Technology in Insurance

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.
2. The need to evaluate the liabilities under the policies in vogue at the time
of valuation.
Thakur College of Science & Commerce
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.
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 in the volume
of the new business and much larger increase in the number of service
operations.
For example, LIC of India has about 13 Crore of policies. Assuming that 20 %
of these are:
Under salary savings scheme, i.e. about 2.4 crore, and another 20 % in paid
up condition, there remain approximately 8 crore policies under which
premiums are received by yearly, half-yearly or quarterly. Usually, 50% are
under quarterly, about 20% under yearly and 30% under half-yearly mode of
payments, i.e. Rs 1.6 crore under yearly, 2.4 crore under half-yearly and Rs 4
crore
under quarterly
modes. The number of premiums
accounting
transactions during a year will therefore be as under-
Duration
Amount
Yearly
1.6 crore
Half-yearly (2.4 x 2)
4.8 crore
Quarterly (4.0 x 4)
16.0 crore
Total
22.4 crore
Thus, in one year , the number of transaction in respect of the premium
payments alone for the organization is Rs. 22.4 crore a huge and
stupendous task indeed without the fast operating computers; it will
impossible task to manage transactions such as magnitude. In addition,
there are many other transactions to be handled. Underwriting of proposals
for the life insurance became standardized because of universal adoption of
Numerical Rating Method. Thus, The use of IT and especially knowledgebased systems in underwriting has developed through generations of
systems, which have progressively increased in complexity.
First Generation: Screening Systems

These were developed by larger companies in the 1970s to decrease
general expenses. 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. The remaining
cases were referred to the underwriters.
Second Generation: Information Display Systems
These appeared in mid 1980s. They were design to save the underwriters
time and thereby improve the productivity. Information display systems
allows the underwriter automated access to various sources of information,
such as underwriting manuals , medical terminology, lists of medications and
other underwriting guidelines. These systems replace the need for multiple
volumes of handbooks. They allow rapid success to the information that an
underwriter needs.
Third Generation: Initial Underwriting System.
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, they have only been available for the past few
years.
Initial underwriting system extend the capability of the first generation

systems and go beyond screening to identify underwriting problems,
automatically underwrite some cases, and pre process other cases for
underwriters by ordering information for cause such attending physician
statements. The advanced third generations systems can also do initial
underwriting with the requirements such as medical examinations, inspection
reports and laboratory test results. Some can even do discrepancy
processing.
Fourth Generation: knowledge Decision Assistance Tools
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 have been designed to
enhance the risk selection process. Their use by the underwriters can help
them to manage the mortality expenses by applying consistency to the
underwriting process.
Fifth Generation: Total Underwriting System
The fifth of underwriting system encompasses and surpasses the previous
system. They integrate all the components discussed above into single
system: they also include a management information system for the entire
process. This is essence of the underwriter work, which as discussed above,
would be integrated into the entire administrative flow for its greatest
impact.
Components of a Total 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. The system needs multiple
components for each of the essential functions.
Initial Data Entry
This is where information from the application is entered into the system
depending upon the specification of the company and its field force; data
may be entered from an agents laptop-computer, at a regional marketing
office
or
at
the
home
office.
Information
from
the
agents
report,
requirements ordered in the field and MIB [Medical Information Bureau]

