UNIVERSITY OF MUMBAI

PROJECT ON
INFORMATION TECHNOLOGY IN INSURANCE

SUBMITTED BY
Mr. DINESH HARESH NEBHANI

PROJECT GUIDE
Prof. MINAL GANDHI

BACHELOR OF MANAGEMENT STUDIES

SEMESTER V
(2009-10)

V.E.S. COLLEGE OF ARTS, SCIENCE & COMMERCE,

SINDHI COLONY, CHEMBUR 400071
UNIVERSITY OF MUMBAI
Page 1 of 74

PROJECT ON
INFORMATION TECHNOLOGY IN INSURANCE
Submitted
In Partial Fulfillment of the requirements
For the Award of the Degree of
Bachelor of Management
By
Mr. DINESH HARESH NEBHANI

PROJECT GUIDE
Prof. MINAL GANDHI
BACHELOR OF MANAGEMENT STUDIES
SEMESTER V
(2009-10)
V.E.S. COLLEGE OF ARTS, SCIENCE & COMMERCE,
SINDHI COLONY, CHEMBUR 400071

Page 2 of 74

Declaration
I
10)

student of BMS Semester V (2009hereby

declare

that

have

completed

this

project

on_____________________________________________
The information submitted is true & original to the best of my
knowledge.

Students Signature

Page 3 of 74

C E R T I F I C A T E
This is to certify that Mr________________________ Of TYBMS has
successfully completed the project on
__________________________
_____________________ under the guidance of_________________
___________

Project Guide
Prof. MINAL GANDHI

Course Co-ordinator
Mrs. A. MARTINA

External Examiner
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Principal
Dr. (Mrs) J.K. PHADNIS

ACKNOWLEDGEMENT
Before we get into thick of things, I would like to add a few words of appreciation for the
people who have been a part of this project right from its inception. The writing of this project
has been one of the significant academic challenges I have faced and without the support,
patience, and guidance of the people involved, this task would not have been completed. It is to
them I owe my deepest gratitude.
It gives me Immense pleasure in presenting this project report on "INFORAMTION
TECHNOLOGY IN INSURANCE SECTOR". It has been my privilege to have a team of
project guide who have assisted me from the commencement of this project. The success of this
project is a result of sheer hard work, and determination put in by me with the help of my project
guide. I hereby take this opportunity to add a special note of thanks for Mrs. MINAL GANDHI,
who undertook to act as my mentor despite her many other academic and professional
commitments. Her wisdom, knowledge, and commitment to the highest standards inspired and
motivated me. Without her insight, support, and energy, this project wouldn't have kick-started
and neither would have reached fruitfulness.
I also feel heartiest sense of obligation to my library staff members & seniors, who
helped me in collection of data & resource material & also in its processing as well as in drafting
manuscript. The project is dedicated to all those people, who helped me while doing this project.

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RESEARCH DESIGN
PURPOSE OF STUDY
The main reason to select "INFORMATION TECHNOLOGY IN INSURANCE" is to
understand the need of IT in insurance business which makes the business more safe and sound
and to study the development of IT in the insurance industry.

OBJECTIVE OF STTUDY
Understanding & studying the various uses of information technology in different fields
of insurance sector.
To make in depth study regarding current status of IT in insurance.
To study the various changes brought in by IT in the insurance sector through its advent.
Understanding the importance & purpose of IT
Learning the various benefits provided by IT to its employees, organization as well as the
individual.

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RESEARCH METHODOLOGY
DATA COLLECTION
The input for the project has been collected keeping in mind the objectives of the project and
accordingly relevant information has been found. The methodology used is a descriptive method
of the research.

PRIMARY DATA
The data regarding "Information technology in Insurance" was collected through primary data.
Semi-structured interviews were conducted with Rajesh Bedichandani the development
manager of the "LIFE INSURANCE CORPORATION OF INDIA" This was done to understand
the current practices and the style of functioning Information Technology in Insurance
Company.

SECONDARY DATA
The data had been collected by reading various books of IT. The data regarding Information
Technology Introduction, recent trends was collected from their official website on the
recommendation of the personal interview.

LIMITATION
There are no specific books for IT in insurance; it is covered as a small topic in the books

of insurance.
IT is very vast topic to cover.

Less information was available on the internet especially in IT use in private insurance

industry.

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EXECUTIVE SUMMERY
The computing technology, networking technology and advanced electronics together
make today's Information Technology. The convergence of electronics & telecommunication
created by devices like fax, telex which the business world wide has been using extensively over
last three decades. It includes hardware, software, computer interface & storage device and data
distribution& networking.
The use of application of the information technology in wide variety of insurers
operations has now become strategies in the sense that it has direct impact on the productivity of
resources and impact on reducing the cost of various activities.
Insurance organization has three-tier set-up. Operating office (BO / DO), controlling
office (RO / DO), and central office (HO). This department includes the technological manager,
system manager, network manager and operation manager. It is applicable in all the functional
areas of the organization such as marketing, finance, HRM, and R&D.
E-Business is the integration of system, process; organization, value-chain and entire
market using internet based and related technologies and concept. E-Commerce is merely a part
of E-business and is limited essentially to marketing and sales processes. E-insurance derive
multiple benefits to the insurer such as speed of Response Issuance of Policy and settlement of
claim faster, flexible pricing and customized service, 24*7 availability and so on. But it is not
possible to quantify and define the risk under the new atmosphere are secrecy of information,
authentication of information and papers, and keeping the data safe.
The form of service being provided by help lines in the field of insurance are customer
information, EPS, issue of payment of premium facility, call centers etc.
IT in stages of policy includes the IT in payment of premium, Claim Settlement and
Underwriting etc.
Selection of Information technology depends on its scalability, quick to market, easy to
maintain & price affordability. Extensive use of technology is ultimately expected to bring about
considerable amount of standardization of products and process. The emerging technologies are
influencing the delivery channels of financial services. The insurance workforce when provided
with wireless connectivity can access critical information and application anywhere, anytime,
resulting in greater efficiency and superior customer service.
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INDEX

SRNO.

TOPICS

PAGE NO

1.

INFORMATION TECHNOLOGY

2.

INFORMATION TECHNOLOGY IN INSURANCE

3.

INSURNACE & ELECTRONIC COMMERCE

18

4.

IT IN STAGES OF POLICY

29

5.
6.
7

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SELECTION OF RIGHT TYPE OF IT FOR AN

ORGANISATION
MOBILE & WIRELESS APPLICATION IN INSURANCE
INDUSTRY

39
45

LIFE INSURANCE CORPORATION OF INDIA

53

CONCLUSION

63

RECOMMENDATION

64

BIBLOGRAPHY

65

Chapter: 1
INFORMATION TECHNOLOGY

INTRODUCTION
DEFINITION
RECENT TRENDS

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INTRODUCTION
Computing technology, networking technology and advanced electronics together make
today's IT. The convergence of electronics and telecommunications created by devices like fax,
telex which the business world-wide has been using extensively over last three decades. The
convergence of computers and telecommunication has generated various computer networks
making the business data transfer feasible. The computers with advanced electronics has
provided the multimedia facilities i.e. apart from the data in electronic format the voice (audio)
and image (video) also can be a controlling input to and output from a computing device.

Hardware:
Development in information technology have been characterized by miniaturization and
reducing cost with improved performance and better reliability combined with shortened product
development cycles, due to advances in clip technology.
The early use of huge computers during the world war two was for military purpose. The
computer technology went hand in hand with the advance in electronics. The computers for
commercial use in 1960s, made use of transistors instead of vacuum tubes in the earlier
computers. The integrated circuit (IC) technology of 1970s from the backbone of latest
computers. With the feasibility of circuits having large scale integration (LSI) and very large
scale integration (VLSI) powerful computers came to the table tops (Micro computers) and then
to laptops and now to palmtops.

Software:
Like the hardware the computer language (software) have also undergone change. The
software transaction from very hard to use machine level language (MLL) through Symbolic
Assembly level Language (ALL). High Level Language (HLL like COBOL, Basic etc), fourth
generation have today reached to expert systems. This has brought the computer closer to
business managers who may not be necessarily computer professionals. With complicated
operating system for mainframes and mini computers the personal computer came handy with
operating system life DOS, UNIX. This changed the concept of huge data processing units. The

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recent additions of user friendly interface like Windows brought menu driven, user friendly
computing to the society.
Word processing and spreadsheets made processes more efficient and one could edit
documents or do calculation faster. But there was no sharing of information.

