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. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice. The developments in IT are the working wonders in all the fields of activity. It has become possible to send and receive information almost instantaneously. If circulars do not reach the agents on time or doubts are not cleared quickly, or the agent does not have details of the new plans announced in the press, the agent may face awkward situation with the prospects. These problems can be totally avoided with the use of IT. Insures traditionally have been quickly to adapt latest advances in the technology. This is happening in the areas of IT as well. The extent of IT application will vary between insures. The information technology has always played a very important role in the operations of every life insurance company. In fact of all the business organizations in the service sector, the life insurance companies were the first to adopt ‘MECHANIZATION’ as an inalienable part of their operation all over the world. This becomes necessary because of two important reasons namely: 1. The nature of services to be rendered to the policyholders.

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Technology In Insurance2 2. The need to evaluate the liabilities under the policies in vogue at the time of valuation.

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 ‘Narrative type’. All the policyholder documents and conditions applicable had to be typed out separately. But the number of policy sold was limited: it was possible to continue that method. But as the business grew, it became humanly impossible to continue that method of preparation of policy bonds. Hence, the life insurance companies switched over to ‘schedule type’ of the policy documents. Here the form of policy bond was standardized and as most of the condition and privileges were similar, pre- printed stationery was prepared. The only work left was to fill up the details of each individual policy, viz. 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. Policy particulars were embossed on Zinc or Aluminum plates and these plates were used to print the particulars in the schedule part of the pre- 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 ‘Unit Record Machines’ otherwise called ‘Power Samas Machines’ which were operated using punch cards. Thakur College of Science & Commerce

Technology In Insurance3 These were parallel records in which policy particulars were punched in the prescribed fields.

There were two types of cards, namely: 1. Premium Master Cards Premium Master Cards were utilized to account for the premiums received and then for generating lists of lapsed policies. 2. Valuation Cards Valuation Cards were prepared to be utilized for the valuation of Liabilities under the policies. There was one-on-one correspondence between the adrema plates and premium master cards. With 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. Both were replaced by a new kind of record called ‘Policy Master’ 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

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The number of premiums accounting transactions during a year will therefore be as under- Duration Yearly Half-yearly (2. i. about 2.4 x 2) Amount 1.e. Assuming that 20 % of these are: Under salary savings scheme.8 crore Thakur College of Science & Commerce . 50% are under quarterly.e.6 crore under yearly.4 crore. For example. 2.Technology In Insurance4 in the volume of the new business and much larger increase in the number of service operations.4 crore under half-yearly and Rs 4 crore under quarterly modes. Rs 1. i. and another 20 % in paid up condition. about 20% under yearly and 30% under half-yearly mode of payments. half-yearly or quarterly. Usually. LIC of India has about 13 Crore of policies. there remain approximately 8 crore policies under which premiums are received by yearly.6 crore 4.

lists of medications and Thakur College of Science & Commerce . • Second Generation: Information Display Systems These appeared in mid 1980’s. 22.4 crore Thus. medical terminology. The remaining cases were referred to the underwriters. They allowed for the entry of the information from the application and screened out or accepted clean non-medical cases which were previously handled by the manual jet screening units. such as underwriting manuals . Information display systems allows the underwriter automated access to various sources of information. there are many other transactions to be handled.0 x 4) Total 16. it will impossible task to manage transactions such as magnitude.” • First Generation: Screening Systems These were developed by larger companies in the 1970’s to decrease general expenses. “The use of IT and especially knowledgebased systems in underwriting has developed through generations of systems.4 crore — a huge and stupendous task indeed without the fast operating computers. the number of transaction in respect of the premium payments alone for the organization is Rs. Thus. They were design to save the underwriter’s time and thereby improve the productivity. which have progressively increased in complexity. In addition.0 crore 22. Underwriting of proposals for the life insurance became standardized because of universal adoption of ‘Numerical Rating Method’. in one year .Technology In Insurance5 Quarterly (4.

and pre — process other cases for underwriters by ordering information for cause’ such attending physician statements. Some can even do discrepancy Thakur College of Science & Commerce . Initial underwriting system extend the capability of the first generation systems and go beyond screening to identify underwriting problems. The advanced third generations systems can also do initial underwriting processing. automatically underwrite some cases. • Fourth Generation: knowledge Decision Assistance Tools with the requirements such as medical examinations. they have only been available for the past few years. These systems replace the need for multiple volumes of handbooks. •Third Generation: Initial Underwriting System. They allow rapid success to the information that an underwriter needs. 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. Because they require complex knowledge-based systems for their processing.Technology In Insurance6 other underwriting guidelines. inspection reports and laboratory test results.

The system needs multiple components for each of the essential functions. Components of a Total Underwriting System: A total underwriting System 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. Initial Data Entry Thakur College of Science & Commerce . would be integrated into the entire administrative flow for its greatest impact. which as discussed above. Their use by the underwriters can help them to manage the mortality expenses by applying consistency to the underwriting process. They have been designed to enhance the risk selection process. • Fifth Generation: Total Underwriting System The fifth of underwriting system encompasses and surpasses the previous system. This is essence of the underwriter work.Technology In Insurance7 This is relatively a new system which provides underwriters with the knowledge — based systems to underwrite complex impairments and to help them to manage their administrative workload. They integrate all the components discussed above into single system: they also include a management information system for the entire process.

data may be entered from an agent’s laptop-computer.Technology In Insurance8 This is where information from the application is entered into the system depending upon the specification of the company and its field force. This involves taking applications and sorting them into two groups. Information from the agents report. This is fairly simple processing. have all medical and non medical questions answered properly. Approved cases are sent directly to the administration system Initial Underwriting Applications that are not approved by screening flow into the next component are called “initial Underwriting”. Screening checks that application need no future requirements . clean ones and those in need of further processing. at a regional marketing office or at the home office. requirements ordered in the field and MIB [Medical Information Bureau] information could also be entered for processing Screening The second component is screening. are within certain age and amount limits and have acceptable finances and an appropriate beneficiary. This series of knowledge — based systems defines underwriting problems and determines why the case Thakur College of Science & Commerce .

It checks for age and amount requirement and examines the financial. If no problem are discovered cases can automatically approved without consulting an underwriter. it noted and the appropriate work-up is ordered. expect that discrepancy processing is done by comparing the details of the information from the application with those received late. In this way. Requirement Processing Since underwriting is an iterative process with information process with information from many sources being reviewed at different times.Technology In Insurance9 required further processing. a total underwriting system permits information to be entered into the system directly from the provider or by home office personnel. WORKFLOW TOOLS Thakur College of Science & Commerce . data from different sources is compared to uncover new problems. it has defined. If there is significant history or physical finding on the examination that was not admitted on the application. non. It decides if there is sufficient information to deal with the problems. Processing requirements are similar to initial underwriting. as well as the interaction among them.medical and medical aspects of the case.

and status function. A total underwriting system provides these. The in. track and change the underwriting problems and requirement of case.Technology In Insurance10 Underwriters need certain tools to process their cases administratively. such as medical and drug references. Information Display The information display component gives online access to underwriting guidelines with several types of automated searches to improve the access of information. back-end tools. as well as the requirement and whether they have been received. Other tools allow the underwriter to manipulate. Thakur College of Science & Commerce . They include front. reporting of MIB codes and the process of requesting reinsurance. For each case their details underwriting problems and their actions. Rather than getting a stack of file. It also makes available other underwriting references. There is also an electronic notepad for the underwriter which can be integrated with an electronic mail system for field communication. post —issue requirement preparation.end workflow tools assist in the final administrative details of case: forms to be signed.end tools. the underwriter now deals with an electronic stack of case. The back. The front end tools workflow tools keep track of cases.tray function accesses cases electronically assigned to underwriter. their requirement and underwriting problems. The status function lets non.underwriter to review the selected case information. An agent’s status reveals the data from the application.