information could also be entered for processing
Screening
The second component is screening. This involves taking applications and
sorting them into two groups; clean ones and those in need of further
processing. This is fairly simple processing. Screening checks that application
need no future requirements , have all medical and non medical questions
answered properly, are within certain age and amount limits and have
acceptable finances and an appropriate beneficiary. Approved cases are sent
directly to the administration system
Initial Underwriting
Applications that are not approved by screening flow into the next
component are called initial Underwriting. This series of knowledge
based systems defines underwriting problems and determines why the case
required further processing. It checks for age and amount requirement and
examines the financial, non- medical and medical aspects of the case, as
well as the interaction among them. It decides if there is sufficient
information to deal with the problems, it has defined.
Requirement Processing
Since underwriting is an iterative process with information process with
information from many sources being reviewed at different times, a total
underwriting system permits information to be entered into the system
directly from the provider or by home office personnel. Processing
requirements are similar to initial underwriting, expect that discrepancy
processing is done by comparing the details of the information from the
application with those received late. In this way, data from different sources
is compared to uncover new problems. If there is significant history or
physical finding on the examination that was not admitted on the
application, it noted and the appropriate work-up is ordered. If no problem
are discovered cases can automatically approved without consulting an
underwriter.
WORKFLOW TOOLS
Underwriters need certain tools to process their cases administratively. A
total underwriting system provides these. They include front- end tools, backend tools, and status function. The front end tools workflow tools keep track
of cases, their requirement and underwriting problems. The in- tray function
accesses cases electronically assigned to underwriter. Rather than getting a
stack of file, the underwriter now deals with an electronic stack of case. For
each case their details underwriting problems and their actions. Other tools
allow the underwriter to manipulate, track and change the underwriting
problems and requirement of case. There is also an electronic notepad for
the underwriter which can be integrated with an electronic mail system for
field communication. The backend workflow tools assist in the final
administrative details of case: forms to be signed, post issue requirement
preparation, reporting of MIB codes and the process of requesting
reinsurance. The status function lets non- underwriter to review the selected
case information. An agents status reveals the data from the application, as
well as the requirement and whether they have been received.
Information Display
The information display component gives online access to underwriting
guidelines with several types of automated searches to improve the access
of information. It also makes available other underwriting references, such as
medical and drug references.
Impairment Knowledge-Based Systems

The next component is the impairment underwriting knowledge-based
systems. This program deals with impairments such as high blood pressure,
diabetes, cancer, respiratory disorders, aviation and coronary heart disease.
Their logic is patterned after the knowledge and thought processes of expert
MDs and underwriters. Information is requested from the record and a rating
is suggested. If underwriters choose, these will guide them through the
detailed decisions needed to underwrite impaired cases.
Management Reporting
This component generates administrative and other reports on the decision
made within the system. The management from the database of information
can create reports.
Benefits
Underwriting system has many benefits. For underwriting they limit the
number of cases that need to be reviewed, because the system is able to
process them without intervention. In this way the technology improves the
work of underwriting by eliminating unnecessary routine cases. Several
companies have developed knowledge based systems for this purpose
and have been very pleased with results. As an underwriting officer stated,
This gives the underwriter to deal with more complex and time consuming
cases.
Furthermore, initial underwriting knowledge based systems decrease the
number of times a case needs to be reviewed by an underwriter, because
requirements are ordered and processed by the system prior to the
underwriter seeing the cases.
For the producer, service is greatly improved. This is possible because some
application can be approved by the system almost immediately, without
having to be seen by an underwriter. One company that has integrated this
type of system with its field offices is able to electronically approve
applications in less than 15 minutes. Also, the sales process can be helped
by determining all requirements {both those required for age and amount
and those necessary for a specific cause} immediately so that producers do
not have to contact an applicant a second or third time for additional
information.
Knowledge-based system can improve underwriter productivity in other ways
with workflow with workflow management tools. Although these system do
not do any underwriting themselves, they do manage these paperwork in the
ordering and keeping track of requirements. Such tools decrease the clerical
work of underwriters and improve the workflow in underwriting departments
by eliminating unnecessary paperwork.
Apart from reducing underwriters work, knowledge-based systems can
provide
decision-assistance
tools
in
the
risk
classifications
process.
Impairment underwriting knowledge-based system is sophisticated decisionsupport tools.
They assist in the determination of ratings by promoting the user for

information and correlating that information with underwriting guidelines and
the programmed thought processes of expert underwriters. They serve as an
excellent training tool for the junior underwriter and assist-experienced
underwriter in very complex cases.
In addition to helping in the actual underwriting decisions making, knowledge
based system can assist the underwriting manager with the overall
underwriting process. Once information has been entered into the knowledge
based system, it becomes available for management reporting and decisionmaking. This allows underwriting managers to follow the screening of cases
by the system, as well as the ordering of requirements and the rating of the
impairments. The decisions can be tracked according to agent, agency or
underwriter so that underwriters can interact better with the procedures with
whom they work ; underwriting managers can also more effectively manage
the underwriters who report to them. Previously unavailable management
information tools are made ready available, is information on specific
underwriting decision making.
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 use and application of information technology in wide variety of insurers
operations has now become strategic in the sense that it has direct impact
on the productivity of resources, and a sweepening impact on reducing the
case of various activities.
With the arrival of private insurance players, the competition has become
more intense and an important role is being played by the insurance sector.
Even though the use of information technology is not new to the insurance
sector, yet 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. The most visible of these
departments are accounting, policy issue and servicing, claim processing,
sales management etc. The innovations in information technology can be
effectively utilized for the following areas:
Speedy and correct issuance of

documents
Expeditious disposal of claims
Proper building of accounts and
Quality Assurance &