Computer Interface and Storage Device:

The dialogue with computer which is through input and output devices has changed its
form and medium. The first interface with computer was the punched card. Today the typewriter
like keyboard or pointing and clicking device like mouse are in common use. Digitizers have
introduced the flexibility of translating maps and figures to computer memory. Scanners have
added image capture facility to computers. The touch screen add-ons and touch panels would
accept finger touches as if they were mouse clicks.
The storage devices have changed from bulky and sequential access magnetic disks and
tops to handy and flexible floppy disks, hard disks. Optical disks offer mass storage capabilities.
Today's compact disks with high storage capacity of 600 MB onwards are replacing concepts of
publication of books manuals and encyclopedia or any other business information with relatively
less cost.

Data Distribution and Networking:

Advancements in IT have provided connectivity amongst computers for electronic data
interchange. This enables the organizations and individuals to spread message within and outside
the organizations at a very low price on electronic mail. Electronic data transmission enable
information sharing within specific sites on Local Area Network (LAN) using coaxial or
unshielded twisted pair (UTP) cables. Operating offices of a business house can be connected
through leased telephone lines to from a network Metro Area Network (MAN) allowing data
transfer within different offices of a city. Electronic data transmission over long distance using
satellite communication links or fiber optic cables forms WANs. The new client-server
technology has provided an open system environment with broad interoperability across diverse
hardware platform and connectivity between offices.

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Definition of Information Technology (IT) on the Web:

"Information technology architecture is an integrated framework for acquiring and
evolving IT to achieve strategic goals. It has both logical and technical components. Logical
components include mission, functional and information requirements, system configurations,
and information flows. Technical components include IT standards and rules that will be used to
implement the logical architecture. "
"Information Technology (sometimes called IT) is a term that covers all forms of
technology used to create, store, transmit, interpret, and manipulate information in its various
format.

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RECENT TRENDS IN IT

Introduction of digital telephone exchange.

Common business documents are being replaced by paperless Electronic data

Interchange.

Conventional data entry gIvmg a way to scanners, digitized Image processors.

Hardware prices are declining and micros are becoming as powerful as minis resulting in
an increases of mini/micro users, compare to mainframe.

Although artificial intelligence is being experimented with, knowledge bases expert

systems are slowly being made available. Decision support system is gaining importance.

Increased capability of computer systems and the growth on use of internet.

The need for data communication and networking is increasing. Even heterogeneous
computers are getting linked.

Greater acceptance of the use of IT.

All these developments have led the insurance and reinsurance practitioners to record the use of
IT as an essential and integral part of their work.

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Chapter: 2
INFORMATION TECHNOLOGY IN INSURANCE

INTRODUCTION
SETUP
IT DEPARTMENT IN INSURANCE COMPANIES.
ADVANTAGES
IT APPLICATION IN FUNCTIONAL AREAS.

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INTRODUCTION
The rapid innovation in the field of information and communication technology has
posed serious challenges for the insurance industry in India. The use and application of the
information technology in wide variety of insurer's operations has now become strategic in the
sense that it has direct impact on the productivity of resources and a sweepening impact on
reducing the cost of various activities.
With arrival of private insurance players, the competition has become more intense and
an important role is being played by the insurance sector. Even though the use of information
technology is not new to the insurance sector, yet it may find tight compartmentalization
regarding the use of information technology in various departments of the insurance companies
including the major players since last 50 years. The most visible of these departments are
accounting, policy issue and servicing, claim processing, sales management etc. The innovation
in information technology can be effectively utilized in the following areas:

Speedy and correct issuance of documents

Expeditious disposal of claims

Proper building of accounts and statistics

Quality Assurance &

Efficiency

Therefore the imperative for all the insurers, especially LIC and GIC is to build up
efficient interface between the various departments and segments. This would reduce the paper
work, improve efficiency of service and provide competitive advantage to the insurance
companies.

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SETUP:
Generally the insurance organizations have three tier set-up - operating office (BO/DO),
controlling offices (RO/DO) & central office (HO). The organization & responsibilities of the IT
department & its sub-departments is more or less in the hierarchical order of the various offices.
The IT department at HO is responsible to the chairman/CEO of the organization for
implementing of IT plan. The department is responsible for procuring new technologies,
conducting training & preparing to the CO. the head of the IT department may have the
following managers with their respective tasks:

Technology manager

Evaluation and acquisition of new technologies in hardware, software, networking and

packaged solution

Recruitment and supervision of system and network engineers

Conducting of various training programmes.

System Manager

System analysis and design

Functional specifications

Development of application and user manuals

Assignment of work to project leaders, system analysts and programmers

Evaluation of studies

Network Manager

Network Administration (Including WAN)

User administration, system security-mail etc.

Controlling and supervision of network administrators.

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Operations Manager

Maintenance of hardware

Job scheduling, backup and file control

Assigning work to operators and DEOs

Training of users

Controlling of data flow.

IT DEPARTMENT IN INSURANCE COMPANY

FUNCTIONS
The IT department in an insurance company performs the following functions:

Provision for hardware & software resources

Adoption of latest technology for competitive advantage.

Training of employees- at operating, head & controlling offices on office automation &
networks

Advise the top management on Business Process Re-engineering (BPR).

Develop, maintain & implement insurance related application.

Maintenance of networks

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ADVANTAGES OF IT IN INSURANCE:
The insurance industry is service-oriented industry and mainly based on the retail
consumer. So the benefit of storing data is immense. They help study the customers test,
preferences, habits etc. The Indian insurance market is still at the embryonic stage and the
companies who enter first and are customer savvy will be at an advantage. A range of insurance
products is available today to suit the customers with varying life style and needs. So product
differentiation is no longer the key to attract customers. The key is consumer care- improved
service, affordable covers, reduced premium and improved quality.
The insurance company also has both front and back end jobs. The front end jobs include
policy servicing, billing, co-insurance, re-insurance, claims management, financial accounts and
audit. Back end jobs include statistics, data warehousing, risk management etc.
Other back end jobs include managing investment, personnel system and policies, office service,
etc. Today every system in an organization has software made to automate the process. Packaged
software products are used extensively to make presentations, follow up proposals, policy and
client services, commission tracking, task management, underwriting etc. IT has made the life
for a manager so much simpler.
The advantages of Information Technology with reference to the insurance business can
be stated as below:

Helps the companies to lower costs of administration, transaction and communication

through their entire supply and demand chain and results in overall increase in efficiency.

Improves customer relationship and quality and effectiveness of communication.

Redefines business relationships.

Speeds up nearly every stage of doing business and results m efficient business.

Keeps all interested parties fully informed of market needs and opportunities.

Will enable a wider range of customer designed products and services.

Will enable greater depth and breadth of customer services.

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DISADVANTAGES

These systems are less flexible, difficult to operate.

IT is rapidly changing and the pace is so fast even expert in this field are finding it
difficult to cope with. This results in hardware and software products becoming obsolete
in ridiculously short periods of time.

Difficulty may arise in finding the right type of personnel to handle the system and data.

A powerful, flexible and adaptable computer system is valuable but it is not a substitute
to experienced people.

Change in technical and business environment will pressurize the need to upgrade the
systems and processes which entails expenditure.

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TECHNOLOGY FOR INSURANCE

1. Database Management System:
The principles of tracking and measuring responses can pay off the insurance industry.
To find more clients, insurer needs to record many factors including: lapsation, cash value,
premium and competition. But the need to record and study the characteristic of persistency- the
length of time insurer retain policies, customers and agent is most important for insurance
companies.
In order to find out profitable combination of households or clients, products and agents,
a database with five to ten years history 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.
Analyzing a 10- 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. Data warehouse:
Data warehousing technology is based on integrating number information system 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
cost & increase revenue resulting in enormous earning for effective users.
The path of business applications of computers, computer based information systems
(CBIS), encompasses many stages including the very early application like transactions
processing systems (TPS) followed by the management information system (MIS). The
computer applications like decision support systems (DSS), expert systems (ES) and executive
information system (EIS) are still awaited in insurance business. Office automation (OAS)
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happens to be a continuously ongoing, dynamic process for any business. Companies need to
utilized decision support systems by implementing data warehouses that pull information from
existing legacy systems into a customer information database. Such decision support systems
will equip the insurance managers with ability to allow for customized products and services that
are more in line with what customer want.

3. Group Linking Software:

Group linking software enables sharing of information and particularly suits document
heavy insurance business. Tracking of policy application shows how information that is input
and accessed from a number of locations can increased efficiency.
An application of coverage is entered into the groupware system from a forms generation
packages. Key fields in the form are already linked to this software allowing a user to click on
the field and view information regarding that area e.g. cost of coverage for similar risk. The user
clicks again and taps into research information regarding such risk, underwriting guideline or
other documentation. If underwriting guidelines have been updated to changes are highlighted in
red and mark with a start.
User from other locations can view any information as soon as it is added to the file. As
each user completes work on the file it is moved to the next station. The basic promise behind
the groupware is to allow an unlimited number of users to collaborate on a project at any time, in
real time, and to track the location and progress of the project. The ability to replicate
information and to synchronies database or applications no matter where you are in the world is
what made group linking software are lotus, exchange, first class.