” Thakur College of Science & Commerce . cancer. This program deals with impairments such as high blood pressure. Information is requested from the record and a rating is suggested. For underwriting they limit the number of cases that need to be reviewed. If underwriters choose. Several companies have developed knowledge — based systems for this purpose and have been very pleased with results. Benefits Underwriting system has many benefits. diabetes. Their logic is patterned after the knowledge and thought processes of expert MD’s and underwriters.Technology In Insurance11 Impairment Knowledge-Based Systems The next component is the impairment underwriting knowledge-based systems. respiratory disorders. In this way the technology improves the work of underwriting by eliminating unnecessary routine cases. As an underwriting officer stated. because the system is able to process them without intervention. The management from the database of information can create reports. these will guide them through the detailed decisions needed to underwrite impaired cases. “This gives the underwriter to deal with more complex and time consuming cases. Management Reporting This component generates administrative and other reports on the decision made within the system. aviation and coronary heart disease.

knowledge-based systems can provide decision-assistance tools in the risk classifications process. Thakur College of Science & Commerce . because requirements are ordered and processed by the system prior to the underwriter seeing the cases. Such tools decrease the clerical work of underwriters and improve the workflow in underwriting departments by eliminating unnecessary paperwork. 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. they do manage these paperwork in the ordering and keeping track of requirements. service is greatly improved. One company that has integrated this type of system with its field offices is able to electronically approve applications in less than 15 minutes. Impairment underwriting knowledge-based system is sophisticated decisionsupport tools. Although these system do not do any underwriting themselves.Technology In Insurance12 Furthermore. initial underwriting knowledge — based systems decrease the number of times a case needs to be reviewed by an underwriter. Apart from reducing underwriters work. Knowledge-based system can improve underwriter productivity in other ways with workflow with workflow management tools. without having to be seen by an underwriter. Also. This is possible because some application can be approved by the system almost immediately. For the producer.

They serve as an excellent training tool for the junior underwriter and assist-experienced underwriter in very complex cases. it becomes available for management reporting and decision-making. knowledge — based system can assist the underwriting manager with the overall underwriting process. This allows underwriting managers to follow the screening of cases by the system. is information on specific underwriting decision making. The decisions can be tracked according to agent. In addition to helping in the actual underwriting decisions making. as well as the ordering of requirements and the rating of the impairments. underwriting managers can also more effectively manage the underwriters who report to them. Once information has been entered into the knowledge based system.Technology In Insurance13 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. Previously unavailable management information tools are made ready available. Thakur College of Science & Commerce . agency or underwriter so that underwriters can interact better with the procedures with whom they work .

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. The innovations in information technology can be effectively utilized for the following areas: • • Speedy and documents correct issuance of Thakur College of Science & Commerce Expeditious disposal of claims . Even though the use of information technology is not new to the insurance sector. policy issue and servicing. sales management etc. and a sweepening impact on reducing the case of various activities. With the arrival of private insurance players. the competition has become more intense and an important role is being played by the insurance sector.Technology In Insurance14 NEED FOR INFORMATION TECHNOLOGY IN THE INSURANCE SECTOR The rapid innovation in the field of information and communication technology has posed serious challenges for the insurance industry in India. The most visible of these departments are accounting. claim processing. 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 50 years.

It brought a complete integration of all activities connected with the processing of policy documents Similarly. the cashier. policy revival module. Application of IT As awareness of quality service began growing among policyholders in India also. A cash module was introduced. were equipped with computer systems. improve efficiency of service delivery and provide competitive advantage to the insurance companies. This would reduce the paper work. LIC of India had to think of many applications of information technology. All the 2050 branch offices. is enable to print and issue official receipts on the spot to the policyholders when they tender money towards premium. claims module were also introduced. Training of employees also was organized on a large scale. loans and surrender value module. a policy quotations or maturity claims intimation letters are generated on the Thakur College of Science & Commerce . operating with. Now revival quotations. the entire operation take a few minutes.Technology In Insurance15 → Quality Assurance & Efficiency Therefore the imperative for all the insurers. while sitting at his desk. especially LIC and GIC is to build up an efficient interface between the various departments and segments. Up gradation of technology was undertaken on a huge scale. Several software packages for different servicing operations were introduced. which were serving centers. A new business module was introduced which enable even underwriting operations to be computerized.

all department in all the zonal offices and central offices. Now.} was set up to give information on the Internet about the organization. To bring out the revolutionary changes in communication to policyholders. All these applications have definitely Thakur College of Science & Commerce . The corporation has plans to redesign these kiosks to provide policy details and accept premium payments. This helps management to review performance against prescribed indices and to take appropriate corrective actions where necessary. which enables policyholders to pay premium anywhere in the country.Technology In Insurance16 Computer. several steps were taken. loan amount. The site includes features on ‘Frequently Asked Questions by Non Resident Indians’. revival. The corporation has also set up interactive touch screen based multimedia Kiosks in prime location in the metros and major cities for dissemination of information on the product and services. “On-line — Bonus Calculation”. many of the cities with MAN are connected by WAN. which enables policyholders to pay premiums or get their status reports. accumulation of bonus . A website {www. The policyholder can also get the information on fax. MAN is installed in several cities. maturity / next survival benefit due . All these gave tremendous boost to the efficiency in rendering service to the policyholders Up gradation of technology also helped in another direction. “On-line Forms” etc. The web pages has been made interactive with the features like online Premium Calculation”. etc. Several reports which could be used as MIS get generated for use by managers at all levels. surrender quotations in any of branches offices convenient to them in the cities. E-mail connections have been established in many of the offices and internet connections has been given to all the divisional offices. over telephones language in language of his choice. premium position.licinda. loan. products. Inter-Voice Response Systems have been introduced which policyholders ascertain several types of information about their policy like policy status.

as a present it is extremely inconvenient to calculate the value of each contract separately.. Thakur College of Science & Commerce . With increasing complexity of products both life insurance and pension entering the market. This adds to importance of IT application. For a sufficient large life insurance organization. It is valuation. needs and matching products . therefore. Several private life insurance companies are also utilizing the latest technology available including creating their own web sites. . A few private web sites like ‘Bima online ‘also have been established Technology is the most important tool in another very important area of life insurance functions. Methods have. been devised to collect data for each plan of insurance in a form suitable for valuation in groups having some common characteristic like age. While discussing life insurance program with potential customers. Like in Japan. Grouping is done only if there is sufficient number of policies to make the group of a reasonable size. especially the agents needs a large support from the company represent.Technology In Insurance17 brought a great amount of satisfaction to policyholders. this work is possible only through application of technology. But when the number of policies runs into several lakh or crore. It is a legal requirement today in our country for a life insurance company to conduct an actuarial valuation every year. duration or term to run to maturity and like. etc. returns. comparisons. life insurance companies in India may also supply ‘Palm — Tops to their sales force. the field force. 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. The steps taken by LIC of India during the past 5 to 6 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. agents need sophisticated information including benefits. policy values used to be calculated for individuals policies. rates and impact on the customer’s budget .

standards and quality of life are changing. attitudes. The world is fast moving towards market driven economy. Market research is another area where information technology has a great role to play. are eagerly aiming to convert themselves into marketing organizations’. Organizations. They should know the pace of sales on the day to day basis. They should not only know the emerging customer profile but also the size of the market. buying behaviors. Different types of product are the need hour. Today’s. the customer has become the center around the entire market revolves. The perceptions of what constitutes standards and quality of life are changing. To certain its share and to improve it. They should know what is selling and where. The needs. The demand is more for ‘flexible’ rather than ‘packaged’ products especially in the service market.Technology In Insurance18 This will be possible only through extension of concepts of information technology. The perceptions of what constitutes standard of life is also undergoing a metamorphosis. The company should know the demographic changes taking place in the society. there is no alternative for any life insurance company than to have a continuous market research. Life insurance companies which primarily deal with the financial needs of the people cannot ignore these realities. aspirations. All these need a scientific market survey and research either done in house or outsourced. which were merely based on ‘sales concept’. A typical market survey report is appended Thakur College of Science & Commerce . The life insurance has become very dynamic.