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

documents Similarly, loans and surrender value module, policy revival
module, claims module were also introduced. Now revival quotations, a
policy quotations or maturity claims intimation letters are generated on the
Computer. All these gave tremendous boost to the efficiency in rendering
service to the policyholders
Up gradation of technology also helped in another direction. Several reports
which could be used as MIS get generated for use by managers at all levels.
This helps management to review performance against prescribed indices
and to take appropriate corrective actions where necessary.
To bring out the revolutionary changes in communication to policyholders,
several steps were taken. Inter-Voice Response Systems have been
introduced which policyholders ascertain several types of information about
their policy like policy status, premium position, loan amount, maturity / next
survival benefit due , accumulation of bonus , etc. over telephones language
in language of his choice. The policyholder can also get the information on
fax. MAN is installed in several cities, which enables policyholders to pay
premiums or get their status reports, revival, loan, surrender quotations in
any of branches offices convenient to them in the cities. Now, many of the
cities with MAN are connected by WAN, which enables policyholders to pay
premium anywhere in the country. E-mail connections have been established
in many of the offices and internet connections has been given to all the
divisional offices, all department in all the zonal offices and central offices. A
website {www.licinda.com} was set up to give information on the Internet
about the organization, products, service. The web pages has been made
interactive with the features like online Premium Calculation, On-line
Bonus Calculation, On-line Forms etc. The site includes features on
Frequently Asked Questions by Non Resident Indians. 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.
The corporation has plans to redesign these kiosks to provide policy details
and accept premium payments. All these applications have definitely brought
a great amount of satisfaction to policyholders. The steps taken by 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.
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. It is valuation. The process by which the values of
various polices of insurance existing at a point of time are obtained is called
valuation of liabilities of an insurer was small, policy values used to be
calculated for individuals policies. But when the number of policies runs into
several lakh or crore, as a present it is extremely inconvenient to calculate
the value of each contract separately. Methods have, therefore, been devised
to collect data for each plan of insurance in a form suitable for valuation in
groups having some common characteristic like age, duration or term to run
to maturity and like. Grouping is done only if there is sufficient number of
policies to make the group of a reasonable size. For a sufficient large life
insurance organization, this work is possible only through application of
technology. It is a legal requirement today in our country for a life insurance
company to conduct an actuarial valuation every year. This adds to
importance of IT application.
With increasing complexity of products both life insurance and pension
entering the market, the field force, especially the agents needs a large
support from the company represent. While discussing life insurance
program with potential customers, agents need sophisticated information
including benefits, comparisons, , needs and matching products , rates and
impact on the customers budget , returns, etc,. Like in Japan, life insurance
companies in India may also supply Palm Tops to their sales force.
This will be possible only through extension of concepts of information
technology. Market research is another area where information technology
has a great role to play. Todays, the customer has become the center around
the entire market revolves. The world is fast moving towards market driven
economy. Organizations, which were merely based on sales concept, are
eagerly aiming to convert themselves into marketing organizations. Life
insurance companies which primarily deal with the financial needs of the
people cannot ignore these realities. The life insurance has become very
dynamic. The needs, aspirations, attitudes, buying behaviors, standards and
quality of life are changing. The perceptions of what constitutes standards
and quality of life are changing. The perceptions of what constitutes standard
of life is also undergoing a metamorphosis. Different types of product are the
need hour. The demand is more for flexible rather than packaged products
especially in the service market. To certain its share and to improve it, there
is no alternative for any life insurance company than to have a continuous
market research. The company should know the demographic changes
taking place in the society. They should know what is selling and where. They
should know the pace of sales on the day to day basis.
They should not only know the emerging customer profile but also the size of
the market. All these need a scientific market survey and research either
done in house or outsourced. A typical market survey report is appended
which shows the enormity of the job. Without the support of technology, this
will be an impossible task for the company.
TECHNOLOGIES FOR INSURANCE