4. Imaging and workflow technologies:

The proposal forms may be scanned into an imagine system, data may be extracted for
update to computer and for automated underwriting workflow may be implemented. It is
estimated that imaging and workflow enabled underwriting could reduce the time taken to issue
a policy as much as 60%. Under the imaging system, every document - be it correspondence,
forms, photocopies of cheque, faxes etc. are all maintained in a shareable electronic folderneatly indexed, updated and available simultaneously to all concerned.
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The recent report of MetLife insurance indicated the performance improvement attributed to
imagine and workflow technology to the extent of 50000 claims document - clearance in 8 hours
in case of dental claim of health insurance service.

5. Mapping:
Mapping technology can be used by insurers to meet different needs, such identifying
loss prone areas or geographic claim analysis. It helps the insurer to analyze the extent of its
network i.e. the insurer can determine whether it has too many or too few agency force in
particular area. Mapping is very convenient way to layer disparate information from various
databases to create pictures.
Maps can illustrate how many buildings are located in flood plain, or whether to
buildings covered by the same insurer's fire policies are close by each other and thus present
potential double loss if fire break out in one of them.

6. Call Centre Technology:

Good consumer service is a crucial element in gaining, maintaining and retaining
profitable customer. Call Centre concept based on interactive voice response services (IVRS) is
gaining importance in this aspect. Employees based the primitive concept of call centre on an
enquiry system providing information services to customer through telephone line answers. The
totally automated computerized exchange but lacks in flexibility i.e. only predefined queries are
serviced.

7. Video Linking:
A video linking facility between two remote units of an insurance company and between
an insurer and broker allows underwriters at one place and brokers at other unit to discuss risk
inherent in a proposal face to face.

8. Cat Models:
Catastrophic models use data from recent spate of natural disasters that helps develop
more predictions of insurer's property exposures in future disasters. Using this data curious
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"what- if' scenarios of probable maximum loss (PML) using the best estimate available at an
insurer's exposures are tested. Finally an underwriting policy that limits the company's exposure
to catastrophic losses is implemented.

9. Intranet, Extranet and Internet:

Intranet is the network connecting different offices of the same business to permit the
internal data within the business. Offices of the same business to permit the internal data within
the business. Extranet is a network allowing the business to communicate with business partners
like suppliers, vendors, banners, regulations etc. on the electronic channel. Internet is a global
network of many computer networks. Any user, who would like to exchange some information
with other user at a remote location, can log into the computer of Internet, provider via modem
or an Internet access CPU (IAC). The Internet and online service providers are providing
opportunities to create new forums that can be utilized by everyone worldwide. Insurers can
browse through many useful sites an Internet.

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IT APPLICATION 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 Ares.

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 claim settlement or further
selling of new product or developing consumer for the product.
Information technology can be integrated with almost all the ps of marketing. It may
help in formation and implementation of various marketing strategies including pricing,
promotion and customization strategies. Some of these areas are discussed below.

Consumer awareness:
The use of information technology may be path breaking for the insurance companies
since conventionally the awareness of insurance products in India is low. With the use of
Internet the information about the products and pricing policies can be made available to the
public in few seconds and much transparency in operation can be established. There are
numerous web sites available which can help the prospective customer to compare the insurance
products of various issuers and decide the product suited to his needs. Also, the information
about the new products changes in the existing ones and of course, the information about
various discounts and incentives can be provided at a much faster rate and lower cost.

Customer Services:
In insurance being a service needs high concerns in terms of services. Customer service
requires maximum attention and should span the entire gamut of activities in the purchase of the
products i.e. right from the dissemination of information, documentation to policy
administration and claim settlement. The service quality standards on the new private insurance
players have a threat to the then giants viz.LIC and GIC. The investment in the personnel and
knowledge systems has helped private players companies build significant demine expertise.
The emerging areas if IT applications are:
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1.

Market Research

2.

Consumer targeting and segmentation

3.

Customization of products

4.

Easy procedure like premium payments, claims settlements, tracking of brokers and

agents.
5.

Complaints managements/ grievance handling.

6.

Intermediary analysis.

FINANCE:
Information technology can be effectively used for internal management viz. Accounting
treasury management, financial performance reporting etc. and as well as in resource
mobilization, portfolio management, investment planning etc.

HUMAN RESOURCE MANAGEMENT:

Application of IT in Human Resource Management is obvious. It can be effectively
utilized in (1) recruitment and selection, (2) training, (3) performance appraisal, (4) promotions,
transfers and dismissals, (5) valuations etc.

RESEARCH AND DEVELOPMENT:

R&D has been made an easy task with 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.
The various applications of information technology in life and non- life insurance companies
broke into identifiable area.

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Chapter: 3
INSURANCE AND ELECTRONIC
COMMERCE, E-INSURANCE

INTRODUCTION
BENEFITS
FACTOR AFFECTING E-INSURANCE
E-INSURANCE BUSINESS CHALLENGES
ROLE OF E-COMMERCE IN DISTRIBUTION OF INSURANCE
PRODUCTS

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INTRODUCTION:
Insurers face a complex array of business issues. They now realize that failure to tackle
these issues may lead to losing the market share which ultimately has its impact on the
profitability. To tackle these issues, the insurance companies should take initiatives that have the
ability to provide a higher level of customer service and there by customer higher retention.
Insurers also need to take initiatives that can reduce cost and therefore increase profitability. In
response to growing need to confront these complex issues, innovative insurance websites are
springing up and new technology development is taking place. The insurance industry is
speedily moving its service online. Insurance providers globally recognize that web enabling
their business will make it possible for them to deliver a faster, simpler, more transparent
customer service at a significantly lower cost. The insurance providers are enhancing their
investment in technology, infrastructure and skill to utilize the new opportunities to the core.
According to one survey in London and New York, the insurance industries presently provided
few online restricted services. The survey also indicates that additional areas of growth likely
and are expected to shift to core areas such as claims management.
Presently a large number of insurance companies are using the internet for marketing
purpose which involves customer contact for various purposes like:
1. To educate and inform the people about the product available.
2. To ascertain the customer needs
3. To suggest suitable products.
4. To finalize the transaction.
Unlike the commercial goods, which any buyer would like to see, feel or test before deciding to
purchase, insurance is an intangible product. It is a promise based on the terms and conditions of
the contract. This distinguished feature makes insurance product very convenient to buy over the
internet. Exhaustive, up to date information on all the strength of insurance company can be
provided on the website which can be browsed by the internet user. This will help him to do
business with insurance company at his leisure.

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BENEFITS OF ELECTRONIC INSURANCE

E-insurance provides multiple benefits to the insurer and the existing and prospective
insured's:

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 customized 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

24*7 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 ROI justification.

Customer: The availability of net-based service 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 e- insurance will be a cost factor rather than a profit driver, but in

the long run it will be a cost reducing factor.

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E-INSURANCE BUSINESS CHALLENGES:

Electronic insurance will not only provide many benefits but also pose business and
technical challenges.

Business Challenges
Disintermediation increases business:
Study has shown that the cost of distribution decreases with the increase 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 mean that prices can be lowered and more
insurance can be sold by reducing the transaction costs of the exchange.

Reorganization of companies- Virtual Companies:

Many insurers will be prompted by the opportunities presented by E-commerce to
restructure the packaging of insurance service. Insurance companies using E-commerce may reengineer, outsource, and/or streamline their management function, or marketing and distribution
arms. To move efficiently deliver these service, some insurers will be able to reduce their
significant investment 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.

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 be provided additional cost saving to
customer. 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. Consumer also could have access to internal records to see
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where their claims are in term of payments, when their next annuity payment is due, and low
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.

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 agents business. The internet does not necessarily imply the death of
the agent. Many insurers are examining their agent's role in the process and are 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.

SECURITY:
Database security:
The business database security is utmost important. This has to be monitored by security of the
web server and web access.

Web Server Security:

Security policies should be defined like who is allowed access, nature of the access and who
authorizes such access? Etc.

Password sniffing:
Protection against password sniffing is to avoid using plain text user names and reusable
passwords.

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Network Scanning Programmes:

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.

Physical Security:
One can ensure physical security by having an alarm system that calls the police, having a keylock on the computer power supply.

Web Access Security:

Host based restrictions can be implemented using a firewall to block incoming HTTP connection
to a particular web server.

Transmission Security:
Encryption is a key technology to ensure transaction security.

Privacy:
Privacy is likely to be a growing concern as internet-based communications and commerce
increase. Designers and operators of web site who disregard the privacy of users do so at their
own peril.

