fundamental and relevant.

The focus on the customer oriented business model will further drive

Insurance companies in embracing the emerging technologies. Due to the data-

intensive nature of the industry, primarily because it involves collection,

processing and maintaining of information relating to insurance policies, IT will

continue to act as a critical enabler. In the volatile insurance environment where

insurers introduce recurrent changes in process model, product design, IT has

helped to gain through web-based, online, front-ending improvements for

efficient selling, analysis and decision making. Technology investments will be

crucial in the dynamic insurance environment not only to serve the competitive

edge but also to maintain the regulatory obligations and hygiene required.

HOW INSURERS CAN ACHIEVE GROWTH

7 Technology Trends Transforming the Insurance Industry

INTRODUCTION

The number-one priority for insurance carriers today is profitable growth

and one of the most effective ways to enable this growth is through the use of

innovative technologies. Yet, while they are critical, implementing new

technologies can drain budgets and resources. Carriers must judiciously

determine which technologies are worth the investment today and which ones

deserve a strategic “wait and watch” approach.

1. Mobility

Mobile devices are here to stay—largely driven by a rapid

proliferation of consumer mobile apps—and are affecting how carriers conduct

business and interact with stakeholders. In fact, more than 30% of carriers

provide agent or customer capabilities via mobile, and more than 60% will add

mobile capabilities for policyholders and agents in 2013, according to

Novarica’s report, Mobile in Insurance Beyond Personal Lines: Current Trends

and Expectations. Karlyn Carnahan, Novarica principal, adds that 70% of

property casualty insurers predict that they will offer mobile capabilities by

2014.

2. Big Data and Analytics

It’s all about the data—and carriers get it. When Novarica asked

insurance CIOs how they would spend an “extra” $5 million in their IT

budgets, almost onethird said they would spend that windfall on Big Data. It’s

not surprising that a large percentage of CIOs prioritized Big Data over a wide

variety of other IT possibilities since insurance continues to be a data-driven

industry that creates huge volumes of structured and unstructured data that

carriers must manage. While insurers recognize that harnessing this data can

provide them with valuable and actionable insights, they struggle with making

the technology modernization needed to support Big Data and embed it into

real-time applications. CIOs will need that extra $5 million because

infrastructure modernization can be costly: Gartner predicts that Big Data

infrastructure changes will drive $232 billion in IT spending through 2016

across industries.

3. Telematics

Telematics and usage based insurance (UBI) are among the hottest

topics in auto insurance. Rather than creating broad rate tiers by looking

backward at the performance of a book of business, it promises the ability to

create more granular pricing segmentation and improve the accuracy of

pricing by using a customer’s actual driving behaviour as the basis for

generating rates. The feedback provided to drivers also has potential for

actually changing driver behaviour to safer levels.

4. Automating Regulatory Compliance

As a highly regulated industry, insurance carriers have always built

regulatory compliance into their business processes and adjusted their processes

to assure they remain in compliance as new regulations are enacted. Whether it

is ensuring producers are properly licensed and appointed, making sure pricing

is generated in a fair and consistent manner or confirming that claims are

handled fairly, compliance practices impact all aspects of the insurance

industry. Carriers that have not built flexibility into their systems struggle with

consistently implementing regulatory requirements and responding quickly to

data calls. “Carriers need to be able to rapidly add data elements, modify

documents and assure workflows are easily modified to deliver consistent

practices,” says Carnahan. The carriers best able to anticipate the future

regulatory landscape and implement technology to streamline regulatory

compliance will be in a much better position than their competitors to address

new and emerging mandates, such as the Affordable Care Act, without missing

a beat or impacting agents or customers

5. Improving the Agency Experience

Since agents write more business with those carriers easiest to do

business with, carriers that work with independent agents cannot achieve their

objective of profitable growth without focusing on the agency experience.

Carriers are taking note, and up to 80% of carriers plan to enable agents to

perform most information and transactional capabilities through easy-to-access

agent portals, according to the Novarica report, Paper, Phone, Email, Web,

Mobile: Communication Channels in U.S. Insurance

6. Social Media and Collaboration

Social media is about helping people connect. Consumer and agent

expectations for connection have been established through social media tools

that provide an opportunity for people to collaborate and share information.

