Technology in Insurance 1

Technology In Insurance1
INTRODUCTION Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium, and can be thought of as a guaranteed small loss to prevent a large, possibly devastating loss. An insurer is a company selling the insurance an insured is the person or entity buying the insurance. The insurance rate is a factor used to determine the amount to be charged for a certain amount of insurance coverage, called the premium. !isk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice. The developments in IT are the working wonders in all the fields of activity. It has become possible to send and receive information almost instantaneously. If circulars do not reach the agents on time or doubts are not cleared quickly, or the agent does not have details of the new plans announced in the press, the agent may face awkward situation with the prospects. These problems can be totally avoided with the use of IT. Insures traditionally have been quickly to adapt latest advances in the technology. This is happening in the areas of IT as well. The extent of IT application will vary between insures. The information technology has always played a very important role in the operations of every life insurance company. In fact of all the business organi"ations in the service sector, the life insurance companies were the first to adopt #$%&'A(I)ATI*(+ as an inalienable part of their operation all over the world. This becomes necessary because of two important reasons namely, 1. The nature of services to be rendered to the policyholders. -. The need to evaluate the liabilities under the policies in vogue at the time of valuation.
Thakur &ollege of .cience / &ommerce
Technology In Insurance-
Evolution of Policy Bond The first service rendered by a life insurance company to the policyholder is the issue of policy bond. In the olden days, every policyholder was #(arrative type+. All the policyholder documents and conditions applicable had to be typed out separately. 0ut the number of policy sold was limited, it was possible to continue that method. 0ut as the business grew, it became humanly impossible to continue that method of preparation of policy bonds. 'ence, the life insurance companies switched over to #schedule type+ of the policy documents. 'ere the form of policy bond was standardi"ed and as most of the condition and privileges were similar, pre1 printed stationery was prepared. The only work left was to fill up the details of each individual policy, vi". policy number, plan and period of assurance, sum assured, mode of payments of premiums, installment premium, date of last payment of premium, date of maturity of the policy, age and whether admitted or not, name address of the policyholder, name of the nominee, etc. In order to complete the schedule of the policy bond with these particulars, addressograph machines were introduced. 2olicy particulars were embossed on )inc or Aluminum plates and these plates were used to print the particulars in the schedule part of the pre1 printed policy bonds. These plates were then used to print advance premium and default notices, premium receipts with counterfoils and final lapse intimations sent to the policyholders. The companies also had #3nit !ecord $achines+ otherwise called #2ower .amas $achines+ which were operated using punch cards. These were parallel records in which policy particulars were punched in the prescribed fields.
There were two types of cards, namely, 1. 2remium $aster &ards 2remium $aster &ards were utili"ed to account for the premiums received and then for generating lists of lapsed policies. -. 5aluation &ards 5aluation &ards were prepared to be utili"ed for the valuation of 6iabilities under the policies. There was one1on1one correspondence between the adrema plates and premium master cards. 7ith the advent of the micro processors, the addressograph machines along with the adrema plates and the # unit record machines+ along with the premium master cards became redundant and went out of use. 0oth were replaced by a new kind of record called #2olicy $aster+ for each policy, integrating both adrema plate and the premium master cards. Apart from the ease with which servicing of the policies could be rendered through micro processor operations, the speed with which the same can be undertaken. The speed was necessary because of the tremendous increase in the volume of the new business and much larger increase in the number of service operations.
9or example, 6I& of India has about 14 &rore of policies. Assuming that -: ; of these are, 3nder salary savings scheme, i.e. about -.8 crore, and another -: ; in paid up condition, there remain approximately < crore policies under which premiums are received by yearly, half1yearly or quarterly. 3sually, =:; are under quarterly, about -:; under yearly and 4:; under half1yearly mode of payments, i.e. !s 1.> crore under yearly, -.8 crore under half1yearly and !s 8 crore under quarterly modes. The number of premiums accounting transactions during a year will therefore be as under1
Duration ?early 'alf1yearly @-.8 x -A Buarterly @8.: x 8A Total
Amount 1.> crore 8.< crore 1>.: crore --.8 crore
Thus, in one year , the number of transaction in respect of the premium payments alone for the organi"ation is !s. --.8 crore C a huge and stupendous task indeed without the fast operating computers it will impossible task to manage transactions such as magnitude. In addition, there are many other transactions to be handled. 3nderwriting of proposals for the life insurance became standardi"ed because of universal adoption of #(umerical !ating $ethod+. Thus, DThe use of IT and especially knowledge1based systems in underwriting has developed through generations of systems, which have progressively increased in complexity.E Thakur &ollege of .cience / &ommerce
Technology In Insurance=
F 9irst Generation, .creening .ystems These were developed by larger companies in the 1HI:+s to decrease general expenses. They allowed for the entry of the information from the application and screened out or accepted clean non1medical cases which were previously handled by the manual Jet screening units. The remaining cases were referred to the underwriters. F .econd Generation, Information Kisplay .ystems These appeared in mid 1H<:+s. They were design to save the underwriter+s time and thereby improve the productivity. Information display systems allows the underwriter automated access to various sources of information, such as underwriting manuals , medical terminology, lists of medications and other underwriting guidelines. These systems replace the need for multiple volumes of handbooks. They allow rapid success to the information that an underwriter needs. FThird Generation, Initial 3nderwriting .ystem. These systems were developed to improve the service to the field by approving some cases automatically and eliminating cases not needing review by an underwriter. 0ecause they require complex knowledge1based systems for their processing, they have only been available for the past few years.
Technology In Insurance>
Initial underwriting system extend the capability of the first generation systems and go beyond screening to identify underwriting problems, automatically underwrite some cases, and pre C process other cases for underwriters by ordering information for cause+ such attending physician statements. The advanced third generations systems can also do initial underwriting with the requirements such as medical examinations, inspection reports and laboratory test results. .ome can even do discrepancy processing. F 9ourth Generation, knowledge Kecision Assistance Tools This is relatively a new system which provides underwriters with the knowledge C based systems to underwrite complex impairments and to help them to manage their administrative workload. They have been designed to enhance the risk selection process. Their use by the underwriters can help them to manage the mortality expenses by applying consistency to the underwriting process. F 9ifth Generation, Total 3nderwriting .ystem The fifth of underwriting system encompasses and surpasses the previous system. They integrate all the components discussed above into single system, they also include a management information system for the entire process. This is essence of the underwriter work, which as discussed above, would be integrated into the entire administrative flow for its greatest impact.
Components of a Total Underwritin !ystem" Thakur &ollege of .cience / &ommerce
Technology In InsuranceI
A total underwriting .ystem needs to address the entire decision making process of underwriting which starts at the times 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 Kata %ntry This is where information from the application is entered into the system depending upon the specification of the company and its field force data may be entered from an agent+s laptop1computer, at a regional marketing office or at the home office. Information from the agents report, requirements ordered in the field and $I0 L$edical Information 0ureauM information could also be entered for processing .creening 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. .creening checks that application need no future requirements , have all medical and non medical questions answered properly, are within certain age and amount limits and have acceptable finances and an appropriate beneficiary. Approved cases are sent directly to the administration system
Initial 3nderwriting Thakur &ollege of .cience / &ommerce
Technology In Insurance<
Applications that are not approved by screening flow into the next component are called Dinitial 3nderwritingE. This series of knowledge C based systems defines underwriting problems and determines why the case required further processing. It checks for age and amount requirement and examines the financial, non1 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. !equirement 2rocessing .ince underwriting is an iterative process with information process with information from many sources being reviewed at different times, a total underwriting system permits information to be entered into the system directly from the provider or by home office personnel. 2rocessing requirements are similar to initial underwriting, expect that discrepancy processing is done by comparing the details of the information from the application with those received late. 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 noted and the appropriate work1 up is ordered. If no problem are discovered cases can automatically approved without consulting an underwriter.
#OR$%&O# TOO&!
Technology In InsuranceH