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ROLE OF E-COMMERCE IN DISTRIBUTION OF INSURANCE

PRODUCTS IN INDIA
Indian insurance industry is now entering into this area. Indian firms are planning to use
the Web to sell their products. The traditional method of selling insurance policies through
agents may soon be rendered obsolete. Private insurance companies would then be reaching out
to their customers through internet. With ecommerce likely to be allowed soon, customer can
choose and buy a policy over the net. Private companies believe that setting up a website is
much cheaper than developing an entire marketing network. These website, can be used in the
future for setting claims. Indian companies have already begun negotiations with IT companies
like Computer Science Corporation, Apex System Pvt Ltd. and IBM for system integration.

INSURANCE MALLS
Insurance malls are growing resource for online insurance shoppers. They offer one stop
shopping facilities. These are certain sites which are provided to compare quotes and products
and facilitate a buying process with participating insurance companies. The malls provide
valuable information regarding various participants, and provide the customer with research
tools and explanations about the various products.
The insurer who like to participate, enter into partnership with these malls. A fee is
charged according to the number of products sold by insurer through these malls. While there are
numerous insurance malls on the internet, the leaders presently in the field are insure market and
insweb.
If the customer decides to purchase the product online then the insure market charges the
insurance company fees whose product is being purchased at percentages on the premium
amount. Currently, the sale from insurance malls is restricted to only a few states.

HELPLINE SERVICE
The development of Helpline is well established and advanced abroad especially in the
UK. A Helpline is defined as the provision of an advisory and/or assistance service via the
telephone. The modus operandi is that the person who provide achieve have an online access to
information relating to the problem in hand, such as a list of trade people, for household claims.
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The respondents are normally well trained and able to make immediate decision so that
appropriate action can be taken swiftly. Helpline are seen as a product of the Information
Technology revaluation. The emphasis in the Helpline is n immediacy, which is the Hallmark of
Help line.

The requirements for the success of helpline are:

Modem telecommunications.

Immediate Access to the source of information.

Affordable computer processing power

Enhance computer processing speed enabling data to be captured, processed and

distributed at unrivalled speed.

Continuous efforts to develop innovative products and services

Benefits of Helplines

Every policyholder will have immediate access to the service at all times anc. whenever
he or she is physically located.

The Helpline staffs are trained to soothe customer and provides quali:~ advice. the
assistance level provided is much more timely than tt:=traditional system

Expeditious settlement of claims.

The insurers are benefited, as customers loyalty increase as a result of efficiency and
quality in claims service.

The firms providing Helpline service have marketing advantages.

CUSTOMER INFORMATION
The Helpline provide improve management of calls from customer for access to
information. They also help to improve the customer knowledge, exponentially increase the
choice of providers, and allow for individualized product offerings. Clients have different needs,
so it is important to identify the information they require, because this is what they will expect
when contacting a Helpline. It is necessary to continually monitor clients changing information
requirements, to ensure that their needs continue to be met satisfactorily. The necessary
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information must be collected and maintained on a regular basis to ensure that it is a latest as
possible. A system must be developed so that the information can be stored in such way that it
can be retrieved easily and quickly whenever required. Modem telephone switching system can
provide sophisticated options which may enhance Helpline operation such as Auto Attendant
and Automatic call distribution, voice mail and touch tone routing, Telephone options, trunk to
trunk calling and other telephone services. Helpline also play a vital role in claims management.
The insured who incurs a loss due to the happening of the event is in dire need for the rights
advice. Helpline undertake to give them immediate relief, in some cases they give the right
information and advice which can be followed by the insured. Sometimes arrangement to
medical facilities, etc. is also undertaken.

ELECTRONIC PAYMENT SYSTEM:

Electronic Payment Systems have been designed to help the increased cash flow, reduced
costs and improved customer service objectives which are important to the insurers. Such system
provides for improved cash flow through automated payment and reconciliation processing. It
results in decreased expenses due to a reduction in paper work, file retention and retrieval.
Thus Helpline service provides the customers with an option to make payments using
Helplines. Some of the methods used to allow the customers to make payment of premium
regularly and for the insurers to settle the claim of the insured are:

Debit card:
A card that resembles a credit card but which debits a transaction account (checking
account) with the transfers occurring contemporaneously with the customer purchases. A debit
card is a machine readable, allowing for the activation of an Automated Teller Machine or other
Automated Payment Equipment.

Electronic Fund Transfer Systems:

A variety of system and technology for transferring funds (money) electronically rather
than by cheque. Includes Fed wire, Bank wire, Automated Clearing House (ACHs) and other
automated systems.
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The electronic payment system shall include requirements for storage of data by and
communications between the parties. This includes not only the data flows for payments
themselves but also for refunds, account enquiries and settlements. It is also to be noted that it
requires a mechanism by which the necessary security requirements for messages and stored data
are achieved.

CALL CENTERS
A typical call center is a service center that has adequate telecom facilities, trained
consultants, and access to wide database, Internet and other online information support
infrastructure to provide round the clock and year round service. Call centers are normally
operated by large airlines, banks to provide service to the customers/callers, investment banks,
mutual funds, telecom services, companies providing customized and high value services, IT
products companies, among others.
In the field of insurance, call centers are helpful in answering complex questions from
policyholders and independent insurance agents, and often use a personal computer to access
insurance information. They are used to handle calls from customers, claimants, and other
parties who have a claim report. They handle correspondence from policyholders and
independent agents to rate Insurance policies correctly. The call center secures basic information
from customer, including where, when and how the loss occurred, who was involved and if any
one was injured. They enter this information into their computer system and then forward the
information and caller to a claim representative in an office near to the caller. They solve
problem and help people, and treat customer with respect, courtesy and positive attitude
WEBSITES AND PLACING GUIDELINES
Helpline are being established to place new guidelines useful to the customers, the
agents, the intermediaries with regard to changes in law, practice of insurance, other related laws
and practices which have a bearing on the insurance activities and impact on the customers.
Data warehousing is a prime example of the industries move towards strategic thinking.
The concept relates to the electronic storage and dissemination of data. The conjunction of data
warehousing applications with Web technology is a key trend, providing insurers with wide data
distribution capabilities at relatively low cost and using this infrastructure to provide database
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incorporating image, text, picture presentation, etc. to a defined user group. Such sites are also
designed to provide guidelines to the agents and other intermediaries.

AVAILABILITY OF RECORDS AND FORMS

Help lines provides access to application forms and other material on the request of the
customer. The application are made available mostly free of cost or for a small amount. Help
lines are attempting to use computer contact centers integrated with existing ERP and document
management systems, to achieve a higher level of customer loyalty.

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Chapter: 4
INFORMATION TECHNOLOGY IN STAGES OF INSURANCE
POLICY

IT IN PAYMENT OF PREMIUM
IT IN CLAIM SETTLEMENT

IT IN UNDERWRITING

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INFORMATION TECHNOLOGY USE IN PAYMENT OF

PREMIUM:
Insurance contract is a contract and premium paid is the consideration of the contract.
The insurer promises to pay the compensation to the insured on the event of suffering of loss by
the insured. In return to this promise to pay compensation, the insured pays the premium. There
are payments which flow in both directions, from the customer to the insurance company and
vice versa

Automated payments are electronic payments which are authorized by the customer in

case of recurring bills. In the case of insurance industry also automated payments can be made
by the both the parties.

Direct payments require the consumers to sign an authorization form for each company

whose bill is to be paid electronically. This form authorizes the designated company to collect
the funds for amount of the bill from the consumer's check or savings account on the date
specified.

PC banking allows the insurance consumer to initiate electronic payments from their

personal Computer. Many PC banking programs also allow the consumer to access account
information, such as personal account balances, account activity or to initiate transfers between
accounts. Current savings or lending rates or other general financial information may also be
available.

Point-of -Sale and Debit Cards aloe the customers to pay an insurer electronically when

making a purchase using an ATM or debit card. Point -of - Sale is a common method of
payments at gas stations and grocery stores. Point - of - sale and debit cards provides consumers
with an alternative to writing cheque or payment cash for purchases. These transactions are
generally completed faster than purchase made by a cheque. Foe many consumers Point- of Sale
and debit Cards provide an attractive to carrying large sums of cash to make purchases.

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LEGALITIES OF E-CONTRACTS AND PAYMENTS:

Insurance companies which sell their insurance products over the internet are confronted
with two sets of problems. First, they need to tackle all the legal and practical complexities
associated with doing business on the Internet. Second, they must come to terms with the
extensive Web of insurance regulation and other legal peculiarities which govern the insurance
industry of that country in which they operate. Hence, from a legal point of view, selling
insurance over the internet is a much more complex endeavor than selling a book, or even a
share of stock in a publicly- traded company.

The nature of insurance requires that the seller of the product is informed of various

characteristic of the buyer (or more accurately, of the risk being insured).