There has never been a time when the effective use of information
technology has been more crucial to the success of the insurance industry.
The insurance markets are being revolutionised by technology at a high
speed pace. IT and software solutions, allowing cross-border trade to become
electronic and paperless, are increasingly on offer to importers, exporters,
shipping companies and financial institutions. Following
technological
advancements can really enhance the performance of insurance companies.

Database Management Systems
The principles of tracking and measuring responses can pay off for the
conventional insurance industry. To find more clients, insurer needs to
consider many factors, including cash value, medium and competition. But
the need to record and study the characteristics of persistency- the length of
time we retain policies, customers and agents is most important in insurance
companies.
In order to find out profitable combinations of households or clients, products
and agents, a database with five to ten years history is of immense
importance. Such historical retention was prohibitively expensive in the past.
But clear advantages of new PC (Personal computer) and RISC (Reduced
Instruction Set Computing) technology gives companies power to keep tens
of millions of policies on a device with thousands of bytes of data per
policy/client/agent. Analyisng a 1O-year database is cost effective.
Reviewing the database provides information on how many clients have
actually migrated not just how many policies have lapsed or surrendered.
Using
database
technology
companies
can
get
comprehensive,
performance, loyalty, and lost opportunity.

Data Warehouse
Data warehousing technology is based on integrating a number of
information systems into a one stop shopping database to achieve vision of
making company national in scope, but regional in focus. Traditionally, the
sale of policies and the claim settlement are two separate areas for the
insurance companies. Data warehousing allows managing by profit levels
with an integrated approach rather than by limiting losses. Data mining can
be used as a means to control costs and increase revenue resulting in
enormous earning for effective users.
Decision Support Systems
The path of business applications of computers, computer based information
systems (CBIS), encompasses many stages including the very early
applications like transactions processing systems (TPS) followed by the
management information systems (MIS). The computer applications like
decision support systems (DSS), expert systems (ES) and executive
information systems (EIS) are still awaited in insurance business. Office
automation (OAS) happens to be a continuously ongoing, dynamic process
for any business. Such decision support systems will provide the insurance
managers with a tool for customised products and services that are more in
line with what customers want.
Group Linking Software
Group-linking software enables sharing of information arid partieular1v suits
document heavy insurance business. Tracking of policy application shows
how information that is input and accessed from a number of locations can
increase efficiency.
Imaging and Workflow Technologies
The proposal forms may be scanned into an imaging system. Data may be
extracted for update to computer and for automated underwriting workflow
may be implemented.
Mapping
Insurers to meet different needs, such as identifying loss prone areas or
geographic claim analysis, can use Mapping technology. It helps the insurer
to analyse the extent of its network i.e. the insurer can determine whether it
has too many or too few agency force in a particular area.
Call Centre Technology

Good customer service is a crucial element for gaining, maintaining and
retaining profitable customers. Call centre concept based on interactive
voice response services (IVRS) is gaining importance in this aspect.
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.
Cat Models
Catastrophic models use data from the recent natural disasters that helps
develop more predictions of insurers property exposures in future disasters.
Using this data curious what-if scenarios of probable maximum loss (PML)
using the best estimate available at an insurers exposures are tested. Finally
an underwriting policy that limits the companys exposure to catastrophic
losses is implemented.
Intranet is the network connecting different offices of the same business to
permit the internal data within the business. Extranet is a network allowing
the business to communicate with business partners like suppliers, vendors,
banners, regulations etc. on the electronic channel. Internet is a global
network of many computer networks. Any user, who would like to exchange
some information with other user at a remote location, can log into the
computer of Internet provider via modem or an Internet access CPU (IAC).
The Internet and online service providers are providing opportunities to
create new forums that can be utilised by everyone worldwide. Insurers can
browse through many useful sites on the Internet.
Technology & Cyber Insurance in India