3nderwriters need certain tools to process their cases administratively. A total underwriting system provides these. They include front1 end tools, back1end tools, and status function. The front end tools workflow tools keep track of cases, their requirement and underwriting problems. The in1 tray function accesses cases electronically assigned to underwriter. !ather than getting a stack of file, the underwriter now deals with an electronic stack of case. 9or each case their details underwriting problems and their actions. *ther tools allow the underwriter to manipulate, track and change the underwriting problems and requirement of case. There is also an electronic notepad for the underwriter which can be integrated with an electronic mail system for field communication. The back1 end workflow tools assist in the final administrative details of case, forms to be signed, post Cissue requirement preparation, reporting of $I0 codes and the process of requesting reinsurance. The status function lets non1 underwriter to review the selected case information. An agent+s status reveals the data from the application, as well as the requirement and whether they have been received. Information Kisplay The information display component gives online 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 and drug references.
Impairment Nnowledge10ased .ystems Thakur &ollege of .cience / &ommerce
Technology In Insurance1:
The next component is the impairment underwriting knowledge1based systems. This program deals with impairments such as high blood pressure, diabetes, cancer, respiratory disorders, aviation and coronary heart disease. Their logic is patterned after the knowledge and thought processes of expert $K+s 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. $anagement !eporting This component generates administrative and other reports on the decision made within the system. The management from the database of information can create reports. 0enefits 3nderwriting system has many benefits. 9or underwriting 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. .everal companies have developed knowledge C based systems for this purpose and have been very pleased with results. As an underwriting officer stated, DThis gives the underwriter to deal with more complex and time consuming cases.E
9urthermore, initial underwriting knowledge C 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 cases. 9or the producer, service is greatly improved. This is possible because some application can be approved by the system almost immediately, without having to be seen by an underwriter. *ne company that has integrated this type of system with its field offices is able to electronically approve applications in less than 1= minutes. Also, the sales process can be helped by determining all requirements Oboth those required for age and amount and those necessary for a specific causeP immediately so that producers do not have to contact an applicant a second or third time for additional information. Nnowledge1based system can improve underwriter productivity in other ways with workflow with workflow management tools. Although these system do not do any underwriting themselves, they do manage these paperwork in the ordering and keeping track of requirements. .uch tools decrease the clerical work of underwriters and improve the workflow in underwriting departments by eliminating unnecessary paperwork. Apart from reducing underwriters work, knowledge1based systems can provide decision1assistance tools in the risk classifications process. Impairment underwriting knowledge1based system is sophisticated decision1support tools.
Technology In Insurance1-
They assist in the determination of ratings by promoting 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 assist1experienced underwriter in very complex cases. In addition to helping in the actual underwriting decisions making, knowledge C based system can assist the underwriting manager with the overall underwriting process. *nce information has been entered into the knowledge based system, it becomes available for management reporting and decision1making. This allows underwriting managers to follow the screening of cases by the system, as well as the ordering of requirements and the rating of the impairments. The decisions can be tracked according to agent, agency or underwriter so that underwriters can interact better with the procedures with whom they work underwriting managers can also more effectively manage the underwriters who report to them. 2reviously unavailable management information tools are made ready available, is information on specific underwriting decision making.
NEED %OR IN%OR'ATION TEC(NO&O)* IN T(E IN!URANCE !ECTOR 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 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 case of various activities. 7ith the arrival of private insurance players, the competition has become more intense and an important role is being played by the insurance sector. %ven though the use of information technology is not new to the insurance sector, yet we may find tight compartmentalisation regarding the use of information technology in various departments of the insurance companies including the maJor players since last =: years. The most visible of these departments are accounting, policy issue and servicing, claim processing, sales management etc. The innovations in information technology can be effectively utili"ed for the following areas,
.peedy and documents
correct
issuance
of
%xpeditious disposal of claims
Buality Assurance / %fficiency
Therefore the imperative for all the insurers, especially 6I& and GI& is to build up an efficient interface between the various departments and segments. This would reduce the paper work, improve efficiency of service delivery and provide competitive advantage to the insurance companies.
Application of IT Thakur &ollege of .cience / &ommerce
As awareness of quality service began growing among policyholders in India also, 6I& of India had to think of many applications of information technology. 3p gradation of technology was undertaken on a huge scale. All the -:=: branch offices, which were serving centers, were equipped with computer systems. Training of employees also was organi"ed on a large scale. .everal software packages for different servicing operations were introduced. A cash module was introduced, operating with, the cashier, while sitting at his desk, is enable to print and issue official receipts on the spot to the policyholders when they tender money towards premium, the entire operation take a few minutes. A new business module was introduced which enable even underwriting operations to be computeri"ed. It brought a complete integration of all activities connected with the processing of policy documents .imilarly, loans and surrender value module, policy revival module, claims module were also introduced. (ow revival quotations, a policy quotations or maturity claims intimation letters are generated on the &omputer. All these gave tremendous boost to the efficiency in rendering service to the policyholders 3p gradation of technology also helped in another direction. .everal reports which could be used as $I. 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. To bring out the revolutionary changes in communication to policyholders, several steps were taken. Inter15oice !esponse .ystems have been introduced which policyholders ascertain several types of information about their policy like policy status, premium position, loan amount, maturity R next survival benefit due , accumulation of bonus , etc. over telephones language in language of his choice. The policyholder can also get the information on fax. $A( is installed in several cities, which enables policyholders to pay premiums or get their status reports, revival, loan, surrender quotations in any of branches offices convenient to them in the cities. (ow, many of the cities with $A( are connected by 7A(, which enables policyholders to pay premium anywhere in the country. %1mail connections have been established in many of the offices and internet connections has been given to all the divisional offices, all department in all the "onal Thakur &ollege of .cience / &ommerce
Technology In Insurance1=
offices and central offices. A website Owww.licinda.comP was set up to give information on the Internet about the organi"ation, products, service. The web pages has been made interactive with the features like online 2remium &alculationE, D*n1line C 0onus &alculationE, D*n1line 9ormsE etc. The site includes features on #9requently Asked Buestions by (on !esident Indians+. The corporation has also set up interactive touch screen based multimedia Niosks in prime location in the metros and maJor cities for dissemination of information on the product and services. The corporation has plans to redesign these kiosks to provide policy details and accept premium payments. All these applications have definitely brought a great amount of satisfaction to policyholders. The steps taken by 6I& of India during the past = to > years are an indication of the importance role that information technology can play in ensuring a very high quality in the serving operations of a life insurance company. .everal private life insurance companies are also utili"ing the latest technology available including creating their own web sites. A few private web sites like #0ima online #also have been established Technology is the most important tool in another very important area of life insurance functions. It is valuation. The process by which the values of various polices of insurance existing at a point of time are obtained is called valuation+ of liabilities of an insurer was small, policy values used to be calculated for individuals policies. 0ut when the number of policies runs into several lakh or crore, as a present it is extremely inconvenient to calculate the value of each contract separately. $ethods have, therefore, been devised to collect data for each plan of insurance in a form suitable for valuation in groups having some common characteristic like age, duration or term to run to maturity and like. Grouping is done only if there is sufficient number of policies to make the group of a reasonable si"e. 9or a sufficient large life insurance organi"ation, this work is possible only through application of technology. It is a legal requirement today in our country for a life insurance company to conduct an actuarial valuation every year. This adds to importance of IT application.
Technology In Insurance1>