Thakur College of Science & Commerce . TECHNOLOGIES FOR INSURANCE There has never been a time when the effective use of information technology has been more crucial to the success of the insurance industry. this will be an impossible task for the company.Technology In Insurance19 which shows the enormity of the job. Without the support of technology.

Technology In Insurance20 The insurance markets are being revolutionised by technology at a high speed pace. and lost opportunity. But the need to record and study the characteristics of persistency. 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. the sale of policies and the claim settlement are two separate areas for the Thakur College of Science & Commerce . exporters. allowing cross-border trade to become electronic and paperless. customers and agents is most important in insurance companies. products and agents. Traditionally. Such historical retention was prohibitively expensive in the past. To find more clients. shipping companies and financial institutions. Following technological advancements can really enhance the performance of insurance companies.the length of time we retain policies. In order to find out profitable combinations of households or clients. medium and competition. are increasingly on offer to importers. Using database technology companies can get a comprehensive. a database with five to ten years’ history is of immense importance. performance. but regional in focus. Analyisng a 1O-year database is cost effective. insurer needs to consider many factors. IT and software solutions. Data Warehouse Data warehousing technology is based on integrating a number of information systems into a ‘one stop shopping’ database to achieve vision of making company national in scope. including cash value. Reviewing the database provides information on how many clients have actually migrated not just how many policies have lapsed or surrendered. Database Management Systems The principles of tracking and measuring responses can pay off for the conventional insurance industry. loyalty.

It helps the insurer Thakur College of Science & Commerce . The computer applications like decision support systems (DSS). Imaging and Workflow Technologies The proposal forms may be scanned into an imaging system. Such decision support systems will provide the insurance managers with a tool for customised products and services that are more in line with what customers want. Mapping Insurers to meet different needs. Decision Support Systems The path of business applications of computers. Tracking of policy application shows how information that is input and accessed from a number of locations can increase efficiency.Technology In Insurance21 insurance companies. Group Linking Software Group-linking software enables sharing of information arid partieular1v suits document heavy insurance business. encompasses many stages including the very early applications like transactions processing systems (TPS) followed by the management information systems (MIS). can use Mapping technology. dynamic process for any business. Office automation (OAS) happens to be a continuously ongoing. Data mining can be used as a means to control costs and increase revenue resulting in enormous earning for effective users. expert systems (ES) and executive information systems (EIS) are still awaited in insurance business. such as identifying loss prone areas or geographic claim analysis. Data may be extracted for update to computer and for automated underwriting workflow may be implemented. computer based information systems (CBIS). Data warehousing allows managing by profit levels with an integrated approach rather than by limiting losses.

Intranet is the network connecting different offices of the same business to permit the internal data within the business. Finally an underwriting policy that limits the company’s exposure to catastrophic losses is implemented. The Internet and online service providers are providing opportunities to Thakur College of Science & Commerce . vendors. Video Linking A video linking facility between two remote units of an insurance company or between an insurer and a broker allows underwriters at one place and brokers at other unit to discuss risk inherent in a proposal face to face. Any user. on the electronic channel.Technology In Insurance22 to analyse the extent of its network i. who would like to exchange some information with other user at a remote location. Internet is a global network of many computer networks. Cat Models Catastrophic models use data from the recent natural disasters that helps develop more predictions of insurers’ property exposures in future disasters.e. Call centre concept based on interactive voice response services (IVRS) is gaining importance in this aspect. Call Centre Technology Good customer service is a crucial element for gaining. the insurer can determine whether it has too many or too few agency force in a particular area. can log into the computer of Internet provider via modem or an Internet access CPU (IAC). Using this data curious “what-if’ scenarios of probable maximum loss (PML) using the best estimate available at an insurer’s exposures are tested. Extranet is a network allowing the business to communicate with business partners like suppliers. banners. maintaining and retaining profitable customers. regulations etc.

As new private sector entrants enter into India. what is needed is a secure legal environment and while legislation in India is providing this environment with the enacting Thakur College of Science & Commerce . Cyberspace presents unique challenges to risk managers for several reasons. For safe business transaction. certification authorities. the foremost being that there is no Standard risk profile.Technology In Insurance23 create new forums that can be utilised by everyone worldwide. is the development of technology and cyber-insurance strategies. emails disappearing and attack from hackers for which there are few precedents in terms of risk management and even less actual insurance coverage. Technology & Cyber Insurance in India The opening up of the Insurance industry in India would boost competition. Insurers can browse through many useful sites on the Internet. better customer service. content aggregators. such as ISP’s. destruction of data. deeper and wider insurance coverage and many more opportunities for employment. Companies conducting business over the internet are exposed to a variety of new. unpredictable and serious exposures such as servers crashing. The wide variety of internet-related businesses. opportunities in the insurance industry are up for grabs. which is gaining prominence tile world over. computer viruses. One important aspect of the insurance industry. Enacting appropriate insurance policies for ensuring cover for security issues and intellectual property rights issues is vital. online merchants and software developers. facilitate technology transfer and lead to new products. Cyberspace is a risky place. all contribute to the difficulty of developing a single risk profile.

these risks can be triggered by worldwide web sites. web hosts & web-designers. employee can initiate sexual harassment charges from an employee due to disturbing e-mail content. Insurance companies in India should provide comprehensive protection policies for a business against web-related risks. such as hackers and viruses. Thakur College of Science & Commerce . and legal action. credit card and employee fraud. and trade publishers who publish illegal content or content which may be constructed as libel. Errors and Omissions liability: these risks are typically triggered by the programmers. and certain provisions in the corporate laws that place additional responsibilities on directors.related exposures are covered by their existing policies. 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. 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. Personal injury & advertising Liability: As e-commerce grows. In addition. through negligence in their work cause injury/damage to a third party. securities related laws. Essentially. Many businesses on the internet mistakenly think their internet. such as consumer protection laws. Intellectual property infringements: content providers who use content of others without permission can trigger these risks. who. business interruption losses.Technology In Insurance24 of laws dealing with the Internet. Director’s liability: Directors and officers often face the risk of litigation due to numbers of factors. Legal fees: Fees incurred for litigation arising out of various claims. such as intellectual property.

Information technology can be integrated with almost all the P’s of marketing. 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 Thakur College of Science & Commerce . 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. promotion and customisation strategies.Technology In Insurance25 IT APPLICATIONS IN FUNCTIONAL AREAS Even though the information technology has wide application in all the spheres of the insurance business. yet following are the most important ones in respective functional areas: Marketing The scope for use of Information Technology in marketing function is tremendous. 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 the insurance products in India is low. It may help in formulation and implementation of various marketing strategies including pricing.