The regulatory landscape which governs insurance sales is extensive and complex. The

law which governs insurance sales is extensive and complex. The laws which govern insurance
industry in various states being different, the insurance company performing selling of its
products in different states needs to comply with the regulations of the different states. This
makes the sale of insurance products globally difficult due to lack of uniformity in laws and
regulations governing the industry.

The insurance laws in general have not kept up with the pace of technology and are

presently inadequate to regulate the sale and delivery of insurance products over the internet the
insurance industry has been slow in embracing the information technology. Presently the
technology needed to initiate, process and complete the contract is not sufficient.

Imposing signature and formal paper delivery requirements on various aspects of

insurance transaction makes it impossible to transact online.

The insurance laws contain a variety of requirements for a "signature" to accompany

documents in connection with insurance transaction, including policy applications, warrants,

release forms for medical records, beneficiary chance, life insurance policy illustrations, claims
forms, proof of loss forms, consumer protection disclosures etc. the purpose of the signature is ,
for assenting to the contract by the contracting parties.

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INFORMATION TECHNOLOGY IN CLAIM SETTLEMENT:

Although till recently the internet was used to a limited extents as a way to sell certain
classes of insurance policies, mow claims are being transacted through the internet. One of the
most significant developments in the past couple of years has been the growing emergence of
Java based technologies. These can be improved to provide well developed insurance software
components with distinct insurance functionalities such as underwriting, reinsurance, claims
management and payments processing.
For many of the consumers, the greatest amount of interaction is during the process of
making claim. The way in which this is handled is likely to dictate the process of making claim.
The way in which this is handled is likely to dictate the attitude of making a claim. The way in
which this is handled is likely to dictate the attitude of the consumers towards the insurer during
renewal the following year. From the point of view of the insurer it is this are where cost are
incurred in physical settlement of the claim and associated administration of the claim. It is this
area which provides the largest potential for cost reduction and improved service provision.
The following are the issues to be tackle in the area of claim management

The insurer aims at selling the claims as quickly and efficiently as possible and reduces

cost by minimal interaction with the consumer and the outside third parties.

The insured desired that the claim be settle as quickly and as painlessly as possible.

Failure to meet these requirements at the claim stage will significantly reduce the chance of his
renewal with the same insurer. Hence time is of essence in such case.

Often insurers offer to replace goods and services rather than make settlements is cash.

This may result introduction in cost. Through the e-enabled insurance the insurers can prenegotiate discounts with suppliers and cut down on frauds and inflated claims.

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MODUS OPERANDI IN CASE OF CLAIMS:

Claims notice by e-mail:
Through the e-mail, online communication can be maintained with the consumers to
know about his insurance needs and to suggest solutions and process the transactions. Once the
cover finalized premium can be collected and policy documents can be issued. Similarly, when
the loss arise and the insured can communicate with the insurance company through an e-mail
submitting claim documents either through fax or e-mail and give consent if required, the
insurance company can settle the claim on the basis of the document received, if there is no
complication or issues on which negotiations are required.
On the occurrence of the events, the claimants who may be the insured or the beneficiary
or the third party is advice to intimate to the insurance company or its near by the branch. Such
as intimation can be send by e-mail. The intimation shall be considered as claim notice required
to be given by the claimant to the insurance company formally. The claims notice shall be quote
the policy number and the date when the events occurred, etc. the claims application required
can be downloaded from the website of the insurer. Facilities may include online filling of
claims form. It ensures speedy communication of loss or event which ultimately speeds up the
process of claims settlements.

Submission of information by e-mail

The person interested in the claim, shall submit the required information and also the
insurance policy along with the submission form. The claimant shall also submit other
documents of proof of the death of person, and also proof of right of the claimant to the
insurance claim. The claimant may also be required to submit beyond doubt in relation to the
age of the claimant, and his relation with the insured, and the little to claim and his identity. All
such submission can be made by e-mail. On receipt of e-mail, the insurance company sends a
letter authorizing the said branch to process the claim and send the papers for setting the claim.
On scrutiny and satisfaction, a cheque is issued to the claimant for settlement of the claim.

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Relevant information and reports

Often in the case of accident claims, reports and information are required from the police
and other investigating authorities' as a proof to settle the claim. In such cases also the report
and information requires to process the claim submission can be sent by e-mail. E-mail is
inexpensive and it covers a wide geographical area.
Settlement of claims dispute is another aspect of the claim settlement. The settlement of
dispute using the regular machinery of arbitration, tribunals or courts is not an easy affair. The
settlement if often considered a laborious, frustrating task. As an alternative, going to the web to
simplify the negotiating process is preferred. Internet enable dispute resolution service such as
click n settle, cyber settle, and settle-online provide a place for opposing parties to make their
demand securely and confidentially. They accept cases submitted online by either the claimant
or the defendant. They notify the opposing side that case is online. They act as mediators,
calculate and compare offers and demand in real-time, and notify both negotiable parties about
the results. Cyber settle is a new website, which are claims oriented. Since its developments
have had 12000 cases submitted more than half of them ended up negotiating online.

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IT IN UNDERWRITING SYSTEM:
A total underwriting system needs to address the entire decision making process of
underwriting, which starts at the time an application is completed and does not end until a
policy is issued. The system needs multiple components for each of the essential functions.

Initial Data Entry:

This is where information from the application is entered into the system. Depending
upon the specifications of the company and its field force, data may be entered from an agent's
laptop computer, at a regional marketing office or at the home office. Information from the
agent's report, requirements ordered in the field and MIB (Medical Information Bureau)
information could also be entered for processing.

Screening:
The second component is screening. This involves taking applications and sorting them
into two groups: clean ones' and those in need of further processing. This is fairly simple
processing. Screening checks that applications need no further requirements, have all medical
and non-medical questions and have acceptable finances and an appropriate beneficiary.
Approved cases are sent directly to the administration system.

Initial Underwriting:
Applications that are not approved by screening flow into the next component, initial
underwriting. This series of knowledge-based systems defines underwriting problems and
determines why the case required further processing. It checks for age and amount requirements
and examines the financial, non-medical and medical aspects of the case, as well as the
interaction among them. It decides if there is sufficient information to deal with the problems, it
has defined. For instance, if a proposed insured admits to a minor illness two years ago, the
system will allow the case to pass through for most ages and amounts, unless the provider of the
service was unusual. However, if there is a history of angina, the system will not try to approve
the case but will refer it to an underwriter. Prior to its referral, the system determines
requirements, such as an APS or ECG, and identifies the appropriate underwriting guidelines. In
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this way the initial underwriting deals with cases not needing an underwriter's attention and
preprocesses those it cannot approve.

Requirement Processing:
Since underwriting is an iterative process with information from many sources being
reviewed at different times, a total underwriting system permits information (from requirements
such as the medical examination, blood pressure, etc.) to be entered into the system directly
from the provider or by home office personnel. Processing requirements are similar to initial
underwriting, except that discrepancy processing is done by comparing the details of the
information from the application with those received later. In this way, data from different
sources is compared to uncover new problems. If there is significant history or physical finding
on the examination that was not admitted on the application, it is noted and the appropriate
work-up is ordered. If no problems are discovered, cases can be automatically approved without
consulting an underwriter.

Workflow Tools:
Underwriters need certain tools to process their cases administratively. A total
underwriting system provides these. They include front-end tools, back-end tools and status
functions. The front-end workflow tools keep track of cases, their requirements and
underwriting problems. The in-tray function accesses cases electronically assigned to the
underwriter. Rather than getting a stack of files, the underwriter now deals with an electronic
stack of case. For each case there is a detailed underwriting status with identifying data, as well
as underwriting problems and their actions. Other tools allow the underwriter to manipulate,
track and change the underwriting problems and requirements of a case.There are also an
electronic notepad for the underwriter; this can be integrated with an electronic mail system for
field communication.
The back-end workflow tools assist in the final administrative details of a case: forms to
be signed, post-issue requirement preparation, reporting of MIB codes and the process of
requesting reinsurance.

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The status function lets non-underwriters to review the selected case information. An
agents status reveals the data from the application, as well as the requirements and whether
they have been received.

Information Display:
The information display component gives on-line access to underwriting guidelines with
several types of automated searches to improve the access of information. It also makes
available other underwriting references, such as medical dictionaries and drug references.

Impairment Knowledge-based Systems:

The next component is the impairment underwriting knowledge-based systems. These
programs deal with impairments such as high blood pressure, diabetes, cancer, respiratory
disorders, aviation, ECG abnormalities and coronary heart disease. Their logic is patterned after
the knowledge and thought processes of expert MDs and underwriters. Information is requested
from the record and a rating is suggested. If underwriters choose, these will guide them through
the detailed decisions needed to underwrite impaired cases.

Management Reporting:
This component generates administrative and other reports on the decisions made within
the system. Reports can be created by management from the database of information.