7ith increasing complexity of products both life insurance and pension entering the market, the field force, especially the agents needs a large support from the company represent. 7hile discussing life insurance program with potential customers, agents need sophisticated information including benefits, comparisons, , needs and matching products , rates and impact on the customer+s budget , returns, etc,. 6ike in Sapan, life insurance companies in India may also supply #2alm C Tops to their sales force. This will be possible only through extension of concepts of information technology. $arket research is another area where information technology has a great role to play. Today+s, the customer has become the center around the entire market revolves. The world is fast moving towards market driven economy. *rgani"ations, which were merely based on #sales concept+, are eagerly aiming to convert themselves into marketing organi"ations+. 6ife insurance companies which primarily deal with the financial needs of the people cannot ignore these realities. The life insurance has become very dynamic. The needs, aspirations, attitudes, buying behaviors, standards and quality of life are changing. The perceptions of what constitutes standards and quality of life are changing. The perceptions of what constitutes standard of life is also undergoing a metamorphosis. Kifferent types of product are the need hour. The demand is more for #flexible+ rather than #packaged+ products especially in the service market. To certain its share and to improve it, there is no alternative for any life insurance company than to have a continuous market research. The company should know the demographic changes taking place in the society. They should know what is selling and where. They should know the pace of sales on the day to day basis.
Technology In Insurance1I
They should not only know the emerging customer profile but also the si"e of the market. All these need a scientific market survey and research either done in house or outsourced. A typical market survey report is appended which shows the enormity of the Job. 7ithout the support of technology, this will be an impossible task for the company.
TEC(NO&O)IE! %OR IN!URANCE Thakur &ollege of .cience / &ommerce
Technology In Insurance1<
There has never been a time when the effective use of information technology has been more crucial to the success of the insurance industry. The insurance markets are being revolutionised by technology at a high speed pace. IT and software solutions, allowing cross1border trade to become electronic and paperless, are increasingly on offer to importers, exporters, shipping companies. Katabase $anagement .ystems The principles of tracking and measuring responses can pay off for the conventional insurance industry. To find more clients, insurer needs to consider many factors, including cash value, medium and competition. 0ut the need to record and study the characteristics of persistency1 the length of time we retain policies, customers and agents is most important in insurance companies. In order to find out profitable combinations of households or clients, products and agents, a database with five to ten years+ history is of immense importance. .uch historical retention was prohibitively expensive in the past. 0ut clear advantages of new 2& @2ersonal computerA and !I.& @!educed Instruction .et &omputingA technology gives companies power to keep tens of millions of policies on a device with thousands of bytes of data per policyRclientRagent. Analyisng a 1*1year database is cost effective. !eviewing the database provides information on how many clients have actually migrated not Just how many policies have lapsed or surrendered. 3sing database technology companies can get a comprehensive, performance, loyalty, and lost opportunity. Kata 7arehouse Kata warehousing technology is based on integrating a number of information systems into a #one stop shopping+ database to achieve vision of making company national in scope, but regional in focus. Traditionally, the sale of policies and the claim settlement are two separate areas for the insurance companies. Kata warehousing allows Thakur &ollege of .cience / &ommerce companies and financial institutions. 9ollowing technological advancements can really enhance the performance of insurance
Technology In Insurance1H
managing by profit levels with an integrated approach rather than by limiting losses. Kata mining can be used as a means to control costs and increase revenue resulting in enormous earning for effective users. Kecision .upport .ystems The path of business applications of computers, computer based information systems @&0I.A, encompasses many stages including the very early applications like transactions processing systems @T2.A followed by the management information systems @$I.A. The computer applications like decision support systems @K..A, expert systems @%.A and executive information systems @%I.A are still awaited in insurance business. *ffice automation @*A.A happens to be a continuously ongoing, dynamic process for any business. .uch decision support systems will provide the insurance managers with a tool for customised products and services that are more in line with what customers want. Group 6inking .oftware Group1linking software enables sharing of information arid partieular1v suits document heavy insurance business. Tracking of policy application shows how information that is input and accessed from a number of locations can increase efficiency. Imaging and 7orkflow Technologies The proposal forms may be scanned into an imaging system. Kata may be extracted for update to computer and for automated underwriting workflow may be implemented. $apping Insurers to meet different needs, such as identifying loss prone areas or geographic claim analysis, can use $apping technology. It helps the insurer to analyse the extent of its network i.e. the insurer can determine whether it has too many or too few agency force in a particular area.
Technology In Insurance-:
&all &entre Technology Good customer service is a crucial element for gaining, maintaining and retaining profitable customers. &all centre concept based on interactive voice response services @I5!.A is gaining importance in this aspect. 5ideo 6inking A video linking facility between two remote units of an insurance company or between an insurer and a broker allows underwriters at one place and brokers at other unit to discuss risk inherent in a proposal face to face. &at $odels &atastrophic models use data from the recent natural disasters that helps develop more predictions of insurers+ property exposures in future disasters. 3sing this data curious Dwhat1if+ scenarios of probable maximum loss @2$6A using the best estimate available at an insurer+s exposures are tested. 9inally an underwriting policy that limits the company+s exposure to catastrophic losses is implemented. Intranet is the network connecting different offices of the same business to permit the internal data within the business. %xtranet 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 &23 @IA&A. The Internet and online service providers are providing opportunities to create new forums that can be utilised by everyone worldwide. Insurers can browse through many useful sites on the Internet.
Technology In Insurance-1
Tec+nolo y , Cy-er Insurance in India The opening up of the Insurance industry in India would boost competition, facilitate technology transfer and lead to new products, better customer service, deeper and wider insurance coverage and many more opportunities for employment. As new private sector entrants enter into India, opportunities in the insurance industry are up for grabs. *ne important aspect of the insurance industry, which is gaining prominence tile world over, is the development of technology and cyber1insurance strategies. &yberspace is a risky place. &ompanies conducting business over the internet are exposed to a variety of new, unpredictable and serious exposures such as servers crashing, computer viruses, destruction of data, e1mails disappearing and attack from hackers for which there are few precedents in terms of risk management and even less actual insurance coverage. &yberspace presents unique challenges to risk managers for several reasons the foremost being that there is no .tandard risk profile. The wide variety of internet1related businesses, such as I.2+s, content aggregators, certification authorities, online merchants and software developers, all contribute to the difficulty of developing a single risk profile. %nacting appropriate insurance policies for ensuring cover for security issues and intellectual property rights issues is vital. 9or safe business transaction, what is needed is a secure legal environment and while legislation in India is providing this environment with the enacting of laws dealing with the Internet, Insurance companies in India should provide comprehensive protection policies for a business against web1related risks, such as hackers and viruses, credit card and employee fraud, business interruption losses, and legal action. %ssentially, the policy can fill the gaps in coverage that have opened up between standard insurance policies due to the fact the way business is done has changed. Intellectual property infringements , content providers who use content of others without permission can trigger these risks. Errors and Omissions liability, these risks are typically triggered by the programmers, web hosts / web1designers, who, through negligence in their work cause inJuryRdamage to a third party. Thakur &ollege of .cience / &ommerce
Technology In Insurance--
Personal injury & advertising Liability , As e1commerce grows, these risks can be triggered by worldwide web sites, and trade publishers who publish illegal content or content which may be constructed as libel. Directors liability, Kirectors and officers often face the risk of litigation due to numbers of factors, such as consumer protection laws, securities related laws, and certain provisions in the corporate laws that place additional responsibilities on directors. Employee liability, These risks would arise from the breach of confidentiality and rights of privacy arising out of confidential client information stored on a particular system or website. In addition, employee can initiate sexual harassment charges from an employee due to disturbing e1mail content. 6egal fees, 9ees incurred for litigation arising out of various claims, such as intellectual property. $any businesses on the internet mistakenly think their internet1 related exposures are covered by their existing policies.
IT APP&ICATION! IN %UNCTIONA& AREA!
%ven though the information technology has wide application in all the spheres of the insurance business, yet following are the most important ones in respective functional areas, $arketing The scope for use of Information Technology in marketing function is tremendous. It may start from the consumer acquaintance to an insurance product to claims settlement or further selling of new products or developing consumers for the products. Information technology can be integrated with almost all the 2+s of marketing. It may help in formulation and implementation of various marketing strategies including pricing, promotion and customisation strategies. .ome of these areas are discussed below, Consumer A areness The use of Information Technology may be path breaking for the insurance companies since conventionally the awareness of the insurance products in India is low. 7ith 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 operations can be established. There are numerous websites available which can help the prospective customers 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 on various discounts and incentives can be provided at a much faster rate and lower cost. Customer !ervices The insurance being a service needs high concerns in terms of services. &ustomer service requires maximum attention and should span the entire gamut of activities in the purchase of a product i.e. right from the dissemination of information, documentation to policy administration and claim settlement. The service quality standards of the new private insurance players have posed a threat to the1then giants vi". the 6I& and GS&.