Also. tracking of brokers and agents (5) Complaints management! grievance handling (6) Intermediary analysis Finance Thakur College of Science & Commerce .Technology In Insurance26 transparency in operations can be established. The service quality standards of the new private insurance players have posed a threat to the-then giants viz.e. claims settlements. The investments in the personnel and knowledge systems have helped private player’s companies build significant domain expertise. Customer Services The insurance being a service needs high concerns in terms of services. the information about the new’ products changes in the existing ones and of course. The emerging areas of IT applications are: (1) Market Research (2) Consumers targeting and segmentation (3) Customisations of products (4) Easy procedures like premium payments. 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. Customer service requires maximum attention and should span the entire gamut of activities in the purchase of a product i. documentation to policy administration and claim settlement. the information on various discounts and incentives can be provided at a much faster rate and lower cost. right from the dissemination of information. the LIC and GJC.

but despite these push backs. they are very cynical of investing in web technology with dot-corn collapse. appraisal. portfolio management. Recent studies reveal that consumers lack passion for insurance because of its complexity. investment planning etc. a growing number of insurers are intrigued by the significant cost saving & customer-retention benefits to be gained through online self-service. analysis of markets. treasury management. which would reduce operational costs vastly. Accounting. Human Resource Management Application of IT in Human Resource Management is obvious. (5) Impact of Technology on Insurers Any new adoption needs time to get acquainted with the users until they gain enough confidence & knowledge in that system. (2) training. tracking with international norms and developments are the profound areas of IT applications. It can be effectively utilised in: (1) recruitment and selection.Technology In Insurance27 Information technology can be effectively used for internal management viz. Driving client to initial online self-service experience Thakur College of Science & Commerce . transfers and dismissals. Surveys and research on market potential. and as well as in resource mobilisation. Research and Development R&D has been made an easy task with the increasing use of IT. financial performance reporting etc. (3) performance valuations etc. (4) promotions. Although carriers think that by encouraging insurers to do transactions by online services. The trick lies in educating insurers about the concept and benefits of eservices in this sector.

the portion of insurers offering customers service websites has been growing dramatically. This balanced approach is how most insurers are enabling online self-service that not only make sense for policyholders. In order to enable efficient online self-service functions. providing interactive plan finder tools. customers probably will become more open for using it as a conduit for insurance services.Technology In Insurance28 into something more interactive by call services that would involve human interactions will certainly have a greater impact. because it implies that when people learn more they establish a deeper relationship and a broader dialogue with the carrier. visualization of information. adding useful links to the websites. The main challenge for any health company’s website would be bringing all sections of people to view their site. Agents and brokers also enjoy the efficiencies that come with writing new businesses and servicing their customers on websites. Thakur College of Science & Commerce . An online activity helps to give necessary knowledge to consumers. companies typically have to update their legacy systems. They should show some positive incentives to bring customers to their websites. but also provides support for intermediaries and agents. In the past year. Despite the current limits to online self-service. Online services have own advantages like accessibility of information 24/7. as the Internet continues to gain acceptance. live chat technologies etc. which is very positive. About 55% to 60% of customers take booklets electronically.

saving companies in these Thakur College of Science & Commerce . Worker’s compensation claims alone are responsible for about $5 billion in losses each year. or it is discovered after claims are paid when recovery of these lost dollars is both expensive to do and unlikely to happen. Unfortunately. resulting in $24 billion dollars in losses each year. The stakes are high: according to the Insurance Information Institute.Technology In Insurance29 INTRDUCTION Losses due to insurance fraud and abuse affect every business and every risk manager. most of this fraud is never detected. 10% of claims payments are fraudulent. 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.

hoc querying or viewing of activity.Technology In Insurance30 sectors billions of dollars each year and reducing fraud by as much as 50 %. as with any new technology. such as those for ad. 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. investigation and prosecution.and the different technologies that can be used for this purpose. with a focus on techniques for surveillance. this paper will identify types of technology utilized in fraud detection.can perhaps best be understood through a framework of detection and review. While detection is the process of identifying and prioritizing suspects from the available data. Many technological tools. recoupment of paid dollars and prosecution. no one technology delivers a complete solution for fraud detection. the challenging task of detection — effectively identifying Thakur College of Science & Commerce . review entails confirmation of fraudulent/abusive activity and the process of taking corrective actions such as blocking of payments. to help risk managers choose appropriate technology for their needs. most of which are not particularly effective if used alone. A complete solution is the result of the intelligent combination of several technologies. have been designed to aid in the review of potentially fraudulent claims. However. their scope and limitations. The challenges of addressing the fraud and abuse problem. Focusing on claimant fraud in insurance. To date. However. Fraud Detection And Technology it reality. primary emphasis has been on review side. considerable confusion exits as to which types of systems are effective for which purposes.

claims master-file information. etc).e.Technology In Insurance31 suspects in the first place. DETECTION & REVIEW The mission is to find insurance fraud and abuse. Our starting point is the mountain of historical transaction data (i. Detection Thakur College of Science & Commerce . once we do that. we can take a variety of actions to recover payments already made and prevent future in appropriate payments. policy information. payment transactions. medical/payment detail.has received less attention and currently offers the greatest opportunity for benefit if addressed in a comprehensive fashion.

The effectiveness of a detection system can be quantified using the following two metrics: • Detection-Rate (the percentage of total fraud isolated in the pool of suspects) • False-Positive-Rate (the ratio of legitimate to fraudulent entities in the pool of suspects) Review Thakur College of Science & Commerce . Not surprisingly. Without the right tools. The process is analogous to fishing for a rare fish in the ocean. a tremendous amount of time and effort can be spent to identify a single case of fraud. and we prioritize effort to inspect the most important cases first. Review is the second step and requires giving human experts the information they need to confirm fraud and abuse. The job of a detection system is to filter the Entire Ocean and scoop out a small pond containing a significant fraction of the total fraud so that the ratio of fraud to non-fraud is much more in our favor than it was in the “ocean”. Fishing in a well-stocked 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. we are left to fish the endless sea of legitimate claims for our rare fraudulent catch.Technology In Insurance32 Detection is the first step and is complicated by a host of technical challenges. averted future fraud and abuse or successful prosecution). We stop wasting effort reviewing false leads. Detection is a statistical game with the goal of improving the odds of finding the target.

The experts may use technology to help them navigate through. Thakur College of Science & Commerce . such as those involving link-analysis (looking at the activity of individuals coming in contact with a particular individual) are also most useful after a suspect has been identified. Other technologies. simple red-flag 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. A detection system is necessary to uncover suspicious activity in the first place. These are good first steps. Because of the complexity of detecting provider fraud and abuse. In some cases. but there is much room for improvement. Most approaches to employ a manual process dependent on human intervention-a claims adjuster spotting unusual activity in a claim or a whistle-blower (e. Many tools offered to assist in the fight against fraud and abuse. such as those allowing for the review process. Detection can be linked to the “front end” of the fraud-fighting process. Once the detection system has generated a pool of suspects.Technology In Insurance33 The review process gathers the evidence that human experts need to confirm fraud and abuse. this paper will focus on the application of technology to the detection problem. Because detection has received far less attention than review. visualize or analyze the detailed data behind a case. while review is analogous to the “back end”. for example investigating rings to which given suspect initially come from? Further. a co-worker disgruntled ex-spouse) calling 1800 fraud line. expert claims adjuster or fraud investigator are needed to review suspects. more the reality is that most fraud and abuse is opportunistic and does not involve elaborate rings. conduct the appropriate investigation and bring the case to closure. While these techniques can be important.g. no system can be 100% accurate in selecting fraudulent claims. There is a great potential for insurance organizations to identify more fraud and abuse and identify it closer to its onset.

For example. In actuality. but not effective enough for pure detection to summarize rule-based technology. not detect suspicious claims. The nature of fraud and a comparison of these two approaches can be better understood by using the analogy of the amoeba. even though neck claims have a higher risk of fraud than head claims. Thakur College of Science & Commerce . neck injuries are more likely to be fraudulent than head injuries. a “rule” may identify neck injury claims as suspect. Using Rules to detect fraud and abuse Rules (or red-flags) are often developed to identify “suspect” claims. A tremendous number of rules are required to cover the amoeba and fill its multi-dimensional space. it is still the case that far more neck claims are valid than are fraudulent. However. Hence. so the rule may be refined to future restrict the claims identified as suspect (e. an employee on the job for less than one year).g. This means rule-based technology is effective as a tool for review. the boundaries of the regions defined by rules(shown as squares in the diagram below) are very simple compared to the boundaries of the amoeba. rules-based systems are most beneficial to find evidence. a rule has some overlap with the amoeba but also has some area outside the amoeba. Usually. In terms of the amoeba analogy.Technology In Insurance34 APPROACHES TO DETECTION Two fundamental approaches to detection are ruled-based and model-based.