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BENEFITS
Underwriting systems have many benefits. For underwriters they limit the number of
cases that need to be reviewed, because the system is able to process them without intervention.
In this way the technology improves the work of underwriting by eliminating unnecessary
routine cases. Several companies have developed knowledge-based systems for this purpose and
have been very pleased with the results. As an underwriting officer stated "This gives the
underwriter to deal with more complex and time-consuming cases which was one of the reasons
for installing the system. Furthermore, initial underwriting knowledge based systems decrease
the number of times a case needs to be reviewed by an underwriter, because requirements are
ordered and processed by the system prior to the underwriter seeing the case.
For the producer, service is greatly improved. This is possible because some applications
can be approved by the system almost immediately, without having to be seen by an
underwriter. One company that has integrated this type of system with its field offices is able to
electronically approve applications in less than 15 minutes. Also, the sales process can be
helped by determining all requirements (both those required for 'age and amount' and those
necessary for a specific cause) immediately so that producers do not have to contact an
applicant a second or third time for additional information.
Knowledge-base, systems can improve underwriter productivity in other ways with
workflow management tools. Although these systems do not do any underwriting themselves,
they do manage the paperwork in the ordering and keeping track of requirements. Such tools
decrease the clerical work of underwriters and improve the workflow in underwriting
departments by eliminating unnecessary paperwork.
Apart from reducing underwriters work, knowledge-based systems can provide decisionassistance tools in the risk classification process. Impairment underwriting knowledge-based
systems are sophisticated decision-support tools. They assist in the determination of ratings by
prompting the user for information and correlating that information with underwriting
guidelines and the programmed thought processes of expert underwriters. They serve as an
excellent training tool for the junior underwriter and assist experienced underwriters in very
complex cases.

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Chapter: 5
SELECTION OF THE RIGHT TYPE OF IT SYSTEMS FOR AN
ORGANIZATION

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INTRODUCTION
Purchasing a new IT management system, be it for risk management or claim
management system is not an easy task. Faced with thousands of different applications and
choice, how does a buyer know what to buy? This process calls for two steps followed:

First, the buyer must understand the types of system available in the marketplace and

their price.

Second, the buyer must know the organizations needs and select the application that will

satisfy those needs

AVAILABILITY OF SYSTEM IN THE MARKET

Information systems are generally grouped into four categories namely:

a)

Risk Management Information System (RMIS):

This system focuses on activities relating to the collection and analysis of exposure-related
information and production of user defined reports. Sometimes, the term "RMIS is also used
to refer to systems that can administer claims"

b)

Claim Management Information System (CMIS):

Usually, this system includes all the RMIS's functionality along with capabilities built in to
judge claims, including monitoring litigation, tracking allocated expenses, making payments
and a multitude of other types of activities related to the claims adjustment function.

c)

Integrated Information System (IIS):

This system contains all of the functionality of an RMIS and CMIS. In addition, is also a
support the organizations underwriting, loss control, legal, accounting, administrative and
financial reporting functions.

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d)

Enterprise resource Planning Solution (EPRS):

It is organizational wide operational systems that includes financial, manufacturing,
accounting, sales, and distribution and in some cases, risk management functions.
Having gotten an idea about the different types of information system available in the
market, now the moot question is now do insurers know which type of system will satisfy
their needs now and into the future, should the organization's needs change? Understanding
the functionality of each system and its implementation cost can help the insurer to solve the
selection problem.

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APPLICATION SERVICE PROVIDERS

An ASP hosts software application, making them available through Wide Area Network
(the Internet) to clients (browsers) or other software on user's systems. All ASPs do not focus on
the same activities.

ASPS AND INSURANCE:

Now days, ASPs are providing comprehensive solutions to both insurers and insured to benefit
from. Following are a number of insurance ASP categories:

(1)

Risk Management Systems:

Some RMIS vendors are now providing Web versions of their systems and may also provide
hosting services. Risk Laboratories and Envision Technology Solutions are two best
examples.

(2)

Agency Management System ASPs:

Adjacent (a type of ASP) hosts various brands of agency management systems. Applied
System (with TAM Central) and AMS Services (with Afw Online) provide their traditional
Windows software in hosted as well as locally installed versions. Three new alternates to
traditional agency management system are also now available in the market.

(3)

Carrier System ASPs:

CSC and a few other carrier system software publishers offer hosted versions of their
traditional software. Many other suppliers, like Ascendant One, are creating native-IP
carrier software that they will provide in both local and hosted version.

(4)

Information ASPs:
Many Application Service Providers offer insurance-related information directly to the end
users or as background services integrated with primary applications. To cite an example,
iiX, ChoicePoint, and ADR provide access to underwriting reports through browsers and the
Internet as well as integration with policy systems. Fair, Isaac offers Internet access to its

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scoring systems.

(5)

Education and Training ASPs:

A growing number of licensing and continuing education offering are now being provided
through insurance education ASPs, some evolving from classroom or paper -training
environments.

(6)

Certificate On-line:
A few new companies provide the online evidence of insurance services (certificate of
insurance, evidence of property insurance, and auto insurance ID cards). Service offered by
these companies are interesting because they use the ASP concept for bettering the
operational environment for all parties concerned with evidence of insurance activities.

(7)

Claim On-line:
Another group of system solution ASPs concentrates on claims problems, hosting a crossentity process that can include the insured, agent, broker, carrier, adjuster, state government,
and even salvage buyer.

(8)

Small Business Insurance ASPs:

Many ASPs such as Agency Port and insure Trade are planning to offer mediation service
between agency and carrier system so that agencies can experience one work flow. Some of
these mediating ASPs also offer access to market perhaps not readily available to agents/
brokers on their own.

(9)

Document Access and Billing:

Some ASPs such as Edos and Docucorp provide hosted solutions for document management
and billing.

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How Asps Benefit Insurers?

Different varieties of ASPs provide different benefits. But most would see following advantages
over the local software:

No need to install software or software upgrades.

No need to do regular back-ups and store them off site.

Internal disaster recovery program.

No need to upgrade hardware regularly to run software upgrades.

Predictable IT expenses based on subscription and fee-for -use arrangement.

Access to application and solutions not available in a local version (with cross entity

business systems solutions.)

Easy provision of Web-based applications to customers.

Faster time to market with lower capital investment.

Using an ASP creates some potentially new demand such as:

Need for high- speed connection to the Internet.

Access to software and data only when on-line, which potentially creates

problem for travelers on airplanes or employees otherwise disconnection from the

Internet.

Potential difficulties with local operations like printing.

Slow internet response times with sub-ten-second rather than sub-second

response times being the norm.

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Chapter: 6
MOBILE AND WIRELESS APPLICATION IN THE
INSURANCE INDUSTRY

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INTRODUCTION
Wireless data communications, commonly referred to as wireless, is the latest wave of
technology slated to push business in new directions. The securities and banking sectors of the
financial service industry and are again leading in the initial use of wireless technology.
However, insurance firm have an advantages in managing their remote workers utilizing
advanced technology. The insurance firm can also take an advantage of opportunities to enhance
claims handling and customer relationship management by using wireless communications.
In the recent years, significant changes in the insurance industry have been forcing
companies to find better ways of doing business. Like other financial services providers, insurers
are identifying new methods of generating revenue, supporting existing business processes, and
integrating emerging business processes. Insurance firms are seeking new technologies to
facilitate the success of e-business. Increasingly, these organizations are looking towards mobile
and wireless solution to help boost productivity, reduce cost and keep clients satisfied, all the
while providing a substantial Return on Investment (ROI). Wireless devices, including Webenabled wireless telephones and Personal Digital Assistance (PDAs), are among the devices that
forerunners in the industry are using to help meet these goals and achieve success in the efinancial world. Empowering insurance agents and claims representatives with anywhere and
anytime access to critical information results in greater efficiency and superior customer service.
Mobile and wireless solutions are also creating existing opportunities for competitive
differentiation and growth in other key areas of insurance industry, such as client self-service,
and e-commerce. In the ensuring discussion, the need and business advantage of wireless
application will be broadly discussed focusing on the global as well as Indian insurance industry.

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IMPROVING INTERNAL BUSINESS PROCESSES

Though many wireless initiatives focus on customer-facing applications, often the
greatest returns come from improving the internal business process. Several large insurance
companies are using mobile technology to significantly cut costs and have experienced
significant ROI in the area of claims and sales.