The investments in the personnel and knowledge systems have helped private player+s companies build significant domain expertise. The emerging areas of IT applications are, @1A $arket !esearch @-A &onsumers targeting and segmentation @4A &ustomisations of products @8A %asy procedures like premium payments, claims settlements, tracking of brokers and agents @=A &omplaints managementT grievance handling @>A Intermediary analysis 9inance Information technology can be effectively used for internal management vi". Accounting, treasury management, financial performance reporting etc. and as well as in resource mobilisation, portfolio management, investment planning etc. 'uman !esource $anagement Application of IT in 'uman !esource $anagement is obvious. It can be effectively utilised in, @1A recruitment and selection, @-A training, @4A performance appraisal, @8A promotions, transfers and dismissals, @=A valuations etc. !esearch and Kevelopment !/K has been made an easy task with the increasing use of IT. .urveys and research on market potential, analysis of markets, tracking with international norms and developments are the profound areas of IT applications.
Technology In Insurance-=
Impact of Tec+nolo y on Insurers Any new adoption needs time to get acquainted with the users until they gain enough confidence / knowledge in that system. !ecent studies reveal that consumers lack passion for insurance because of its complexity, but despite these push backs, a growing number of insurers are intrigued by the significant cost saving / customer1 retention benefits to be gained through online self1service. Although carriers think that by encouraging insurers to do transactions by online services, which would reduce operational costs vastly, they are very cynical of investing in web technology with dot1 corn collapse. The trick lies in educating insurers about the concept and benefits of eservices in this sector. Kriving client to initial online self1service experience into something more interactive by call services that would involve human interactions will certainly have a greater impact. This balanced approach is how most insurers are enabling online self1 service that not only make sense for policyholders, but also provides support for intermediaries and agents. The main challenge for any health company+s website would be bringing all sections of people to view their site. They should show some positive incentives to bring customers to their websites. *nline services have own advantages like accessibility of information -8RI, visuali"ation of information, providing interactive plan finder tools, adding useful links to the websites, live chat technologies etc. An online activity helps to give necessary knowledge to consumers, which is very positive, because it implies that when people learn more they establish a deeper relationship and a broader dialogue with the carrier. Agents and brokers also enJoy the efficiencies that come with writing new businesses and servicing their customers on websites. About ==; to >:; of customers take booklets electronically. In order to enable efficient online self1service functions, companies typically have to update their legacy systems. Kespite the current limits to online self1service, as the Internet continues to gain acceptance, customers probably will become more open for using it as a conduit for
Technology In Insurance->
insurance services. In the past year, the portion of insurers offering customers service websites has been growing dramatically.
Technology In Insurance-I
INTRDUCTION 6osses due to insurance fraud and abuse affect every business and every risk manager. The stakes are high, according to the Insurance Information Institute, 1:; of claims payments are fraudulent, resulting in U-8 billion dollars in losses each year. 7orker+s compensation claims alone are responsible for about U= billion in losses each year. 3nfortunately, most of this fraud is never detected, or it is discovered after claims are paid when recovery of these lost dollars is both expensive to do and unlikely to happen. Insurance fraud detection has taken a giant step forward with the introduction of the same sophisticated technology already used by most banks and credit card companies to stop fraud, saving companies in these sectors billions of dollars each year and reducing fraud by as much as =: ;. 'owever, as with any new technology, considerable confusion exits as to which types of systems are effective for which purposes. 9ocusing on claimant fraud in insurance, this paper will identify types of technology utili"ed in fraud detection, their scope and limitations, to help risk managers choose appropriate technology for their needs. 9raud Ketection And Technology it reality, no one technology delivers a complete solution for fraud detection. A complete solution is the result of the intelligent combination of several technologies, most of which are not particularly effective if used alone. The challenges of addressing the fraud and abuse problem1 and the different technologies that can be used for this purpose1 can perhaps best be understood through a framework of detection and review. 7hile detection is the process of identifying and prioriti"ing suspects from the available data, review entails confirmation of fraudulentRabusive activity and the process of taking corrective actions such as blocking of payments, recoupment of paid dollars and prosecution.
Technology In Insurance-<
The variety of technologies that can be employed can perhaps be best understood by assessing their contribution in improving either or both of these two processes. To date, primary emphasis has been on review side, with a focus on techniques for surveillance, investigation and prosecution. $any technological tools, such as those for ad1 hoc querying or viewing of activity, have been designed to aid in the review of potentially fraudulent claims. 'owever, the challenging task of detection C effectively identifying suspects in the first place1 has received less attention and currently offers the greatest opportunity for benefit if addressed in a comprehensive fashion.
DETECTION , RE.IE#
Technology In Insurance-H
The mission is to find insurance fraud and abuse once we do that, we can take a variety of actions to recover payments already made and prevent future in appropriate payments. *ur starting point is the mountain of historical transaction data @i.e. claims master1file information, payment transactions, medicalRpayment detail, policy information, etcA. Ketection Ketection is the first step and is complicated by a host of technical challenges. !eview is the second step and requires giving human experts the information they need to confirm fraud and abuse. Ketection is a statistical game with the goal of improving the odds of finding the target. The process is analogous to fishing for a rare fish in the ocean. 7ithout the right tools, we are left to fish the endless sea of legitimate claims for our rare fraudulent catch. (ot surprisingly, a tremendous amount of time and effort can be spent to identify a single case of fraud. The Job of a detection system is to filter the %ntire *cean and scoop out a small pond containing a significant fraction of the total fraud so that the ratio of fraud to non1fraud is much more in our favor than it was in the DoceanE. 9ishing in a well1stocked pond translates into substantial savings because we can use the system to focus expensive human expertise on reviewing those claims that are most likely to pay off @in settlements, averted future fraud and abuse or successful prosecutionA. 7e stop wasting effort reviewing false leads, and we prioriti"e effort to inspect the most important cases first. The effectiveness of a detection system can be quantified using the following two metrics, F Ketection1!ate @the percentage of total fraud isolated in the pool of suspectsA F 9alse12ositive1!ate @the ratio of legitimate to fraudulent entities in the pool of suspectsA
!eview The review process gathers the evidence that human experts need to confirm fraud and abuse. 0ecause of the complexity of detecting provider fraud and abuse, no system can be 1::; accurate in selecting fraudulent claims. *nce the detection system has generated a pool of suspects, expert claims adJuster or fraud investigator are needed to review suspects, conduct the appropriate investigation and bring the case to closure. The experts may use technology to help them navigate through, visuali"e or analy"e the detailed data behind a case. Ketection can be linked to the Dfront endE of the fraud1 fighting process, while review is analogous to the Dback endE. $any tools offered to assist in the fight against fraud and abuse, such as those allowing for the review process. *ther technologies, such as those involving link1analysis @looking at the activity of individuals coming in contact with a particular individualA are also most useful after a suspect has been identified. 7hile these techniques can be important, for example investigating rings to which given suspect initially come fromV 9urther, more the reality is that most fraud and abuse is opportunistic and does not involve elaborate rings. A detection system is necessary to uncover suspicious activity in the first place. $ost approaches to employ a manual process dependent on human intervention1a claims adJuster spotting unusual activity in a claim or a whistle1blower @e.g. a co1worker disgruntled ex1spouseA calling 1<:: fraud line. In some cases, simple red1flag rules are used to assist in the identification of potentially abusive activity or simple statistical tools that profile peer groups and use standard deviations to identify outliners. These are good first steps, but there is much room for improvement. There is a great potential for insurance organi"ations to identify more fraud and abuse and identify it closer to its onset. 0ecause detection has received far less attention than review, this paper will focus on the application of technology to the detection problem. Thakur &ollege of .cience / &ommerce