The opening up of the Insurance industry in India would boost competition,
facilitate technology transfer and lead to new products, better customer
service, deeper and wider insurance coverage and many more opportunities
for
employment.
As
new
private
sector
entrants
enter
into
India,
opportunities in the insurance industry are up for grabs. One important

aspect of the insurance industry, which is gaining prominence tile world over,
is
the
development
of
technology
and
cyber-insurance
strategies.
Cyberspace is a risky place. Companies conducting business over the

internet are exposed to a variety of new, unpredictable and serious
exposures such as servers crashing, computer viruses, destruction of data, emails disappearing and attack from hackers for which there are few
precedents in terms of risk management and even less actual insurance
coverage. Cyberspace presents unique challenges to risk managers for
several reasons; the foremost being that there is no Standard risk profile.
The wide variety of internet-related businesses, such as ISPs, content
aggregators,
certification
authorities,
online
merchants
and
software
developers, all contribute to the difficulty of developing a single risk profile.

Enacting appropriate insurance policies for ensuring cover for security issues
and intellectual property rights issues is vital.
For safe business transaction, what is needed is a secure legal environment
and while legislation in India is providing this environment with the enacting
of laws dealing with the Internet, Insurance companies in India should
provide comprehensive protection policies for a business against web-related
risks, such as hackers and viruses, credit card and employee fraud, business
interruption losses, and legal action. Essentially, the policy can fill the gaps
in coverage that have opened up between standard insurance policies due to
the fact the way business is done has changed.
Intellectual property infringements: content providers who use content of
others without permission can trigger these risks.
Errors and Omissions liability: these risks are typically triggered by the
programmers, web hosts & web-designers, who, through negligence in their
work cause injury/damage to a third party.
Personal injury & advertising Liability: As e-commerce grows, these risks can
be triggered by worldwide web sites, and trade publishers who publish illegal
content or content which may be constructed as libel.
Directors liability: Directors and officers often face the risk of litigation due
to numbers of factors, such as consumer protection laws, securities related
laws, and certain provisions in the corporate laws that place additional
responsibilities on directors.
Employee liability: These risks would arise from the breach of confidentiality
and rights of privacy arising out of confidential client information stored on a
particular system or website. In addition, employee can initiate sexual
harassment charges from an employee due to disturbing e-mail content.
Legal fees: Fees incurred for litigation arising out of various claims, such as
intellectual property. Many businesses on the internet mistakenly think their
internet- related exposures are covered by their existing policies.
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. It may start from the consumer acquaintance to an insurance
product to claims settlement or further selling of new products or developing
consumers for the products.
Information technology can be integrated with almost all the Ps of
marketing. It may help in formulation and implementation of various
marketing
strategies
including
pricing,
promotion
and
customisation
strategies. Some of these areas are discussed below:

Consumer Awareness
The use of Information Technology may be path breaking for the insurance
companies since conventionally the awareness of the insurance products in
India is low. With the use of Internet the information about the products and
pricing policies can be made available to the public in few seconds and much
transparency in operations can be established. There are numerous websites
available which can help the prospective customers to compare the
insurance products of various issuers and decide the product suited to his
needs. Also, the information about the new products changes in the existing
ones and of course, the information on various discounts and incentives can
be provided at a much faster rate and lower cost.
Customer Services
The insurance being a service needs high concerns in terms of services.
Customer service requires maximum attention and should span the entire
gamut of activities in the purchase of a product i.e. right from the
dissemination of information, documentation to policy administration and
claim settlement. The service quality standards of the new private insurance
players have posed a threat to the-then giants viz. the LIC and GJC.
The investments in the personnel and knowledge systems have helped
private players companies build significant domain expertise. 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, claims settlements, tracking of
brokers and agents
(5) Complaints management! grievance handling
(6) Intermediary analysis
Finance
Information technology can be effectively used for internal management viz.
Accounting, treasury management, financial performance reporting etc. and
as well as in resource mobilisation, portfolio management, investment
planning etc.
Human Resource Management
Application of IT in Human Resource Management is obvious. It can be
effectively utilised in: (1) recruitment and selection, (2) training, (3)
performance
appraisal,
(4)
promotions,
transfers
and
dismissals,
(5)
valuations etc.
Research and Development
R&D has been made an easy task with the increasing use of IT. Surveys and
research on market potential, analysis of markets, tracking with international
norms and developments are the profound areas of IT applications.
Impact of Technology on Insurers