Social media tools—such as Facebook, LinkedIn and Twitter—are frequently

used in marketing to drive brand awareness and connect with customers. But

other uses of social media tools improve collaboration and improve decisions

and processes both internally with carriers and externally with the distribution

channel. Today, most collaboration in the insurance industry takes place in the

form of emails and face-to-face meetings. While there will likely always be a

need for these types of collaborations, carriers can create efficiencies by moving

beyond these communication avenues and providing a centralized collaboration

platform where people can share documents and ideas and manage knowledge

.

7. Distribution Channel Management

In a multi-channel world, existing distribution channels remain

as new channels emerge, complicating channel management. Today,

they are managed as discrete distribution channels unable to integrate for

seamless agent and carrier interactions. “Different elements of insurers’

communications are shifting at different speeds, and older channels are

not going away,”.

E-INSURANCE

On a global basis, there is mad rush of companies willing to enable their

business. E-insurance is one of the growth areas in India. Enormous

opportunities are being created by the Internet’s new connectivity such as

improving customer’s service, reducing cycle time, becoming more cost

effective, and selling goods, services, or information to an expanded global

customer base. As entire industries are being reshaped and rules for competition

are changing, enterprises need to rethink the strategic fundamentals of their

business in order to be successful. Globally, insurance on the net has lagged

behind other financial service products such as banking and brokerage. Of the

total online users only 5% used insurance service online.

E-Insurance in India

The intriguing question before all associated with the insurance industry

is that will it be possible for private companies or even public sector monoliths

to sell insurance online in India in the near future? Insurance companies will

probably have to wait for Internet penetration to increase and the still

ambiguous e-commerce rules to take concrete form. However, what is not

debatable is that new private entrants will change the rules of the game for the

Indian insurance business, both in the life and the non- life segment, unfolding

opportunities for software engineers and professional agents.

To peep into the possibilities and opportunities emerging out of the

integration of insurance and information technology, various organisations have

organised seminars and conferences in the recent past to explore the

possibilities of selling insurance on the Net and gauge the opportunities for the

growing Indian software industry.

Online insurance will also help companies reduce costs and keep

premiums low, a prerequisite in a price sensitive market like India. The

government, however, will have to address problems relating to bandwidth on

an urgent basis to make online insurance a reality in India. Other major

challenges to face Indian insurers will be to design and develop strategies for

delivering services to well segmented customers. The third challenge lies in

developing the right combination of customer segments and applicable

distribution channel strategies.

Most Web sites offer contact numbers of their branch officers where we can get

further details of the products on offer. The Agent locator feature, available on

maxnewyorklife.com, iciciprulife.com and on bimaonline.com help one locate

an insurance agent most accessible to you based on a search facility. One would

expect downloadable proposal forms on insurance web sites, but these are

missing in most cases. Only Iicindia.com seems to offer downloadable proposal

and claim forms for a few of the schemes.

Benefits of Electronic Insurance

E-insurance provides multiple benefits to the insurer and the existing and

prospective insured:

• Information collected is better and cheaper

• Speed of response — Issuance of policy and settlement of claims is

faster

• Provides new ways of doing business in competitive market

• Flexible pricing and customised services

• Global accessibility i.e. lapse of physical boundaries

• Increased sales without additional sales force

• Immediate premium collection and funds transfer

• Reduced cost per transaction

• 24x7 availability i.e. round the clock availability of information

• Real time knowledge base building

Major Factors Affecting E-insurance

• Growth of net: it is estimated that India would have about 150 million

net users by 2010. These figures represent a huge buying potential.

• Competition pressures: insurance companies because of competitive

pressures would be driven into Internet rather than a clear ROT

justification.

• Customer: the availability of net-based services will be a huge factor

for customer retention.

• Cross sells: when linked with other financial products, a portfolio

approach to investment, savings and risk coverage will increase cross

sells and customer loyalty and retention.

• Costs: in the beginning c-insurance will be a cost factor rather than a

profit driver, but in the long run it will be a cost reducing factor. E-Insurance Challenges

Electronic insurance will not only provide many benefits but will also

pose business and technological changes.

Business Challenges

1. Disintermediation increases business:

Study has shown that the cost of distribution decreases with the

increased value of connection. Products with relatively high fixed costs and low

value such as travel, credit or burial insurance are relatively expensive to

produce. Customers pay a high price per dollar of coverage for these products.

The Internet allows the disintermediation of this relatively high overhead for

these low face value products. This means that prices can be lowered and more

insurance can be sold by reducing the transaction costs of the exchange.