APPROAC(E! TO DETECTION Two fundamental approaches to detection are ruled1based and model1based. The nature of fraud and a comparison of these two approaches can be better understood by using the analogy of the amoeba. Usin Rules to detect fraud and a-use !ules @or red1flagsA are often developed to identify DsuspectE claims. 9or example, neck inJuries are more likely to be fraudulent than head inJuries. 'ence, a DruleE may identify neck inJury claims as suspect. 'owever, even though neck claims have a higher risk of fraud than head claims, it is still the case that far more neck claims are valid than are fraudulent, so the rule may be refined to future restrict the claims identified as suspect @e.g. an employee on the Job for less than one yearA. In terms of the amoeba analogy, the boundaries of the regions defined by rules@shown as squares in the diagram belowA are very simple compared to the boundaries of the amoeba. 3sually, a rule has some overlap with the amoeba but also has some area outside the amoeba. A tremendous number of rules are required to cover the amoeba and fill its multi1dimensional space. In actuality, rules1based systems are most beneficial to find evidence, not detect suspicious claims. This means rule1based technology is effective as a tool for review, but not effective enough for pure detection to summari"e rule1based technology.
NEURA& NET#OR$ TEC(NO&O)* 7ithin supervised or unsupervised models, a variety of technologies are available. Amongst the most powerful are neural networks. 'umans cannot simultaneously consider more than a handful of variables. (eural networks provide an effective tool for shifting through large amounts of data to identify those patterns1 comprised of interactions involving multiple variables1 most indicative of fraud. In a supervised model can consider hundreds of variables in developing a score through a learning process of looking at known historical examples of DgoodE claims and DbadE claims. The result is a model that can recogni"e the highly complex and subtle differences between DgoodE and DbadE patterns of behavior. In an unsupervised setting, a neural network can characteri"e complex behavior patterns to identify those claims that are most similar to each other, as well as claims that are most unusual. Traditionally statistical methods @for example, regressionA can in theory, produce models that are Just as accurate as those produced using neural network technology. 'owever, because such methods rely upon human experts @typically statisticiansA to explicitly determine the complex data relationships, it is nearly impossible for such systems to match the predictive power of a neural network model. 9urthermore, maintenance of traditional statistical models is costly.
TEC(NICA& C(A&&EN)E! Thakur &ollege of .cience / &ommerce
A host of tech accompanies the task of insurance fraud and abuse detection. An abusive solution to the problem requires a comprehensive approach enabled by a variety of technologies that addresses these technical challenges head1on. .ome of these design issues include F *ngoing reassessment of fraud risk 0ecause fraud may not exist at the time the claim is submitted, or because evidence of abuse may not yet be apparent, a system must each claim over and over on an ongoing basis. F 3nderstanding raw data The starting point is the Draw mountain of dataE. A thorough understanding of this data requires careful analysis and domain expertise. 9urthermore regardless of what technologies are employed, careful engineering is required to address issues of data being messy. missing or standardi"ed F 0ehavior from ongoing transactional data &haracteri"ing claim activity involves the summari"ation of all transactional data @e.g. payments or medical service detailsA. This summari"ation must not lose key aspects of activity. F &omplex pattern in data Identifying which claims are most suspicious requires a comprehensive analysis of many different features characteri"ing the claim and its activity. A detection system must be able recogni"e those patterns of behavior most indicative of fraud. F 6imited examples of confirmed fraudulent claims In many cases, only a small number of known examples of fraud may exist in the historical data. *ne must be able to handle such situations when developing the detection system.
F 2rioriti"ation of suspects In order to match work level to staffing constraints, which may be different for different customers and may vary over time, a detection system must allow for prioriti"ation of suspects. .coring models provide a rank ordering of all suspects so that attention can be focused on those deemed most suspicious. F %ffective use of detection results In order to effectively use the detection system+s results, explanations for what makes a claim look suspicious should be provided, strategies for effective workflow assignment should be determined @e.g., match resources with suspects that are most beneficial to reviewA and tools to review the results should be available @these may already existA. F .ystem $aintenance The system performance must not deteriorate due to changing patterns of activity overtime. 0ecause neural network models are built from data and automatically learn complex patterns within the data, they can be efficiently redeveloped. Indeed, as more examples of abuse become known, model performance can be expected to improve over time.
INTERNET , INTRANET The Internet is a worldwide system, accessible through computers. Information travels through the internet at incredible speeds. It cuts across national / international boundaries. 7hile the internet allows access for anybody from anywhere, the internet is an in1house network, working on the same principle. The difference is similar to the difference between a national newspaper / in1house newsmaga"ine, which is for private circulation. If an insurer has an intranet system, the information in the intranet will be available only to its offices / personal. The policyholders will not be able to access the data in the intranet. &irculars meant for internal circulation can be posted on the intranet / everybody will have immediate access to it, however far away he may be located. In the intranet also, it is possible to restrict some information to certain categories of persons, who will be identified through passwords. 0oth internet / intranet enables users to do the following at any time @-8 hours, 4>= daysA .end / receive letters, which are called e1mail. %very person will have an De1mail idE, which is his address in the net. .earch, read / retrieve data, files, and pictures. 0uy / sell of policy 0enefits to Agents
If the insurer has an intranet, the agent can, sitting at his place of work, be attending the insurer+s office, making enquiries about status of proposals or claims or discussing with any other agent, for clarification or advice, whenever he wants to do it. The physical distance between the agent / the office will not be of any consequences at all. The benefits to agents will be, 'e can receive all circulars / instructions issued by any office. All delays on account of postal transmission, being forwarded from one level to another, dispatch department
absence of peons, wrong addresses, misplaced through oversight, lost in transit etc., are avoided.
Any doubts with regard to proposal, benefit, premium, taxation, medical examination, insurability etc., can be discussed / got clarified directly from the person concerned. &ommunications to / from the office will be immediate through e1mail / at a low cost. 0enefits to 2olicyholdersl2rospects, 2rospects can get benefit through the internet in the following ways1 They can get details of the various policies, the benefits there under, the premiums payable etc., F 2rospects can get advice on the suitable insurance plan for themselves. F 2olicyholders can get information with regard to the status of the policy, the premiums due, the bonuses attached, the surrender values or loans available, revival possibilities, nearest office for any further transactions. F 2remium can be paid without having to go to the office of the insurer, by direct debit to the policyholder credit card or bank account The 6I& has included in its websites, for the benefit of the prospectus and the policyholder, information to health issues
$I!O$! Niosks are unmanned information centers, placed strategically at public places. They are called Interactive Touch screen kiosks. A kiosk is a self1 contained hardware / software to blend all current media including graphics, video, text / quality sound. It consists of a touch sensor/ a monitor on which the sensor can be fitted. The user is expected to touch the relevant sensors, according to the choices offered by the kiosks visually on the monitor. The kiosks then takes him the required information or to transact the required business. The 6I& has installed kiosks in more than 1:: locations covering its divisional headquarters. The kiosks provide information on policy status, product information about all products including group insurance products. These can he used by persons, who do not have their own computers and cannot access the internet. They can be operated -8 hours a day and do not require any supervision like the AT$s of banks. The touch1screen kiosks were installed in some of the branch, divisional and "onal offices of 6I&. 0y this facility the customers can obtain information about 6I&, its performance, schemes and statuses of policies by the touch of the screen. The kiosks are interactive and user1friendly. .uch kiosks are also to be installed in bus and railway stations and in busy thoroughfares of maJor towns and cities. In due course, payment of premium will also be made by dropping cheques and KKs in drop1in boxes.
DATA CO'PRO'I!E CO.ERA)E The breach of personal data stored in business files and computers is a serious risk for any company that controls the information. &ustomers and employees may become the victims of identity theft and fraud. 7ith so many incidents of data loss being reported, companies are looking for solutions that include new insurance protection. All companies are responsible for personal information. %ven a small business may have data on a large number of customers, clients and vendors. That information can be lost, stolen, or inadvertently disclosed. 0ut the result is the sameCanxious victims, unexpected business costs and damage to a company+s brand and reputation. &aptop T+efts Increase Ris/s The breach of personal information is a serious problem in the 3.. In the past two years alonc, data breaches have affected approximately 1:: million Americans, a consumer watch group reports. .ome people may have been affected more than once and not all of them were victims of identity fraud, of course, but the growing number of data losses points out the continuing exposure to consumers and businesses. 2ersonal data may be stolen from physical records, or obtained by fraud such as the sale of information to a sham company It might be hacked from computers, mistakenly released or published, even posted to a website. A key factor in many of the recent high profile data breaches has been the theft or loss of laptop computers. ln fact, about a quarter of all reported data breaches may involve missing laptops. It+s not surprising since laptops are a target of thieves. &yber Angel .ecurity .olutions, a national security technology firm, reports that 1:; of all laptops are stolen in the first 1- months and H:; of those computers are never recovered. 'alf of the companies in the 3. had their laptops stolen in the last year and almost H:; of all corporate crimes are linked to stolen laptops.