SALES AGENT AUTOMATION AND CUSTOMER SERVICE

Wireless initiatives should be geared towards agents since they are the point of customer
contract, the ones in the field generating revenue, and have the most to gain through wireless
applications. Wireless sales force Automation (SFA)/ Customer Relationship Management
(CRM) tools will aid agents the most, since they have to manage large amounts of customer and
policy data. Additionally, being able to access forms and documents wirelessly will greatly
reduce submission errors.
If all customer data is readily available, a wireless- enable sales force can see dramatic
improvement in productivity and customer service. Instant access to customer accounts, pricing
and billing information, along with history, can greatly Improve how sales managers handle
client engagements. Field sales representatives can obtain instant access to critical information
stored in back-office systems, significantly reducing cycle time of answering customer question.
Maintaining close customer relationship is a top priority for the insurance companies. To
deliver efficient, personalize service, insurance agents need regular access to customer profile
and contact information, service contacts, and accounts tools. The mobile solution enables
agents to connect to network applications from any location more conveniently and reliably, at a
lower cost. As they always have the latest customer information at their fingertips, agents can
manage existing client relationship and establish new ones, speed up the processing, and make
informed decisions about client needs. This results in better customer service and builds stronger
customer relationship.
The synchronization technology enables the timely exchange of information with head
office, expediting the application processing, and speeding the time to underwriting. Field agents
equipped with a cell phone, pager, or handheld device can receive information at any time such
as, notification of impending client policy expirations, alerts regarding premiums past due or
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even changes to their daily book of business. This helps field agents to make informed decisions
about clients needs.
The emergence of new mobile computer or Pocket PC is a breakthrough, as it can be
used in virtually any remote selling environment; it has the computing power to run real
applications; and it is much easier to use. This implies large opportunities in mobile applications
for the field force in farm, food and crop Insurance.

BETTER HANDLING OF CLAIMS PROCESSING:

Wireless technology can also make the claims processing more efficient. Most
consumers believe that claims process never happens quickly enough, and that carriers
deliberately drag out the process to delay payment. On an average, the longer a carrier waits to
settle a claim, the better the chance the insured will litigate. In addition, a shorter claims period
results in a happier customer. The field claims representatives equipped with handheld devices
can capture critical claims assessment data, ensures fast and accurate processing of claims,
eliminating reentry and associated costs.
One delay common to almost every claim is the time taken in the estimation process.
This involves adjusters and body shops. Expediting this process can save everyone's time and
money using wireless devices; adjuster can download claims notices and can even leave a copy
of the claim with body shop or insured, saving valuable time. They can even better plan their
schedules and routes, and thereby, can process more claims per day resulting in productivity
enhancement and reduced costs. Insurance adjusters can use mobile device and applications to
write the appraisal about claims instantly, instead of writing later in the office, which saves times
and possibly reduces data loss.
Wireless devices containing the multimedia applications and digital cameras may be used
onsite in the property and casualty sector to documents the damaged physical property and
casualty sector to document the damaged physical property. Digital photographs may be
transmitted to the insurance provider along with claims documentation.

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CUSTOMER APPLICATION
With the rapid diffusion of wireless technology and availability of mobile services at less
cost, the use of mobile phones by the public is growing tremendously. This provides
unprecedented opportunities for the insurance firms for better customer service. With mobile
device, the clients could be empowered to make inquiries about their policies and payments,
submitting and status tracking on claims, receiving quotes and locating nearby agents at any
time, all that greatly increase client satisfaction and loyalty. It also facilitates clients to send email to agents or claims adjuster instantly, and even receives news; confirmations, changes alerts
and offers on reduce products on a timely basis.

WIRELESS E-COMMERCE:
As the technology that enables the wireless revolution matures, Insurance companies
need to ensure that their e-commerce infrastructure are prepared for this new access channel and
at the same time, they hone their tactical plans for wireless e-service delivery. From Web-enable
wireless telephone to PDAs, these devices offer the mobile consumer the ability to interact, and
transact, with Financial Service Providers. They are viewed as one of the means of implementing
an enterprise customer relationship management strategy, designed to provide business to
customer (B2C) functionality for personal lines insurance and Business to Business (B2B)
functionality for commercial insurance. Mobile commerce functionality includes a wide variety
of channel option like allowing clients to access their policy information, perform service
activities and interact with the insurance provider or an agent.

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WIRELESS APPLICATION IN INDIAN CONTEXT:

Despite this broad area of wireless application spelled in the above discussion with
reference to global markets of insurance industry, the insurance business in the context of Indian
markets may not completely take an advantage of it. The market environment in its current form
may not completely support for implementing hi-reach processing, but with the refined
processes and improved infrastructures the question of wireless feasibility could solely tend to
disappear. The mindset of Indian markets towards insurance products majorly confines the need
for wireless usage, at least for client side applications. Moreover the current penetration level of
mobile phones is reasonably good only in the urban markets. As even the third parties get
involved, many bureaucratic baseless areas in insurance processing particularly in claims
processing, which may results in more delay. Through the technology could enable faster
processing, the existing system may not provide conductive environment for reaping the
complete benefits of it.
However, the wireless application can be optimally utilized in most of the area of Indian
Insurance Business. The emergence of e-choupal acts as an unprecedented means for reaching
the remote rural markets, but requires waiting for its wide adoption. From the perspective of the
sales agents, the advantage of wireless could be optimally exploited. As the rural markets
encompass a major percent of the total Indian insurance market, its potential could be well
tapped with the use of wireless application providing wireless device to the sales agents
particularly in the rural areas enables them to access information or submit and process
application remotely, reducing the need to travel between the office and work area. Even
reporting to the office can be done from the field itself.
In addition to the cost saving, the time saving opens opportunities for more sales calls
and market coverage. This not only leads to better sales, but also improves the productivity of
sales agents. Access to consumer data from remote areas helps agents make informed decisions
and pursue the payment better. They can even effectively build better relation with the customer
at remote market.

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In the claims processing area, though the wireless applications could not be completely
exploited at least the initial processing of the claims (i.e. submitting the claim request) could be
handled instantly with wireless, saving considerable time and reducing the processing delay to
some extent. The insurance companies can effectively market their products by advertising or
selling offers through Short Message Service (SMS) to the customer.
The payments of premium could be streamlined well by sending regular alerts to the
mobile customer, at least. In addition, the field force could be contacted instantly by the office
administration wherever they are in the field at any time.

TECHNOLOGY OPTIONS:
The success and widespread use of wireless technologies is due to the convenience and
portability, improved quality and reliability, increased speed, decreasing cost for the user and the
increased geographical range of the communication fields. There are a myriad of wireless
technologies available today that can enable insurers to effectively manage their mobile
activities.
The key is to focus on areas of a business where true mobile needs exits, and where
existing wireless applications can yield immediate benefits. Although there has been a lot of
hype associated with wireless technologies, the focus should not be on the technology, but rather
on what it enables the users to do.
Wireless LAN and WAN technologies enable companies to set up fully functioning
command centers onsite, enabling instant processing of claims reimbursements, and better, more
-informed customer service. The mobile phones are best used as a way to push information to
users via preselected criteria. Personal Digital Assistants (PDAs) and other handheld devices are
useful in claims notification, processing, and capturing assessment data and related multimedia
content.

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Prudential Insurance Improves Field Agent Effectiveness.

With over 12000 field workforce and 300 offices, Prudential Insurance Company wanted
to improve client service by providing its mobile sales agents with a powerful and feature-rich
field automation system. Specifically, it wanted to enable its remote and mobile employees to
access client information from anywhere in the country and to share that information with home
office administrators and underwriters. After a careful selection process, it implemented Client
Data system (CDS) that offers powerful sales and marketing capabilities, allowing field
representatives to track client, insurance and investment information in order to provide superior
customer service. CDS provided the database management and synchronization capabilities that
are critical to enable sales representatives to access the most current clients and prospect
information. Using this system, Prudential has seen sales representative's productivity increase
by 150%, while simplifying maintenance and reducing costs.

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LIFE INSURANCE CORPORATION

OF INDIA

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INTRODUCTION:
The Life Insurance Corporation of India (LIC) is the largest Life insurance company in
India and also the country's largest investor; it is fully owned by the Government of India. It also
funds close to 24.6% of the Indian Government's expenses. It was founded in 1956.
Headquartered in Mumbai, which is considered the financial capital of India, the Life
Insurance Corporation of India currently has 8 zonal Offices and 101 divisional offices located
in different parts of India, at least 2048 branches located in different cities and towns of India
along with satellite Offices attached to about some 50 Branches, and has a network of around
one million and 200 thousand agents for soliciting life insurance business from the public.