Technology In Insurance35 Thakur College of Science & Commerce .

as well as claims that are most unusual. regression) can in theory.Technology In Insurance36 NEURAL NETWORK TECHNOLOGY Within supervised or unsupervised models. The result is a model that can recognize the highly complex and subtle differences between “good” and “bad” patterns of behavior. a variety of technologies are available. Furthermore. a neural network can characterize complex behavior patterns to identify those claims that are most similar to each other. Thakur College of Science & Commerce . Amongst the most powerful are neural networks. In a supervised model can consider hundreds of variables in developing a score through a learning process of looking at known historical examples of “good” claims and “bad” claims. produce models that are just as accurate as those produced using neural network technology. Humans cannot simultaneously consider more than a handful of variables. In an unsupervised setting. Traditionally statistical methods (for example. it is nearly impossible for such systems to match the predictive power of a neural network model. because such methods rely upon human experts (typically statisticians) to explicitly determine the complex data relationships. Neural networks provide an effective tool for shifting through large amounts of data to identify those patternscomprised of interactions involving multiple variables. However.most indicative of fraud. maintenance of traditional statistical models is costly.

or because evidence of abuse may not yet be apparent.Technology In Insurance37 TECHNICAL CHALLENGES A host of tech accompanies the task of insurance fraud and abuse detection. A thorough understanding of this data requires careful analysis and domain expertise. An abusive solution to the problem requires a comprehensive approach enabled by a variety of technologies that addresses these technical challenges head-on. missing or standardized • Behavior from ongoing transactional data Characterizing claim activity involves the summarization of all transactional data (e. payments or medical service details). • Ongoing reassessment of fraud risk Because fraud may not exist at the time the claim is submitted. Furthermore regardless of what technologies are employed. careful engineering is required to address issues of data being messy. • Complex pattern in data Identifying which claims are most suspicious requires a comprehensive analysis of many different features characterizing the claim and its activity. a system must each claim over and over on an ongoing basis. • Understanding raw data The starting point is the “raw mountain of data”. A Thakur College of Science & Commerce .g. Some of these design issues include. This summarization must not lose key aspects of activity.

Scoring models provide a rank ordering of all suspects so that attention can be focused on those deemed most suspicious. • Effective use of detection results In order to effectively use the detection system’s results. Because neural network models are built from data and automatically learn complex patterns within the data.Technology In Insurance38 detection system must be able recognize those patterns of behavior most indicative of fraud. which may be different for different customers and may vary over time. • System Maintenance The system performance must not deteriorate due to changing patterns of activity overtime. • Limited examples of confirmed fraudulent claims In many cases. only a small number of known examples of fraud may exist in the historical data. explanations for what makes a claim look suspicious should be provided. match resources with suspects that are most beneficial to review) and tools to review the results should be available (these may already exist). as more examples of abuse become known. • Prioritization of suspects In order to match work level to staffing constraints. One must be able to handle such situations when developing the detection system.g. they can be efficiently redeveloped. Indeed. a detection system must allow for prioritization of suspects. model performance can be expected to improve over time.. Thakur College of Science & Commerce . strategies for effective workflow assignment should be determined (e.

which is for private circulation.Technology In Insurance39 INTERNET & INTRANET The Internet is a worldwide system. It cuts across national & international boundaries. While the internet allows access for anybody from anywhere. In the intranet also. Information travels through the internet at incredible speeds. The difference is similar to the difference between a national newspaper & in-house newsmagazine. which is his address in the net. accessible through computers. it is possible to restrict some information to certain categories of persons. which are called e-mail. the information in the intranet will be available only to its offices & personal. Both internet & intranet enables users to do the following at any time (24 hours. however far away he may be located. 365 days) • Send & receive letters. who will be identified through passwords. the internet is an in-house network. Every person will have an “e-mail id”. Circulars meant for internal circulation can be posted on the intranet & everybody will have immediate access to it. If an insurer has an intranet system. Thakur College of Science & Commerce . working on the same principle. The policyholders will not be able to access the data in the intranet.

can be discussed & got clarified directly from the person concerned. read & retrieve data. Benefits to PolicyholderslProspects: Prospects can get benefit through the internet in the following ways. lost in transit etc. the agent can. wrong addresses. revival possibilities. nearest office for any further transactions. Communications to & from the office will be immediate through e-mail & at a low cost. the premiums payable etc. premium. for clarification or advice. and pictures. being forwarded from one level to another. The benefits to agents will be: He can receive all circulars & instructions issued by any office. taxation. making enquiries about status of proposals or claims or discussing with any other agent. benefit. be attending the insurer’s office.They can get details of the various policies. the bonuses attached. sitting at his place of work. The physical distance between the agent & the office will not be of any consequences at all.. the benefits there under. whenever he wants to do it. the premiums due. dispatch department absence of peons. insurability etc. the surrender values or loans available. Thakur College of Science & Commerce . misplaced through oversight.Technology In Insurance40 • • Search. All delays on account of postal transmission... Buy & sell of policy Benefits to Agents If the insurer has an intranet. are avoided. • Prospects can get advice on the suitable insurance plan for themselves. medical examination. files. Any doubts with regard to proposal. • Policyholders can get information with regard to the status of the policy.

video. It consists of a touch sensor& a monitor on which the sensor can be fitted. These can he used by persons. by direct debit to the policyholder credit card or bank account The LIC has included in its websites.Technology In Insurance41 • Premium can be paid without having to go to the office of the insurer. The kiosks then takes him the required information or to transact the required business. according to the choices offered by the kiosks visually on the monitor. The LIC has installed kiosks in more than 100 locations covering its divisional headquarters. text & quality sound. A kiosk is a selfcontained hardware & software to blend all current media including graphics. for the benefit of the prospectus and the policyholder. The user is expected to touch the relevant sensors. They are called Interactive Touch screen kiosks. information to health issues KISOKS Kiosks are unmanned information centers. The kiosks provide information on policy status. who do not have their own computers and cannot Thakur College of Science & Commerce . placed strategically at public places. product information about all products including group insurance products.

divisional and zonal offices of LIC. companies are looking for solutions that include new insurance protection.Technology In Insurance42 access the internet. But Thakur College of Science & Commerce . The touch-screen kiosks were installed in some of the branch. By this facility the customers can obtain information about LIC. That information can be lost. payment of premium will also be made by dropping cheques and DDs in drop-in boxes. clients and vendors. or inadvertently disclosed. They can be operated 24 hours a day and do not require any supervision like the ATMs of banks. Customers and employees may become the victims of identity theft and fraud. All companies are responsible for personal information. The kiosks are interactive and user-friendly. With so many incidents of data loss being reported. its performance. Such kiosks are also to be installed in bus and railway stations and in busy thoroughfares of major towns and cities. schemes and statuses of policies by the touch of the screen. In due course. Even a small business may have data on a large number of customers. DATA COMPROMISE COVERAGE The breach of personal data stored in business files and computers is a serious risk for any company that controls the information. stolen.

mistakenly released or published. ln fact. of course. Cyber Angel Security Solutions. In many cases. Data Breaches Spur New Laws To fight identity theft. unexpected business costs and damage to a company’s brand and reputation. but the growing number of data losses points out the continuing exposure to consumers and businesses. 32 states have passed laws that require businesses to respond to the breach of personal information under their control.Technology In Insurance43 the result is the same—anxious victims. a national security technology firm. In the past two years alonc. or obtained by fraud such as the sale of information to a sham company It might be hacked from computers. about a quarter of all reported data breaches may involve missing laptops. Personal data may be stolen from physical records. Laptop Thefts Increase Risks The breach of personal information is a serious problem in the US. reports that 10% of all laptops are stolen in the first 12 months and 90% of those computers are never recovered. data breaches have affected approximately 100 million Americans. Most of the laws require businesses to warn victims about potential ID theft and fraud. the warning must he Thakur College of Science & Commerce . It’s not surprising since laptops are a target of thieves. a consumer watch group reports. Federal legislation is pending. Half of the companies in the US had their laptops stolen in the last year and almost 90% of all corporate crimes are linked to stolen laptops. Some people may have been affected more than once and not all of them were victims of identity fraud. 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.