Data Breac+es !pur New &aws To fight identity theft, 4- states have passed laws that require businesses to respond to the breach of personal information under their control. 9ederal legislation is pending. $ost of the laws require businesses to warn victims about potential IK theft and fraud. In many cases, the warning must he issued within days and include the news media. 0usinesses may have to pay to monitor personal credit. %ven without a legal requirement, consumer sentiment is pressuring businesses to take responsibility to safeguard personal information. They want victims to be notified and informed about the scope of the damage. They also demand the company provide personal assistance including identity restoration case management when a data breach occurs. A data breach can seriously harm tie brand and a eta business. Although it can be expensive to notify and assist victims of a data breach, the risk of notifying people affected can be far worse. In today+s environment, a business that experience data breach must protect itself from both the risk to its reputation and the cost of providing services to those exposed to identity theft and fraud. Data Compromise Covera e Offers Protection A new insurance product 111 data compromise coverage 111 us starting to appear in the market. This commercial lines coverage addresses the issue of data breaches by helping a business or institution respond. This is important since IK Analytics (ational Kata 0reach Analysis found that early notification of breached personal information may significantly lower the rate of misuse. The findings suggest that breach notification could serve as a deterrent to IK fraud.
!everal %orms Now Availa-le At this time, there are a few data compromise coverage forms being offered. At least one monoline form appears aimed at large accounts, and at least one packaged firm is designed for middle marker and $ain .treet accounts. *ne of these combines first and third party coverage and the other is first party only. 7ith corporate managers citing data breaches as their (o. 1 concern in a recent poll, data compromise should he an area of further development and innovation, in the coming months. !maller Companies Can Be .ulnera-le .mall businesses can find it most difficult to respond to the breach of personal information. ?et it is particularly challenging to offer broad and affordable coverage for smaller businesses. 3nlike larger companies, they may not have the knowledge, staff and resources to inform and protect potential victims. .maller businesses might not recover as easily from the extra expense and had publicity. They should look for data compromise coverage that will arrange and pay for, F The cost of notifying individuals F 6egal reviews and forensic information technology exercises F 2ersonal services for eligible insured such as a helpline, credit checks and case managers for the victims of IK fraud. Treatin Claim Data Carefully Kata compromise coverage raises sensitive issues for insurance professionals as well. *ne is the extreme sensitivity of claim data. 'ow will a claim be adJustedV 'ow much information do you needV The personal information of potential identity theft victims can+t simply be faxed and dropped inside an inbox. It requires special handling and careful security procedures so that insurers are part of the solution, and not the problem. Another issue is for the insurance industry to take action so that we are not fooled ourselves. It can and does happen that insurance companies issue policies to people Thakur &ollege of .cience / &ommerce
who are not who they claim to be. 7orse yet, insurers may claim payments to imposters. Identity verification is not always easy, but our industry must take steps to protect personal information and prevent claim1related identity fraud. Insurance Professionals Can (elp It is difficult enough to keep up with developments. As technology continues to advance, personal information becomes increasingly exposed and new coverage options for data breaches are evolving. The pain of being an identity theft victim is driving public reaction to data breach incidents. The insurance industry can help by taking good care of the data in its own control, offering high quality services to IK theft victims and developing new insurance programs for data breach exposures.
IN!URANCE AND E&ECTRONIC CO''ERCE 0 E0IN!URANCE *n a global basis, there is mad rush of companies willing to enable their business. %1 insurance is one of the growth areas in India. %normous opportunities are being created Thakur &ollege of .cience / &ommerce
by the Internet+s new connectivity such as improving customer+s service, reducing cycle time, becoming more cost effective, and selling goods, services, or information to an expanded global customer base. As entire industries are being reshaped and rules for competition are changing, enterprises need to rethink the strategic fundamentals of their business in order to be successful. Globally, insurance on the net has lagged behind other financial service products such as banking and brokerage. *f the total online users only =; used insurance service online. This lag was due to lack of relevant and adequate content. Traditional insurers, while leveraging on new information technologies, have been slow to utilise the Internet as an alternative distribution channel. All the largest insurers have been focused on static marketing presence online, encompassing product information, 9AB+s and quotes. *nly a few insurers have added the ability to submit applications online. This lack of participation in the e1business revolution is seen across lines. The insurance companies attribute two factors for the slow take off. 9irst and foremost, insurance is a product that is sold and not bought. The Internet is perceived to be a buyer+s medium, with online customers able to search quickly and for the most competitive prices and variety of products. Insurance is one product that cannot be easily commoditi"ed. The more personal the selling process, the greater the difficulty in using the net as a medium for selling. Insurance is one product, which involves personalised selling. The process of insurance sales requires a series of face1to1face interactions. International Trends The convergence effect of IT is being felt by the insurance industry as well in developed countries. The insurance industry is expected to lose market share to banking and other financial institutions. &ustomers today expect enhance levels of service due to increased competition. This customer demand is likely to result in non1traditional access to specific information. The global online insurance market is expected to achieve an exponential growth in the near future. The Gartner Group in a study conducted by them says that in a year -=; of all customer contacts and enquiries for enterprises will come via the internet, e1mail and Thakur &ollege of .cience / &ommerce
online forms. 0ancassurance customer service, which has been almost exclusively done via the telephone @H>; of all transactionsA, will become increasingly e1mail based in the next four years decreasing telephone related service by -<;. In response to these trends in customer preference, insurers are mobilising their online sales and customer account management capabilities. This move towards building Internet based business solutions benefits the insured by providing greater flexibility, greater customisation of information and improved customer service for the insurance company. This drastically reduces the costs involved. .imilarly, by essentially outsourcing administrative and cost intensive processes such as policy administration to customers, the cost of administration and servicing the insurance policy also decreases sharply. E0Insurance in India The intriguing question before all associated with the insurance industry is that will it be possible for private companies or even public sector monoliths to sell insurance online in India in the near futureV Insurance companies will probably have to wait for Internet penetration to increase and the still ambiguous e1commerce rules to take concrete form. 'owever, what is not debatable is that new private entrants will change the rules of the game for the Indian insurance business, both in the life and the non1 life segment, unfolding opportunities for software engineers and professional agents. To peep into the possibilities and opportunities emerging out of the integration of insurance and information technology, various organisations have organised seminars and conferences in the recent past to explore the possibilities of selling insurance on the (et and gauge the opportunities for the growing Indian software industry.
According to T. !amanan of Assocham, life insurers were among the first to go online with informative content and features like actuarial calculators. 'owever, according to him, they have been relatively slow to embrace online commerce, which currently makes up about 1 per cent of the total term life market. *nly 1- per cent of insurance Thakur &ollege of .cience / &ommerce
companies globally sell policies online. %xperts expect the percentage of term life sold over the Internet to increase from I per cent to 1= per cent by -::4, which in monetary terms works out to U-1 billion. Although traditionally term life insurance has been sold through independent agents, the big shift will become manifest sooner than later. And more importantly Indians cannot watch from the sidelines as this paradigm shift in the insurance sector takes place. In the non1life sector, automobile policies are popular over the Internet. 2remium income, points out the paper, is expected to rise to U1< billion from about U1 billion currently. The growth of global online insurance business augurs well for the Indian IT sector. The exponential growth in the online insurance business will unfold significant business opportunities for software companiesRconsultants. The opportunities that rise out of this will be both global and local, because new entrants will have to either fine tune or prepare customi"ed packages for the Indian market. *nline insurance will also help companies reduce costs and keep premiums low, a prerequisite in a price sensitive market like India. The government, however, will have to address problems relating to bandwidth on an urgent basis to make online insurance a reality in India. *ther maJor challenges to face Indian insurers will be to design and develop strategies for delivering services to well segmented customers. The third challenge lies in developing the right combination of customer segments and applicable distribution channel strategies. $ost 7eb sites offer contact numbers of their branch officers where we can get further details of the products on offer. The Agent locator feature, available on maxnewyorklife.com, iciciprulife.com and on bimaonline.com help one locate an insurance agent most accessible to you based on a search facility. *ne would expect downloadable proposal forms on insurance web sites, but these are missing in most cases. *nly Iicindia.com seems to offer downloadable proposal and claim forms for a few of the schemes. Benefits of Electronic Insurance %1insurance provides multiple benefits to the insurer and the existing and prospective insured, Thakur &ollege of .cience / &ommerce