Any new adoption needs time to get acquainted with the users until they
gain enough confidence & knowledge in that system. Recent studies reveal
that consumers lack passion for insurance because of its complexity, but
despite these push backs, a growing number of insurers are intrigued by the
significant cost saving & customer-retention benefits to be gained through
online self-service. Although carriers think that by encouraging insurers to do
transactions by online services, which would reduce operational costs vastly,
they are very cynical of investing in web technology with dot-corn collapse.
The trick lies in educating insurers about the concept and benefits of
eservices in this sector. Driving client to initial online self-service experience
into something more interactive by call services that would involve human
interactions will certainly have a greater impact. This balanced approach is
how most insurers are enabling online self-service that not only make sense
for policyholders, but also provides support for intermediaries and agents.
The main challenge for any health companys website would be bringing all
sections of people to view their site.
They should show some positive incentives to bring customers to their
websites. Online services have own advantages like accessibility of
information 24/7, visualization of information, providing interactive plan
finder tools, adding useful links to the websites, live chat technologies etc.
An online activity helps to give necessary knowledge to consumers, which is
very positive, because it implies that when people learn more they establish
a deeper relationship and a broader dialogue with the carrier. Agents and
brokers also enjoy the efficiencies that come with writing new businesses
and servicing their customers on websites. About 55% to 60% of customers
take booklets electronically. In order to enable efficient online self-service
functions, companies typically have to update their legacy systems.
Despite the current limits to online self-service, as the Internet continues to
gain acceptance, customers probably will become more open for using it as a
conduit for insurance services. In the past year, the portion of insurers
offering customers service websites has been growing dramatically.
INTRDUCTION
Losses due to insurance fraud and abuse affect every business and every
risk manager. The stakes are high: according to the Insurance Information
Institute, 10% of claims payments are fraudulent, resulting in $24 billion
dollars in losses each year. Workers compensation claims alone are
responsible for about $5 billion in losses each year. Unfortunately, most of
this fraud is never detected, or it is discovered after claims are paid when
recovery of these lost dollars is both expensive to do and unlikely to happen.
Insurance fraud detection has taken a giant step forward with the
introduction of the same sophisticated technology already used by most
banks and credit card companies to stop fraud, saving companies in these
sectors billions of dollars each year and reducing fraud by as much as 50 %.
However, as with any new technology, considerable confusion exits as to
which types of systems are effective for which purposes. Focusing on
claimant fraud in insurance, this paper will identify types of technology
utilized in fraud detection, their scope and limitations, to help risk managers
choose appropriate technology for their needs. Fraud Detection And
Technology it reality, no one technology delivers a complete solution for
fraud detection. A complete solution is the result of the intelligent
combination of several technologies, most of which are not particularly
effective if used alone.
The challenges of addressing the fraud and abuse problem- and the different
technologies that can be used for this purpose- 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,
review entails confirmation of fraudulent/abusive activity and the process of
taking corrective actions such as blocking of payments, recoupment of paid
dollars and prosecution.
The variety of technologies that can be employed can perhaps be best

understood by assessing their contribution in improving either or both of
these two processes. To date, primary emphasis has been on review side,
with a focus on techniques for surveillance, investigation and prosecution.
Many technological tools, such as those for ad- hoc querying or viewing of
activity, have been designed to aid in the review of potentially fraudulent
claims. However, the challenging task of detection effectively identifying
suspects in the first place- has received less attention and currently offers
the greatest opportunity for benefit if addressed in a comprehensive fashion.
DETECTION & REVIEW