2. Reorganisation of companies-

Virtual Companies: Many insurers will be prompted by the

opportunities presented by E-commerce to restructure the packaging of

insurance services. Insurance companies using c-commerce may re-engineer,

outsource, and/or streamline their management functions, or marketing and

distribution arms. To more efficiently deliver these services, some insurers will

be able to reduce their significant investments in physical facilities and certain

personnel. E-commerce will enable independent agency insurers to more easily

adapt their distribution mechanism to market competition and expedite their

transactions with intermediaries.

3. Insurance customers what do they want:

Customers could get better and different service through the

Internet. It is possible to obtain quotes from a number of companies. In some

cases, the Internet provides rating agencies’ evaluation of insurers. The Internet

and outsourcing can provide additional cost savings to the consumer.

Technology can bring the customer closer to the insurance contract, by

removing layers of inefficiencies. Consumers will also obtain price comparisons

for relatively generic contracts, such as life insurance and rates for a standard

set of auto insurance coverage for given vehicle and driver characteristics.

Consumers also could have access to internal records to see where their claims

are in terms of payment, when their next annuity payment is due, and how their

mutual fund is performing. This can be done without calling a burdensome

voicemail system, being put on hold, or finding a person who can give them the

desired information efficiently.

4. The Death of Insurance Agent:

One of the reasons why insurers have been slow to use electronic

commerce could be the fear of swallowing up the agent’s business. The Internet

does not necessarily imply the death of the agent. Many insurers are examining

their agent’s role in the process and arc also developing direct contacts with the

insured through their web presence. Agents could enhance their advisory role to

consumers as their paper and money processing functions diminish.

Technological Challenges

One of the most prominent challenges of e-commerce is security. It is very evident

that many users are reluctant to do business on the Internet due to security reasons:

1. Database Security:

The business database security is utmost important. This

has to be monitored by security of the web server and web access.

2. Web Server Security:

Security policies should be defined as who is allowed access,

nature of the access and who authorises such access, etc.

3. Password sniffing:

Protection against password sniffing is to avoid using plain text

user names and reusable passwords.

4. Network Scanning Programs:

Automated tools should be used to scan your network. These tools

check for well-known security related bugs in network programs such as send

mail and FTPD.

5. Physical Security:

One can ensure physical security by having an alarm system that

calls the police, having a key-lock on the computer power supply.

6. Web Access Security:

Host based restrictions can be implemented using a firewall to

block incoming HTTP connections to a particular web server.

7. Transmission Security:

Encryption is a key technology to ensure transaction security.

8. Privacy:

Privacy is likely to be a growing concern as internet-based

communications and commerce increase, Designers and operators of web sites

who disregard the privacy of users do so at their own peril.

Chapter 3

Chapter 3

Information technology in LIC

INTRODUCTION

LIC has been one of the pioneering organizations in India who

introduced the leverage of Information Technology in servicing and in their

business. Data pertaining to almost 10 crore policies is being held on computers

in LIC. We have gone in for relevant and appropriate technology over the

years.1964 saw the introduction of computers in LIC. Unit Record Machines

introduced in late 1950’s were phased out in 1980’s and replaced by

Microprocessors based computers in Branch and Divisional Offices for Back

Office Computerization. Standardization of Hardware and Software commenced

in 1990’s. Standard Computer Packages were developed and implemented for

Ordinary and Salary Savings Scheme (SSS) Policies.

WIDE AREA NETWORK All 7 Zonal Offices and all the MAN centres are connected through a

Wide Area Network (WAN). This will enable a customer to view his

policy data and pay premium from any branch of any MAN city. As at

November 2005, we have 91 centers in India with more than 2035

branches networked under WAN.

INTERACTIVE VOICE RESPONSE SYSTEMS (IVRS) IVRS has already been made functional in 59 centers all over the

country. This would enable customers to ring up LIC and receive

information (e.g. next premium due, Status, Loan Amount, Maturity

payment due, Accumulated Bonus etc.) about their policies on the

telephone. This information could also be faxed on demand to the

customer.

LIC on the internet Our Internet site is an information bank. We have displayed

information about LIC & its offices . Efforts are on to upgrade our web site

to make it dynamic and interactive.The addresses/e-mail Ids of ur Zonal

Offices, Zonal Training Centers, Management Development Center,

Overseas Branches, Divisional Offices and also all Branch Offices with a

view to speed up the communication process.