F F F F F F F F F F
Information collected is better and cheaper .peed of response C Issuance of policy and settlement of claims is faster 2rovides new ways of doing business in competitive market 9lexible pricing and customised services Global accessibility i.e. lapse of physical boundaries Increased sales without additional sales force Immediate premium collection and funds transfer !educed cost per transaction -8xI availability i.e. round the clock availability of information !eal time knowledge base building
'a1or %actors Affectin E0insurance F Growth of net, it is estimated that India would have about 1=: million net users by -:1:. These figures represent a huge buying potential. F &ompetition pressures, insurance companies because of competitive pressures would be driven into Internet rather than a clear !*T Justification. F &ustomer, the availability of net1based services will be a huge factor for customer retention. F &ross 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. F &osts, in the beginning c1insurance will be a cost factor rather than a profit driver, but in the long run it will be a cost reducing factor.
E0Insurance Business C+allen es %lectronic insurance will not only provide many benefits but will also pose business and technological changes. 0usiness &hallenges F Kisintermediation increases business, .tudy has shown that the cost of distribution decreases with the increased value of connection. 2roducts with relatively high fixed costs and low value such as travel, credit or burial insurance are relatively expensive to produce. &ustomers pay a high price per dollar of coverage for these products. The Internet allows the disintermediation of this relatively high overhead for these low face value products. This means that prices can be lowered and more insurance can be sold by reducing the transaction costs of the exchange. F !eorganisation of companies15irtual &ompanies, $any insurers will be prompted by the opportunities presented by %1commerce to restructure the packaging of insurance services. Insurance companies using c1commerce may re1engineer, outsource, andRor streamline their management functions, or marketing and distribution arms. To more efficiently deliver these services, some insurers will be able to reduce their significant investments in physical facilities and certain personnel. %1commerce will enable independent agency insurers to more easily adapt their distribution mechanism to market competition and expedite their transactions with intermediaries. F Insurance customers what do they want, &ustomers could get better and different service through the Internet. It is possible to obtain quotes from a number of companies. In some cases, the Internet provides rating agencies+ evaluation of insurers. The Internet and outsourcing can provide additional cost savings to the consumer. Technology can bring the customer closer to the insurance contract, by removing layers of inefficiencies. &onsumers 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. &onsumers also could have Thakur &ollege of .cience / &ommerce
access to internal records to see where their claims are in terms of payment, when their next annuity payment is due, and how their mutual fund is performing. This can be done without calling a burdensome voicemail system, being put on hold, or finding a person who can give them the desired information efficiently. F The Keath of Insurance Agent, *ne of the reasons why insurers have been slow to use electronic commerce could be the fear of swallowing up the agent+s business. The Internet does not necessarily imply the death of the agent. $any insurers are examining their agent+s role in the process and arc also developing direct contacts with the insured through their web presence. Agents could enhance their advisory role to consumers as their paper and money processing functions diminish. Technological &hallenges *ne of the most prominent challenges of e1commerce is security. It is very evident that many users are reluctant to do business on the Internet due to security reasons, Database !ecurity, The business database security is utmost important. This has to be monitored by security of the web server and web access. "eb !erver !ecurity, .ecurity policies should be defined as who is allowed access, nature of the access and who authorises such access, etc. Pass ord sniffing, 2rotection against password sniffing is to avoid using plain text user names and reusable passwords. #et or$ !canning Programs, Automated tools should be used to scan your network. These tools check for well1known security related bugs in network programs such as send mail and 9T2K. P%ysical !ecurity, *ne can ensure physical security by having an alarm system that calls the police, having a key1lock on the computer power supply.
"eb Access !ecurity, 'ost based restrictions can be implemented using a firewall to block incoming 'TT2 connections to a particular web server. &ransmission !ecurity, %ncryption is a key technology to ensure transaction security. Privacy, 2rivacy is likely to be a growing concern as internet1based communications and commerce increase, Kesigners and operators of web sites who disregard the privacy of users do so at their own peril.
IN%OR'ATION TEC(NO&O)* AND &IC Thakur &ollege of .cience / &ommerce
Technology In Insurance=:
6I& has been one of the pioneering organisations in India who introduced the leverage of Information Technology in servicing and in their business. Kata pertaining to almost 1: crone policies is being held on computers in 6I&. The computers were introduced in 1H>8 in 6I&. 3nit !ecord $achines introduced in late 1H=:+s were phased out in 1H<:+s and replaced by $icroprocessors based computers in 0ranch and Kivisional *ffices for 0ack *ffice &omputerisation. .tandardisation of 'ardware and .oftware commenced in 1HH:+s. .tandard &omputer 2ackages were developed and implemented for *rdinary and .alary .avings .cheme @...A 2olicies. %ront End Operations 7ith a view to enhancing customer responsiveness and services, in Suly 1HH=, 6I& started a drive of *n1line .ervice to policyholders and agents through computers which enables policyholders to receive immediate policy status report, prompt acceptance of their premium and get !evival Buotation, 6oan Buotation on demand. Incorporating change of address can be done on line. Buicker completion of proposals and dispatch of policy documents have become a reality. All -18< branches across the country have been covered under front1end operations. .o 6I& claims that all its 1:: divisional offices have achieved the distinction of 1::; branch computerisation. (ew payment related $odules pertaining to both ordinary and ... policies have been added to the 9ront %nd 2ackage catering to 6oan, &laims and Kevelopment *fficers+ Appraisal to reduce time lag and ensure accuracy. 'etro Area Networ/ A $etropolitan Area (etwork, connecting I8 branches in $umbai was commissioned in (ovember, 1HHI, enabling policyholders in $umbai to pay their 2remium or get their .tatus !eport. .urrender 5alue Buotation, 6oan Buotation etc. from any branch in the city. The .ystem has been working successfully. $ore than 1:,::: transactions are carried out over this (etwork on any given working day. .uch (etworks have been implemented in other cities also.
Technology In Insurance=1
#ide Area Networ/ All I )onal *ffices and all the 56( centres are connected through a 7ide Area (etwork 7A(A. This enables the customer to view his policy data and pay premium from cur branch of an $A( city. As at $ay -::-, there were H1 centres in India with more than 1-:: branches networked under 7A(. Interactive .oice Response !ystems 2#R!3 I5!., functional in =< centres all over the country, enables customers to ring up 6I& and receive information @e.g. next premium due, .tatus, 6oan Amount, $aturity payment due, Accumulated 0onus etc.A about their policies on the telephone. This information could also be faxed on demand to the customer. #e-site 6I&+s website, www.licindia.com, displays information about 6I& and its subsidiaries. 6I& @InternationalA %.&., 6I& @(epalA 6td., 6I& $utual 9und, 6I& 'ousing 9inance and their products. The addressesRe1mail IKs of its )onal *ffices, )onal Training &entres, $anagement Kevelopment &entre, *verseas 0ranches, Kivisional *ffices and also all 0ranch *ffices are also provided. 6I& has given its policyholders a unique facility to pay premiums through Internet absolutely free and view their policy details on Internet premium payments. Information $ios/s 6I& has set up Interactive Touch screen based $ultimedia NI*.N. in prime locations in metros and some maJor cities for dissemination information to general public on various products and services offered. These NI*.N., enable the users to provide policy details and accept premium payments. Info Centres It has also set up call centres to provide information about our 2roducts, 2olicy .ervices, 0ranch addresses and other organisational information.
Technology In Insurance=-
IN!URANCE APP&ICATION! #IT( ADOBE Brea/ free of paper0-ased processes Insurance companies tell us that they are hindered by slow, paper1based processes. Agents waste time and money shuffling forms, instead of closing business and prospecting for new customers. 0ack1office burdens, such as re1keying data and handling huge volumes of mail, further increase costs. As a result, customers are put off by frequent poor service, causing them to look for other alternatives or abandon the process altogether. The challenge is to find a way to streamline the application processCdriving down costs while helping to drive additional revenues and profitsCbut it hasn+t been easy. Restricted -y system silos and patc+wor/ processes If your company is like most carriers, you have legacy system silos and patchwork processes for various product lines. This lack of integration creates islands of information, which necessitates extensive manual handling and staff paperwork. The resulting inefficiencies dramatically impact your organi"ation+s ability to put the customer first and efficiently meet the needs of policyholders and agents. F F F Applications for new insurance take an hour or more to complete. &ustomers have to supply the same information repeatedly A seemingly endless stream of paper flows from desk to desk and department to department, often back stepping more than once. F 9requent data errors and broken process steps require timeCtime that costs you money. .tudies have shown that paper1based processes are expensiveCup to an estimated U1=: to print, scan, fax, copy mail, and process each insurance application. In addition, growing regulatory requirements add to the burdens that your headquarters faces, forcing you to update systems and disclosures to remain in compliance. All this leads to Thakur &ollege of .cience / &ommerce