Businesses may have to pay to monitor personal starting to appear in the market. consumer sentiment is pressuring businesses to take responsibility to safeguard personal information. In today’s environment. They want victims to be notified and informed about the scope of the damage. Data Compromise Coverage Offers Protection A new insurance product --. A data breach can seriously harm tie brand and a. eta business. Even without a legal requirement. The findings suggest that breach notification could serve as a deterrent to ID fraud. Several Forms Now Available Thakur College of Science & Commerce . This is important since ID Analytics National Data Breach Analysis found that early notification of breached personal information may significantly lower the rate of misuse. the risk of notifying people affected can be far worse. This commercial lines coverage addresses the issue of data breaches by helping a business or institution respond. 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. Although it can be expensive to notify and assist victims of a data compromise coverage --.Technology In Insurance44 issued within days and include the news media. They also demand the company provide personal assistance including identity restoration case management when a data breach occurs.

Smaller Companies Can Be Vulnerable Small businesses can find it most difficult to respond to the breach of personal information. Treating Claim Data Carefully Data compromise coverage raises sensitive issues for insurance professionals as well. staff and resources to inform and protect potential victims. • Personal services for eligible insured such as a helpline. One of these combines first and third party coverage and the other is first party only. Smaller businesses might not recover as easily from the extra expense and had publicity. One is the extreme sensitivity of claim data. 1 concern in a recent poll. there are a few data compromise coverage forms being offered. With corporate managers citing data breaches as their No. It requires special handling and careful security procedures so that insurers are part of the solution. Thakur College of Science & Commerce . They should look for data compromise coverage that will arrange and pay for: • The cost of notifying individuals. Yet it is particularly challenging to offer broad and affordable coverage for smaller businesses. • Legal reviews and forensic information technology exercises. they may not have the knowledge. credit checks and case managers for the victims of ID fraud. At least one monoline form appears aimed at large accounts. and at least one packaged firm is designed for middle marker and Main Street accounts. How will a claim be adjusted? How much information do you need? The personal information of potential identity theft victims can’t simply be faxed and dropped inside an inbox. Unlike larger companies. and not the problem. in the coming months.Technology In Insurance45 At this time. data compromise should he an area of further development and innovation.

As technology continues to advance. It can and does happen that insurance companies issue policies to people who are not who they claim to be. Thakur College of Science & Commerce . The insurance industry can help by taking good care of the data in its own control. Worse yet. personal information becomes increasingly exposed and new coverage options for data breaches are evolving. Identity verification is not always easy.Technology In Insurance46 Another issue is for the insurance industry to take action so that we are not fooled ourselves. Insurance Professionals Can Help It is difficult enough to keep up with developments. insurers may claim payments to imposters. The pain of being an identity theft victim is driving public reaction to data breach incidents. but our industry must take steps to protect personal information and prevent claimrelated identity fraud. offering high quality services to ID theft victims and developing new insurance programs for data breach exposures.

enterprises need to rethink the strategic fundamentals of their business in order to be successful. Enormous opportunities are being created by the Internet’s new connectivity such as improving customer’s service. the greater the difficulty in using the net as a medium for selling. This lag was due to lack of relevant and adequate content.E-INSURANCE On a global basis. The insurance companies attribute two factors for the slow take off. This lack of participation in the e-business revolution is seen across lines. insurance on the net has lagged behind other financial service products such as banking and brokerage. becoming more cost effective. The more personal the selling process. Globally. have been slow to utilise the Internet as an alternative distribution channel. The process of insurance sales requires a series of face-to-face interactions. insurance is a product that is sold and not bought. First and foremost. or information to an expanded global customer base. while leveraging on new information technologies. there is mad rush of companies willing to enable their business. with online customers able to search quickly and for the most competitive prices and variety of products. reducing cycle time. Insurance is one product. and selling goods.Technology In Insurance47 INSURANCE AND ELECTRONIC COMMERCE . encompassing product information. International Trends Thakur College of Science & Commerce . services. E-insurance is one of the growth areas in India. which involves personalised selling. As entire industries are being reshaped and rules for competition are changing. Insurance is one product that cannot be easily commoditized. Of the total online users only 5% used insurance service online. Only a few insurers have added the ability to submit applications online. All the largest insurers have been focused on static marketing presence online. The Internet is perceived to be a buyer’s medium. Traditional insurers. FAQ’s and quotes.

In response to these trends in customer preference. However. greater customisation of information and improved customer service for the insurance company. This move towards building Internet based business solutions benefits the insured by providing greater flexibility. The global online insurance market is expected to achieve an exponential growth in the near future. insurers are mobilising their online sales and customer account management capabilities. E-Insurance in India The intriguing question before all associated with the insurance industry is that will it be possible for private companies or even public sector monoliths to sell insurance online in India in the near future? Insurance companies will probably have to wait for Internet penetration to increase and the still ambiguous e-commerce rules to take concrete form.Technology In Insurance48 The convergence effect of IT is being felt by the insurance industry as well in developed countries. will become increasingly e-mail based in the next four years. The insurance industry is expected to lose market share to banking and other financial institutions. the cost of administration and servicing the insurance policy also decreases sharply. This drastically reduces the costs involved. Customers today expect enhance levels of service due to increased competition. Bancassurance customer service. decreasing telephone related service by 28%. The Gartner Group in a study conducted by them says that in a year 25% of all customer contacts and enquiries for enterprises will come via the internet. what is not debatable is that new private entrants will change the rules of the game for Thakur College of Science & Commerce . e-mail and online forms. Similarly. by essentially outsourcing administrative and cost intensive processes such as policy administration to customers. This customer demand is likely to result in non-traditional access to specific information. which has been almost exclusively done via the telephone (96% of all transactions).

automobile policies are popular over the Internet. Experts expect the percentage of term life sold over the Internet to increase from I per cent to 15 per cent by 2003. To peep into the possibilities and opportunities emerging out of the integration of insurance and information technology. various organisations have organised seminars and conferences in the recent past to explore the possibilities of selling insurance on the Net and gauge the opportunities for the growing Indian software industry. The government. Thakur College of Science & Commerce . is expected to rise to $18 billion from about $1 billion currently. which currently makes up about 1 per cent of the total term life market. Ramanan of Assocham. Online insurance will also help companies reduce costs and keep premiums low. And more importantly Indians cannot watch from the sidelines as this paradigm shift in the insurance sector takes place. the big shift will become manifest sooner than later. because new entrants will have to either fine tune or prepare customized packages for the Indian segment. According to T. However. Only 12 per cent of insurance companies globally sell policies online. The growth of global online insurance business augurs well for the Indian IT sector. life insurers were among the first to go online with informative content and features like actuarial calculators. unfolding opportunities for software engineers and professional agents. The exponential growth in the online insurance business will unfold significant business opportunities for software companies/consultants. points out the paper. In the non-life sector.Technology In Insurance49 the Indian insurance business. according to him. they have been relatively slow to embrace online commerce. both in the life and the non. Although traditionally term life insurance has been sold through independent agents. which in monetary terms works out to $21 billion. Premium income. The opportunities that rise out of this will be both global and local. a prerequisite in a price sensitive market like India.