The mission is to find insurance fraud and abuse; once we do that, we can
take a variety of actions to recover payments already made and prevent
future in appropriate payments. Our starting point is the mountain of
historical transaction data (i.e. claims master-file information, payment
transactions, medical/payment detail, policy information, etc).
Detection
Detection is the first step and is complicated by a host of technical
challenges. Review is the second step and requires giving human experts the
information they need to confirm fraud and abuse. Detection is a statistical
game with the goal of improving the odds of finding the target. The process
is analogous to fishing for a rare fish in the ocean. Without the right tools, we
are left to fish the endless sea of legitimate claims for our rare fraudulent
catch. Not surprisingly, a tremendous amount of time and effort can be spent
to identify a single case of fraud.
The job of a detection system is to filter the 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, averted future fraud
and abuse or successful prosecution). We stop wasting effort reviewing false
leads, and we prioritize effort to inspect the most important cases first.
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
The review process gathers the evidence that human experts need to
confirm fraud and abuse. Because of the complexity of detecting provider
fraud and abuse, no system can be 100% accurate in selecting fraudulent
claims. Once the detection system has generated a pool of suspects, expert
claims adjuster or fraud investigator are needed to review suspects, conduct
the appropriate investigation and bring the case to closure. The experts may
use technology to help them navigate through, visualize or analyze the
detailed data behind a case. Detection can be linked to the front end of the
fraud-fighting process, while review is analogous to the back end.
Many tools offered to assist in the fight against fraud and abuse, such as
those allowing for the review process. Other technologies, 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.
While
these
techniques
can
be
important,
for
example
investigating rings to which given suspect initially come from? Further, more
the reality is that most fraud and abuse is opportunistic and does not involve
elaborate rings. A detection system is necessary to uncover suspicious
activity in the first place.
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.g. a co-worker disgruntled ex-spouse) calling 1800 fraud
line. In some cases, 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.
These are good first steps, but there is much room for improvement. There is
a great potential for insurance organizations to identify more fraud and
abuse and identify it closer to its onset. Because detection has received far
less attention than review, this paper will focus on the application of
technology to the detection problem.
APPROACHES TO DETECTION
Two fundamental approaches to detection are ruled-based and model-based.
The nature of fraud and a comparison of these two approaches can be better
understood by using the analogy of the amoeba.
Using Rules to detect fraud and abuse
Rules (or red-flags) are often developed to identify suspect claims. For
example, neck injuries are more likely to be fraudulent than head injuries.
Hence, a rule may identify neck injury claims as suspect. However, even
though neck claims have a higher risk of fraud than head claims, it is still the
case that far more neck claims are valid than are fraudulent, so the rule may
be refined to future restrict the claims identified as suspect (e.g. an
employee on the job for less than one year).
In terms of the amoeba analogy, 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. Usually, a rule has some overlap with the
amoeba but also has some area outside the amoeba. A tremendous number
of rules are required to cover the amoeba and fill its multi-dimensional
space.
In actuality, rules-based systems are most beneficial to find evidence, not
detect suspicious claims. This means rule-based technology is effective as a
tool for review, but not effective enough for pure detection to summarize
rule-based technology.
NEURAL NETWORK TECHNOLOGY

Within supervised or unsupervised models, a variety of technologies are
available. Amongst the most powerful are neural networks. Humans cannot
simultaneously consider more than a handful of variables. Neural networks
provide an effective tool for shifting through large amounts of data to identify
those patterns- comprised of interactions involving multiple variables- most
indicative of fraud. In a supervised model can consider hundreds of variables
in developing a score through a learning process of looking at known
historical examples of good claims and bad claims.
The result is a model that can recognize the highly complex and subtle
differences between good and bad patterns of behavior.
In an unsupervised setting, a neural network can characterize complex
behavior patterns to identify those claims that are most similar to each
other, as well as claims that are most unusual.
Traditionally statistical methods (for example, regression) can in theory,
produce models that are just as accurate as those produced using neural
network technology. However, because such methods rely upon human
experts (typically statisticians) to explicitly determine the complex data
relationships, it is nearly impossible for such systems to match the predictive
power of a neural network model. Furthermore, maintenance of traditional
statistical models is costly.
TECHNICAL CHALLENGES
A host of tech accompanies the task of insurance fraud and abuse detection.
An abusive solution to the problem requires a comprehensive approach
enabled by a variety of technologies that addresses these technical
challenges head-on. Some of these design issues include;
Ongoing reassessment of fraud risk
Because fraud may not exist at the time the claim is submitted, or because
evidence of abuse may not yet be apparent, a system must each claim over
and over on an ongoing basis.
Understanding raw data
The starting point is the raw mountain of data. A thorough understanding
of this data requires careful analysis and domain expertise. Furthermore
regardless of what technologies are employed, careful engineering is
required to address issues of data being messy. missing or standardized
Behavior from ongoing transactional data
Characterizing claim activity involves the summarization of all transactional
data (e.g. payments or medical service details). This summarization must not
lose key aspects of activity.
Complex pattern in data
Identifying which claims are most suspicious requires a comprehensive
analysis of many different features characterizing the claim and its activity. A
detection system must be able recognize those patterns of behavior most
indicative of fraud.
Limited examples of confirmed fraudulent claims
In many cases, only a small number of known examples of fraud may exist in
the historical data. One must be able to handle such situations when
developing the detection system.
Prioritization of suspects
In order to match work level to staffing constraints, which may be different
for different customers and may vary over time, a detection system must
allow for prioritization of suspects. Scoring models provide a rank ordering of
all suspects so that attention can be focused on those deemed most
suspicious.
Effective use of detection results
In order to effectively use the detection systems results, explanations for
what makes a claim look suspicious should be provided, strategies for
effective workflow assignment should be determined (e.g., match resources
with suspects that are most beneficial to review) and tools to review the
results should be available (these may already exist).
System Maintenance
The system performance must not deteriorate due to changing patterns of
activity overtime. Because neural network models are built from data and
automatically learn complex patterns within the data, they can be efficiently
redeveloped. Indeed, as more examples of abuse become known, model
performance can be expected to improve over time.
INTERNET & INTRANET