slower service, unhappy customers, and dissatisfied agents and brokersCwho Just may decide to take their business elsewhere. Adobe can help remedy the situation. The Adobe solution for insurance application helps you improve service while reducing costs, meeting policyholder needs, and increasing agent loyaltyCso you can dose more business. )et faster4 more accurate processin The Adobe Intelligent Kocument 2latform accommodates both paper forms and electronic documents, simplifying the collection and sharing of information, and minimi"ing time1cons tuning back1office tasks. F F Agents, customers, and call center representatives need to enter data only once. !enewal forms and other documents can be automatically populated, dramatically reducing time1consuming and error1prone re1keying. F Adobe Kocument .ervices simplify underwriting and risk appraisal by allowing ratings and not to be made right on the form for review by all partiesCwithout altering the original document. F %lectronic distribution eliminates postal delays and costs, and improves response times by eliminating back1office handling. F Agents and brokers can present intelligent forms to clientsCin an offline modeC by using the free Adobe !eader. F 7hen wet signatures are required, you can print forms out and then easily revert back to an intelligent, automated process while maintaining full integrity of the original form data. 0uild data validation and calculations into all application processes. .upport for eWtensible $arkup 6anguage @W$6A and A&*!K W$6 standards helps efficiently integrate this information into your enterprise applications. Adobe Kocument .ervices
also offer a flexible front end, so you can adapt easily to the latest regulatory policies, to minimi"e the business disruption and expense of compliance. 0eyond the wide range of benefits delivered by the solution, Adobe also partners with industry leaders such as I0$ and Kocumentum, so that you can extend Adobe supported insurance solutions throughout your enterprise.
Technology In Insurance==
Ado-e PD%" $ey to streamlinin t+e insurance application process Adobe 2ortable Kocument 9ormat @2K9A provides a secure, reliable way to distribute and exchange documents and information. 2K9 files look like the original documents, offering customers and agents the look of paper with the added efficiency of fillable forms. This familiarity helps to increase the acceptance of your self1service channel and maintains better consistency between online and offline processes. $ultiple policyholder documents can be dynamically converted and combined into a single Adobe 2K9 file, decreasing document preparation time and expense, while ensuring higher quality packages. And since Adobe 2K9 files are searchable, they are ideal for archiving and retrieval. 7ith free Adobe !eader software, your internal staff as well as independent brokers and agents can access documents and forms as needed. !eviewers can easily add comments without altering the original, and agents as well as customers can see and respond to these comments, avoiding redundancy and saving cycles. 2assword protection and other built1in security features can be added to control access and ensure data integrity at every step. This efficient workflow translates into to faster reviews and underwriting, and improved service. The Adobe solution for insurance application improves the quality of your service to agents, brokers, and customersCmaking it easier for agents to sell more policies, decreasing abandonment rates, and enhancing your profitability. F The application process is simplified and back1office tasks are automated, improving cycle time and reducing the costs of acquiring and servicing customers. F !evenues increase because you and your agents and brokers can efficiently handle more business. F ?our headquarters gains better control over costly, disruptive compliance issues.
Technology In Insurance=>
2ersonal information gathered from policyholders is safeguarded, ensuring privacy and maintaining transaction integrity with customers and partners.
To streamline the insurance application process and improve back1office efficiency, turn to Adobe. 'ICRO!O%T AND T(E IN!URANCE INDU!TR*
9or many drivers, the seemingly endless round of phone message and paper work that follow traffic accident can make the Job of resolving on insurance claim feel as damaging as the accident itself. 9or insurance carriers auto claims processing which involves handling estimates adJustments repairs billing, and more is no less time1 consuming, expensive, and frustrating. Today, innovative technologies from $icrosoft are transforming from the way auto insurance claims are processed. 0ased on the power of the $icrosoft.(%T framework these technologies open the door of integrated IT system that link programs and applications built of any platform and written in any language. .treamlining the flow of data and bringing new levels of efficiency to the business of claim processing. 2rocess claims is a leading software provider to the insurance industry, offering a broad range of property and casualty solution that span heavy equipment, commercial, personal and specialty lines. A $icrosoft certified partner, process claims deliver solutions that automate solution that automate communication and information flow, and yield rapid return on investment. 0y harnessing the power of $icrosoft .(%T framework and its own data transformation technology and industry expertise, process claim solutions provide data transformation an d mining, business intelligence, work flow management, assignment automation, appraisal management and trading partner integration. 6ast year, process claims facilitated settlement of U8 billion in claims. The issue of data integration is critical for all parties involved in resolving auto insurance claims. In addition to insurance companies there are companies that depend on data to provide
Technology In Insurance=I
rental car services, supply parts, facilitate salvage processing, determine vehicle valuation, and more.
2rocess claims+ end to end material damage management systems provide the vital link between all of these parties. 3tili"ing $icrosoft visual studio, .(%T, W$6 and web service programmable application components that can be accessed over the internet with standard web protocols1process claims enables its client to conduct business with greater speed and efficiency. Typically, when a driver reports an accident, the carrier assigns an adJuster or refers the driver to an authori"ed body shop. 0ecause process claims uses W$6 it can take information from any claim system and instantly route the assignment to the most appropriate appraiser. After receiving the claim the appraiser downloads is it to an estimating application, writes the estimates, adds digital photos, and sends the package back to the carrier through the process claims browser1based application suite. The ability to utili"e W$6 and web services has established process claims as a market place leader. (ot only does the solution streamline claims processes. It also extent and enhances the value of existing legacy system functionality through seamless integration with outside services. And because legacy system can access this new functionality transparently, Training and support costs are minimal. 2rocess claims+ claims port system focus on areas of material damage to reduce loss1adJustment expenses, increases efficiencies, and improve customer satisfaction, and they are configured to meet the specific business requirements of individual insures. Today, innovators are taking advantage of technologies like this to automate business processes and transform insurance claim processing.
Technology In Insurance=<
CONC&U!ION The technology in insurance has grown through their performance, restructuring policy and their efficiency in providing the large amount of insurance services with the help of technology as their technology as their tool. The supporting technology require will be real time, rather than batch, longitudinal rather than episodic will require connectivity rather than be self contained will be interactive will rely on large relational databases. Today+s consumers do not like to wait. Insurance companies that are enabling to react to their customer+s demands will lose market share to their competitors that can. The question now facing insurance companies is no longer if they should take advantage of the internet, but now should they do it. .hould you adapt your existing products or create internet specific insurance products and brandsV Ko you focus your efforts on distribution or serviceV Thus the insurance services without technology will be like tea without sugar. Therefore both need to be integrated in order to provide quality service / also to tap the insurance market.
Technology In Insurance=H
BIB&IO)RAP(* Boo/s" Insurance / !isk $anagement X Kr. 2.N. Gupta Technology / Insurance X I&9AI 'a a5ines" The 7indows $aga"ine Insurance Sournal #e-sites" Insurance / Technology X http,RRwww.insurancetec%'com (etwork $aga"ine India X http,RRwww.networkmaga"ineindia.com $icrosoft &orporation X http,RRwww.mircosoft.com Adobe .ystems Incorporated X http,RRwww.adobe.com 7ikipedia X http,RRwww.wikipedia.com 'ow .tuff 7orks X http,RRwww.howstuffworks.com

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Thakur &ollege of .cience / &ommerce

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Thakur &ollege of .cience / &ommerce

Duration ?early 'alf1yearly @-.8 x -A Buarterly @8.: x 8A Total

Amount 1.> crore 8.< crore 1>.: crore --.8 crore

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Components of a Total Underwritin !ystem" Thakur &ollege of .cience / &ommerce

Initial 3nderwriting Thakur &ollege of .cience / &ommerce

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Impairment Nnowledge10ased .ystems Thakur &ollege of .cience / &ommerce

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.peedy and documents

%xpeditious disposal of claims

Buality Assurance / %fficiency

Application of IT Thakur &ollege of .cience / &ommerce

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TEC(NO&O)IE! %OR IN!URANCE Thakur &ollege of .cience / &ommerce

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IT APP&ICATION! IN %UNCTIONA& AREA!

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TEC(NICA& C(A&&EN)E! Thakur &ollege of .cience / &ommerce

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IN%OR'ATION TEC(NO&O)* AND &IC Thakur &ollege of .cience / &ommerce

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