PAYMENT OF PREMIUM AND POLICY STATUS ON

INTERNET 

LIC has given its policyholders a unique facility to pay premiums

through Internet absolutely free and also view their policy details on

Internet premium payments. There are 11 service providers with whom

LIC has signed the agreement to provide this service.

Information KIOSKSWe have set up 150 Interactive Touch screen based Multimedia

KIOSKS in prime locations in metros and some major cities for

dissemination information to general public on our products and services.

These KIOSKS are unable to provide policy details and accept premium

payments.

Info Centers

We have also set up 8 call centres, manned by skilled employees to

provide you with information about our Products, Policy Services, Branch

addresses and other organizational information. 

LIC’s E-servicesLIC's e-Services is LIC's initiative to provide you with on demand service

within a few clicks! You can now have many of the functionalities that

were available only at a branch office, online at your fingertips.

LICMobile Official mobile application from Life Insurance Corporation of India

Application developed for our Esteemed Customers and Marketing Personnel. Now all information about LIC products & portal services are on your fingertips. Options for viewing Products of LIC, Premium calculation, Check Policy Details, Apply for Policy and get LIC Branch contact information.

Case Study

Document management at Sahara Life Insurance

Life insurance revolves around documents that must be checked and verified. Sahara Life Insurance (SLI) deployed a document management system to expidite this process even before the insurer signed up its first customer.

Saving time

Balaram Sarma, Chief Operating Officer of SLI informs, “Paper validation for every transaction is time consuming.” Proposals from a potential insurance

applicant need to be verified and underwritten before a policy is presented. Sometimes, there is also the need for additional documents adding to the time taken. The traditional process took 15 to 20 days for each application. SLI, being new in this segment could not afford to take this much time for processing.

In Perspective

SLI wanted everything in place before it launched its operations. To speed up the validation process it decided to send only the information to its primary location at Lucknow. “We realised that sending a scanned copy to the primary location would help save time,” recalls Sarma. Additional documents and secondary papers would be sent later by post. However, the primary papers still had to be sent according to the law.

The company also wanted a process by which it would be possible to record every incoming paper form received from a policyholder. The requirements were clear—the vendor had to be able to provide the right solution and do so in a short period of time. He remarks that Newgen Software Technologies, the chosen vendor, wanted to prove itself in the software arena, while SLI wanted to prove itself in the insurance sector.

The vendor provided SLI with a solution in three parts: OmniCapture for scanning documents, OmniDocs for document management, and OmniFlow to manage automated workflow which helped SLI reduce the processing time.

Less Intervention

According to Sarma, OmniCapture has helped them scan documents with less human intervention and fewer errors. On the other hand, OmniDocs has been useful for archival, helping them preserve important documents such as policies and claims granted. Finally, OmniFlow has acted as the spine of all information that comes into the organisation through policyholders.

Balaram Sarma

UPDATE

The company intends to integrate AsiaLife with the system after April 2007.

It is getting a good response to the system which has been fine-tuned to meet its current requirements.

IT comes first

While most organisations start operations and then look to upgrade their infrastructure, Sahara Life Insurance decided to take a different route. Sarma explains that the company commenced operations in October 2004, but the IT implementation began around July 2004. There were no phases to the implementation. “The idea was to ensure that there was a system in place which would automate document validation and workflow throughout the organisation.”

Perceived hurdles

The only problem for them was that the users were new and they had a mental block related to dealing with information on a computer rather than paper. However, this block was soon cleared, and today the users at SLI are largely satisfied. The time needed to complete paperwork has dropped to three days. Sarma furhter disclosed that the next move is to align a software called AsiaLife with existing enterprise wide applications.

FINDINGS AND CONCLUSION

The findings of this study found that insurance firms in India have

implemented information technology systems in their firm with private sector

slightly lower than public sector. The employees young in age with high

potentials easily understand the application and efficient use of new systems.

Further, brand and image promotion will create demand for the online

insurance. Increase of sales and good knowledge of management and better

stakeholder relationship will be considered important with respect to corporate

related benefits while transparency, speed of claim management and desired

CRM through continuous service and high productivity will be considered

important customer related benefits.

Thus, it is believed that insurance companies must try to find out the

specific needs of different customers so that pertinent services as per their

expectations can be provided to attract customers and retain the market share.