Technology In Insurance50 however, will have to address problems relating to bandwidth on an urgent basis to make online insurance a reality in India. Other major challenges to face Indian insurers will be to design and develop strategies for delivering services to well segmented customers. The third challenge lies in developing the right combination of customer segments and applicable distribution channel strategies. Most Web sites offer contact numbers of their branch officers where we can get further details of the products on offer. The Agent locator feature, available on, and on help one locate an insurance agent most accessible to you based on a search facility. One would expect downloadable proposal forms on insurance web sites, but these are missing in most cases. Only seems to offer downloadable proposal and claim forms for a few of the schemes. Benefits of Electronic Insurance E-insurance provides multiple benefits to the insurer and the existing and prospective insured: • Information collected is better and cheaper

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

• Provides new ways of doing business in competitive market • Flexible pricing and customised services • Global accessibility i.e. lapse of physical boundaries • Increased sales without additional sales force • Immediate premium collection and funds transfer • Reduced cost per transaction Thakur College of Science & Commerce

Technology In Insurance51 24x7 availability i.e. round the clock availability of information

• Real time knowledge base building Major Factors Affecting E-insurance • Growth of net: it is estimated that India would have about 150 million net users by 2010. These figures represent a huge buying potential. • Competition pressures: insurance companies because of competitive pressures would be driven into Internet rather than a clear ROT justification. • Customer: the availability of net-based services will be a huge factor for customer retention. • Cross sells: when linked with other financial products, a portfolio approach to investment, savings and risk coverage will increase cross sells and customer loyalty and retention. • Costs: in the beginning c-insurance will be a cost factor rather than a profit driver, but in the long run it will be a cost reducing factor.

E-Insurance Business Challenges Electronic insurance will not only provide many benefits but will also pose business and technological changes. Business Challenges • Disintermediation increases business: Study has shown that the cost of distribution decreases with the increased value of connection. Products with relatively high fixed costs and low value such as travel, credit or burial insurance are relatively expensive to produce. Customers pay a high price per dollar of coverage for these products. The Internet allows the Thakur College of Science & Commerce

Technology In Insurance52 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. • Reorganisation of companies-Virtual Companies: Many insurers will be prompted by the opportunities presented by E-commerce to restructure the packaging of insurance services. Insurance companies using c-commerce may re-engineer, outsource, and/or streamline their management functions, or marketing and distribution arms. To more efficiently deliver these services, some insurers will be able to reduce their significant investments in physical facilities and certain personnel. E-commerce will enable independent agency insurers to more easily adapt their distribution mechanism to market competition and expedite their transactions with intermediaries. • Insurance customers what do they want: Customers could get better and different service through the Internet. It is possible to obtain quotes from a number of companies. In some cases, the Internet provides rating agencies’ evaluation of insurers. The Internet and outsourcing can provide additional cost savings to the consumer. Technology can bring the customer closer to the insurance contract, by removing layers of inefficiencies. Consumers will also obtain price comparisons for relatively generic contracts, such as life insurance and rates for a standard set of auto insurance coverage for given vehicle and driver characteristics. Consumers also could have access to internal records to see where their claims are in terms of payment, when their next annuity payment is due, and how their mutual fund is performing. This can be done without calling a burdensome voicemail system, being put on hold, or finding a person who can give them the desired information efficiently. • 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 Thakur College of Science & Commerce

Technology In Insurance53 agent’s business. Thakur College of Science & Commerce . This has to be monitored by security of the web server and web access. Network Scanning Programs: Automated tools should be used to scan your network. The Internet does not necessarily imply the death of the agent. Physical Security: One can ensure physical security by having an alarm system that calls the police. Web Access Security: Host based restrictions can be implemented using a firewall to block incoming HTTP connections to a particular web server. nature of the access and who authorises such access. etc. Technological Challenges One of the most prominent challenges of e-commerce is security. Password sniffing: Protection against password sniffing is to avoid using plain text user names and reusable passwords. having a key-lock on the computer power supply. Web Server Security: Security policies should be defined as who is allowed access. It is very evident that many users are reluctant to do business on the Internet due to security reasons: Database Security: The business database security is utmost important. These tools check for well-known security related bugs in network programs such as send mail and FTPD. Many insurers are examining their agent’s role in the process and arc also developing direct contacts with the insured through their web presence. Agents could enhance their advisory role to consumers as their paper and money processing functions diminish.

INFORMATION TECHNOLOGY AND LIC Thakur College of Science & Commerce .Technology In Insurance54 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 sites who disregard the privacy of users do so at their own peril.

Incorporating change of address can be done on line. Metro Area Network A Metropolitan Area Network. The computers were introduced in 1964 in LIC. 1997. All 2148 branches across the country have been covered under front-end operations. Loan Quotation etc. prompt acceptance of their premium and get Revival Quotation. More than 10. Data pertaining to almost 10 crone policies is being held on computers in LIC.Technology In Insurance55 LIC has been one of the pioneering organisations in India who introduced the leverage of Information Technology in servicing and in their business. from any branch in the city.000 transactions are carried out over this Thakur College of Science & Commerce . LIC started a drive of On-line Service to policyholders and agents through computers which enables policyholders to receive immediate policy status report. Loan Quotation on demand. Quicker completion of proposals and dispatch of policy documents have become a reality. Surrender Value Quotation. in July 1995. So LIC claims that all its 100 divisional offices have achieved the distinction of 100% branch computerisation. Standard Computer Packages were developed and implemented for Ordinary and Salary Savings Scheme (SSS) Policies. Claims and Development Officers’ Appraisal to reduce time lag and ensure accuracy. connecting 74 branches in Mumbai was commissioned in November. Front End Operations With a view to enhancing customer responsiveness and services. New payment related Modules pertaining to both ordinary and SSS policies have been added to the Front End Package catering to Loan. enabling policyholders in Mumbai to pay their Premium or get their Status Report. Unit Record Machines introduced in late 1950’s were phased out in 1980’s and replaced by Microprocessors based computers in Branch and Divisional Offices for Back Office Computerisation. The System has been working successfully. Standardisation of Hardware and Software commenced in 1990’s.

Maturity payment In Insurance56 Network on any given working day. As at May 2002. www.) about their policies on the telephone. This enables the customer to view his policy data and pay premium from cur branch of an MAN city. enables customers to ring up LIC and receive information (e.. LIC (Nepal) Ltd. Interactive Voice Response Systems (WRS) IVRS. there were 91 centres in India with more than 1200 branches networked under WAN. Loan Amount. LIC (International) E. Information Kiosks LIC has set up Interactive Touch screen based Multimedia KIOSKS in prime locations in metros and some major cities for dissemination information to Thakur College of Science & Commerce . Wide Area Network All 7 Zonal Offices and all the VLN centres are connected through a Wide Area Network WAN). LIC Mutual Fund. Zonal Training Centres. Overseas Branches. The addresses/e-mail IDs of its Zonal Offices. next premium due.. Management Development Centre. This information could also be faxed on demand to the customer. Status. functional in 58 centres all over the country. LIC has given its policyholders a unique facility to pay premiums through Internet absolutely free and view their policy details on Internet premium payments.g. LIC Housing Finance and their products. Website LIC’s website. Such Networks have been implemented in other cities also. Divisional Offices and also all Branch Offices are also provided. displays information about LIC and its subsidiaries. Accumulated Bonus etc.licindia.