HISTORY:
The Oriental Life Insurance Company, the first corporate entity in India offering life
insurance coverage, was established in Calcutta in 1818 by Bipin Behari Dasgupta and others.
Europeans in India were its primary target market, and it charged Indians heftier premiums. The
Bombay Mutual Life Assurance Society, formed in 1870, was the first native insurance provider.
Other insurance companies established in the pre-independence era included:

Bharat Insurance Company (1896)

United India (1906)

National Indian (1906)

National Insurance (1906)

Co-operative Assurance (1906)

Hindustan Co-operatives (1907)

Indian Mercantile

General Assurance

Swadeshi Life (later Bombay Life)

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The first 150 years were marked mostly by turbulent economic conditions. It witnessed,
Indias First War of Independence, adverse effects of the World War I and World War II on the
economy of India, and in between them the period of worldwide economic crises triggered by
the Great depression.
The first half of the 20th century also saw a heightened struggle for Indias
independence. The aggregate effect of these events led to a high rate of bankruptcies and
liquidation of life insurance companies in India. This had adversely affected the faith of the
general public in the utility of obtaining life cover.
The LIFE INSURANCE Act and the Provident Fund Act were passed in 1912, providing
the first regulatory mechanisms in the Life Insurance industry. The Indian Insurance Companies
Act of 1928 authorized the government to obtain statistical information from companies
operating in both life and non-life insurance areas.
The subsequent Insurance Act of 1938 brought stricter state control over an industry that
had seen several financially unsound ventures fail. A bill was also introduced in the Legislative
Assembly in 1944 to nationalize the insurance industry.

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OBJECTIVES:

Spread Life Insurance widely and in particular to the rural areas and to the socially and

economically backward classes with a view to reaching all insurable persons in the country and
providing them adequate financial cover against death at a reasonable cost.

Maximize mobilization of people's savings by making insurance-linked savings

adequately attractive.

Bear in mind, in the investment of funds, the primary obligation to its policyholders,

whose money it holds in trust, without losing sight of the interest of the community as a whole;
the funds to be deployed to the best advantage of the investors as well as the community as a
whole, keeping in view national priorities and obligations of attractive return.

Conduct business with utmost economy and with the full realization that the moneys

belong to the policyholders.

Act as trustees of the insured public in their individual and collective capacities.

Meet the various life insurance needs of the community that would arise in the changing

social and economic environment.

Involve all people working in the Corporation to the best of their capability in furthering

the interests of the insured public by providing efficient service with courtesy.

Promote amongst all agents and employees of the Corporation a sense of participation,

pride and job satisfaction through discharge of their duties with dedication towards achievement
of Corporate Objective.

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MISSION
"Explore and enhance the quality of life of people through financial security by providing
products and services of aspired attributes with competitive returns, and by rendering resources
for economic development."

VISION
"A trans-nationally competitive financial conglomerate of significance to societies and Pride of
India."

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INFORMATION TECHNOLOGY AND LIC

LIC has been one of the pioneering organizations in India who introduced the leverage of

INFORMATION TECHNOLOGY in servicing & in their business. Data pertaining to almost 10

crore policies is being held on computers in LIC.

The computers were introduced in 1964 in LIC Unit record machines introduced in late

1950's were phased out in 1980's replaced by microprocessors based computers in Branch &
Divisional offices for back office computerization.

Standardization of hardware & software commenced in 1990's. Standard computer

packages were developed & implemented for ordinary & salary savings scheme (SSS) policies.

As awareness of quality service began growing among policyholders in India also, LIC

of India had to think of many applications of information technology offices, which are servicing
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 which, the cashier, while sitting at his desk, is

enabled to print and issue official receipts on the spot to policyholders when they tender money
towards premiums, the entire operation taking a few minutes.

A new business module was introduced which enabled even underwriting operations to

be computerized.

It brought a complete integration of all activities connected with the processing of new

business from proposal to adjustment of first premium to ultimately issue of policy documents.

Similarly, loans and surrender value module, policy revival module, claims module were

also introduced.
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Now a revival quotation, a policy quotation, or maturity claim intimation letters are

generated on the computer. All these gave tremendous boost to the efficiency in rendering
service to policyholders.

Up gradation of technology also helped in another direction. Several reports, which could

be used as management information systems, get generated for use by managers at all levels.

This helps management to review performance against prescribed indices and to take

appropriate corrective actions where necessary.

FRONT END OPERATIONS:

With a view to enhance customer responsiveness & services, in 1995, LIC started a drive

of On-line service to policyholders & agents through computers which enables policyholders to
receive immediate policy status report, prompt acceptance of their premium & Revival
Quotation, loan Quotation on demand. Incorporating change of address can be done online.

Quicker completion of proposals & dispatch of policy documents have become a reality.

All 2048 branches across the country have been covered under front end operations.

So LIC claims that all its 100 divisional offices have achieved the distinction of 100%

branch computerization.

New payment related Modules pertaining to both ordinary & SSS policies have been

added to the Front End Package catering to loan, claims & development officer's Appraisal to
reduce time lag & ensure accuracy.

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METRO AREA NETWORK

A Metropolitan Area Network, connecting 74 branches in Mumbai was commissioned in
November, 1997, enabling policyholders in Mumbai to pay their premium or get their Status
Report, Surrender value Quotation, loan quotation etc. from any branch in the carried out over
this network on any given working day. Such networks have been implemented in other cities
also.
WIDE AREA NETWORK
All 7 zonal offices & all the MAN centers are connected through a Wide Area Network
(WAN). This enables the customer to view his policy data premium from any branch of MAN
city. As at May 2002, there were 91 centers in India with more than 1200 branches networked
under WAN.
INTERACTIVE VOICE RESPONSE SYSTEMS (IVRS)
IVRS functional in functional in 58 centers all over the country, enables customers to
ring up LIC & 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.
WEBSITE

LIC's website, www.licindia.com displays information about LIC & its subsidiaries LIC

(international) E.C., LIC (Nepal) Ltd,. LIC Mutual Fund, LIC Housing Finance & their products.

The addresses/e-mails Ids of its zonal offices, zonal training centers, management

development center, overseas branches, divisional offices & also all branch offices are also
provided. LIC has given its policyholders a unique facility to pay premiums payments.

A website (www.licindia.com) was set up to give information on internet about the

organization, products and services.

The web page has been made interactive with features like 'On-line Premium

Calculation', 'On-line Bonus Calculation', 'Online Forms', etc., The site also includes a feature on
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'Frequently Asked Questions by Non-Resident Indians'. The page 'Contact Us' provides all email addresses of I the offices to aid communication.

These web sites also serve as a virtual community for insurance professional with

features such as the latest insurance news, career opportunities, insurance education, message
board for discussions and events in insurance sector.

Information is available on the website in Hindi also.

INFORMATION KIOSKS

LIC has set up interactive touch screen based multimedia KIOSKS in prime locations in

metros & some major cities for dissemination information to general public on various products
& services offered.

These KIOSKS enable the users to provide policy details & accept premium payments.

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INFO CENTERS
It has also set up all call centers to provide information about the products, policy
services, branch addresses & other organizational information.
All these applications have definitely brought a great amount of satisfaction to
policyholders. The steps taken by LIC of India during the past 5 to 6 years are an indication of
the important role that information technology can play in ensuring a very high quality in the
servicing operations of a life insurance company. Several private life insurance companies also
are utilizing the latest technology available including creating their own websites. A few private
web sites like Bima online also have been established.

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CONCLUSION
From this study I would like to conclude that the insurance market is being
revolutionized by technology at a high speed. There is a paradigm shift in the way insurance
business is being carried out today. IT is being increasingly used as an enabling tool to carry out
insurance business more effectively.
IT includes computing technology, networking technology & advanced electronics. The
convergence of computer and telecommunication has generated various computer networks
making the business data transfer feasible. Because of IT insurance companies are able to
provide various quality services to their customer such as EPS, issue of payment premium
facility and so on and thus it make their customers satisfied. But, there are prominent challenges
faced by insurance company i.e. Security. Many users are reluctant to do business on the internet
due to security reason. It is also argued that internet related technology were not fully available
to the nationalized insurance companies.
So further I like to conclude that insurance related technology should developed in
nationalized and international level so insurance business will grow more rapidly and more
effectively.

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RECOMMENDATION

Insurance companies should improve their technical efficiency by upgrading their

information support and by developing R&D department in their respective organization.

Management of insurance companies should accept meaningful computerization as a

total managerial responsibility and should adopt appropriate strategies for its implementation.

IT should be used as a tool to increase the companies' competitiveness and its prosperity.

A good web site should develop so that consumer can actually transact its business.

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BIBLOGRAPHY
BOOKS:

INSURANCE AND RISK MANAGEMENT

- P.K. GUPTA

PRINCIPLES OF INSURANCE MANAGEMENT.

- GULATI, NEELAM

CLAM SATTLEMENT VOL-V (ICFAI)

INSURANCE CUSTOMER SERVICE

-KBS KUPA

GROUP AND HEALTH INSURANCE(ICFAI)

LIFE INSURANCE VOL-I

WEBSITE:
www.licindia.com
SEARCH ENGINE:
www.google.com
www.altavista.com

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