This lack of integration creates islands of information. causing them to look for other alternatives or abandon the process altogether. Branch addresses and other organisational information. which necessitates extensive manual handling and staff paperwork. you have legacy system silos and patchwork processes for various product lines. Agents waste time and money shuffling forms. enable the users to provide policy details and accept premium payments. The resulting inefficiencies dramatically impact your organization’s ability to put the customer first and efficiently meet the needs of policyholders and agents. paper-based processes. Restricted by system silos and patchwork processes If your company is like most carriers. As a result. further increase costs. Policy Services. instead of closing business and prospecting for new customers. • Applications for new insurance take an hour or more to complete. INSURANCE APPLICATIONS WITH ADOBE Break free of paper-based processes Insurance companies tell us that they are hindered by slow. The challenge is to find a way to streamline the application process—driving down costs while helping to drive additional revenues and profits—but it hasn’t been easy. These KIOSKS. Thakur College of Science & Commerce . Info Centres It has also set up call centres to provide information about our Products.Technology In Insurance57 general public on various products and services offered. Back-office burdens. customers are put off by frequent poor service. such as re-keying data and handling huge volumes of mail.

often back stepping more than once. dramatically reducing time-consuming and error-prone re-keying. and call center representatives need to enter data only once. and process each insurance application. fax.Technology In Insurance58 • Customers have to supply the same information repeatedly • A seemingly endless stream of paper flows from desk to desk and department to department. The Adobe solution for insurance application helps you improve service while reducing costs. scan. • Renewal forms and other documents can be automatically populated. unhappy customers. growing regulatory requirements add to the burdens that your headquarters faces. Adobe can help remedy the situation. simplifying the collection and sharing of information. • Frequent data errors and broken process steps require time—time that costs you money. Studies have shown that paper-based processes are expensive—up to an estimated $150 to print. Thakur College of Science & Commerce . forcing you to update systems and disclosures to remain in compliance. and minimizing time-cons tuning back-office tasks. Get faster. • Agents. customers. copy mail. All this leads to slower service. In addition. meeting policyholder needs. more accurate processing The Adobe Intelligent Document Platform accommodates both paper forms and electronic documents. and dissatisfied agents and brokers—who just may decide to take their business elsewhere. and increasing agent loyalty—so you can dose more business.

Adobe Document Services also offer a flexible front end. Beyond the wide range of benefits delivered by the solution. • Agents and brokers can present intelligent forms to clients—in an offline mode—by using the free Adobe Reader. Adobe also partners with industry leaders such as IBM and Documentum. automated process while maintaining full integrity of the original form data. so you can adapt easily to the latest regulatory policies. • Electronic distribution eliminates postal delays and costs. and improves response times by eliminating back-office handling.Technology In Insurance59 • Adobe Document Services simplify underwriting and risk appraisal by allowing ratings and not to be made right on the form for review by all parties—without altering the original document. Thakur College of Science & Commerce . so that you can extend Adobe supported insurance solutions throughout your enterprise. you can print forms out and then easily revert back to an intelligent. to minimize the business disruption and expense of compliance. Support for eXtensible Markup Language (XML) and ACORD XML standards helps efficiently integrate this information into your enterprise applications. Build data validation and calculations into all application processes. • When wet signatures are required.

they are ideal for archiving and retrieval. while ensuring higher quality packages. Reviewers Thakur College of Science & Commerce . And since Adobe PDF files are searchable. your internal staff as well as independent brokers and agents can access documents and forms as needed. offering customers and agents the look of paper with the added efficiency of fillable forms. Multiple policyholder documents can be dynamically converted and combined into a single Adobe PDF file. decreasing document preparation time and expense. With free Adobe Reader software.Technology In Insurance60 Adobe PDF: Key to streamlining the insurance application process Adobe Portable Document Format (PDF) provides a secure. This familiarity helps to increase the acceptance of your self-service channel and maintains better consistency between online and offline processes. reliable way to distribute and exchange documents and information. PDF files look like the original documents.

ensuring privacy and maintaining transaction integrity with customers and partners. avoiding redundancy and saving cycles. The Adobe solution for insurance application improves the quality of your service to agents. decreasing abandonment rates. • Your headquarters gains better control over costly. and enhancing your profitability. disruptive compliance issues. • Personal information gathered from policyholders is safeguarded.Technology In Insurance61 can easily add comments without altering the original. turn to Adobe. • The application process is simplified and back-office tasks are automated. and customers—making it easier for agents to sell more policies. brokers. MICROSOFT AND THE INSURANCE INDUSTRY For many drivers. • To streamline the insurance application process and improve backoffice efficiency. This efficient workflow translates into to faster reviews and underwriting. • Revenues increase because you and your agents and brokers can efficiently handle more business. and improved service. improving cycle time and reducing the costs of acquiring and servicing customers. Password protection and other built-in security features can be added to control access and ensure data integrity at every step. and agents as well as customers can see and respond to these comments. For insurance carriers auto Thakur College of Science & Commerce . 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.

business intelligence. Today. Streamlining the flow of data and bringing new levels of efficiency to the business of claim processing. Based on the power of the Microsoft. assignment automation. facilitate salvage processing. expensive. and more. Process claims is a leading software provider to the insurance industry. offering a broad range of property and casualty solution that span heavy equipment. process claims deliver solutions that automate solution that automate communication and information flow. The issue of data integration is critical for all parties involved in resolving auto insurance claims. and frustrating. process claim solutions provide data transformation an d mining. personal and specialty lines. supply parts. A Microsoft certified partner. innovative technologies from Microsoft are transforming from the way auto insurance claims are processed. and yield rapid return on investment. and more is no less time-consuming. determine vehicle valuation.NET framework and its own data transformation technology and industry expertise. work flow management. Thakur College of Science & Commerce . In addition to insurance companies there are companies that depend on data to provide rental car services. Last year. By harnessing the power of Microsoft . appraisal management and trading partner integration. process claims facilitated settlement of $4 billion in claims.Technology In Insurance62 claims processing which involves handling estimates adjustments repairs billing. commercial.NET framework these technologies open the door of integrated IT system that link programs and applications built of any platform and written in any language.

innovators are taking advantage of technologies like this to automate business processes and transform insurance claim processing. and they are configured to meet the specific business requirements of individual insures. Typically. Training and support costs are minimal. writes the estimates. It also extent and enhances the value of existing legacy system functionality through seamless integration with outside services. and improve customer satisfaction. Process claims’ claims port system focus on areas of material damage to reduce loss-adjustment expenses. increases efficiencies. The ability to utilize XML and web services has established process claims as a market place leader. And because legacy system can access this new functionality transparently.Technology In Insurance63 Process claims’ end to end material damage management systems provide the vital link between all of these parties. After receiving the claim the appraiser downloads is it to an estimating application. XML and web service programmable application components that can be accessed over the internet with standard web protocols-process claims enables its client to conduct business with greater speed and efficiency. adds digital photos. the carrier assigns an adjuster or refers the driver to an authorized body shop. Because process claims uses XML it can take information from any claim system and instantly route the assignment to the most appropriate appraiser. Today. and sends the package back to the carrier through the process claims browser-based application suite. when a driver reports an accident. . Not only does the solution streamline claims processes. Thakur College of Science & Commerce .NET. Utilizing Microsoft visual studio.

Therefore both need to be integrated in order to provide quality service & also to tap the insurance market. The supporting technology require will be real time. rather than batch. will be interactive. The question now facing insurance companies is no longer if they should take advantage of the internet. longitudinal rather than episodic. Should you adapt your existing products or create internet specific insurance products and brands? Do you focus your efforts on distribution or service? Thus the insurance services without technology will be like tea without sugar. will rely on large relational databases.Technology In Insurance64 CONCLUSION The technology in insurance has grown through their performance. will require connectivity rather than be self contained. Thakur College of Science & Commerce . but now should they do it. restructuring policy and their efficiency in providing the large amount of insurance services with the help of technology as their technology as their tool. 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.

com  How Stuff Works – http://www.mircosoft. Gupta  Technology & Insurance – ICFAI  Magazines:  The Windows Magazine  Insurance Journal  Websites:  Insurance & Technology – http://www.networkmagazineindia.  Adobe Systems Incorporated –  Microsoft Corporation – Thakur College of Science & Commerce .com  Network Magazine India –  Wikipedia – http://www.Technology In Insurance65 BIBLIOGRAPHY  Books:  Insurance & Risk Management – Dr.K.howstuffworks.