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

Search, read & retrieve data, files, and pictures.
Buy & sell of policy Benefits to Agents
If the insurer has an intranet, the agent can, sitting at his place of work, be
attending the insurers office, making enquiries about status of proposals or
claims or discussing with any other agent, for clarification or advice,
whenever he wants to do it. The physical distance between the agent & the
office will not be of any consequences at all. The benefits to agents will be:
He can receive all circulars & instructions issued by any office. All delays on
account of postal transmission, being forwarded from one level to another,
dispatch department absence of peons, wrong addresses, misplaced through
oversight, lost in transit etc., are avoided.
Any doubts with regard to proposal, benefit, premium, taxation, medical

examination, insurability etc., can be discussed & got clarified directly from
the person concerned.
Communications to & from the office will be immediate through e-mail & at a
low cost.
Benefits to PolicyholderslProspects:
Prospects can get benefit through the internet in the following ways- They
can get details of the various policies, the benefits there under, the
premiums payable etc.,
Prospects can get advice on the suitable insurance plan for themselves.
Policyholders can get information with regard to the status of the policy,
the premiums due, the bonuses attached, the surrender values or loans
available, revival possibilities, nearest office for any further transactions.
Premium can be paid without having to go to the office of the insurer, by
direct debit to the policyholder credit card or bank account
The LIC has included in its websites, for the benefit of the prospectus and the
policyholder, information to health issues
KISOKS
Kiosks are unmanned information centers, placed strategically at public
places. They are called Interactive Touch screen kiosks. A kiosk is a selfcontained hardware & software to blend all current media including graphics,
video, text & quality sound. It consists of a touch sensor& a monitor on which
the sensor can be fitted. The user is expected to touch the relevant sensors,
according to the choices offered by the kiosks visually on the monitor. The
kiosks then takes him the required information or to transact the required
business.
The LIC has installed kiosks in more than 100 locations covering its divisional
headquarters. The kiosks provide information on policy status, product
information about all products including group insurance products. These can
he used by persons, who do not have their own computers and cannot
access the internet. They can be operated 24 hours a day and do not require
any supervision like the ATMs of banks.
The touch-screen kiosks were installed in some of the branch, divisional and
zonal offices of LIC. By this facility the customers can obtain information
about LIC, its performance, schemes and statuses of policies by the touch of
the screen.
The kiosks are interactive and user-friendly. Such kiosks are also to be
installed in bus and railway stations and in busy thoroughfares of major
towns and cities. In due course, payment of premium will also be made by
dropping cheques and DDs in drop-in boxes.
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. Customers and
employees may become the victims of identity theft and fraud. With so many
incidents of data loss being reported, companies are looking for solutions
that include new insurance protection.
All companies are responsible for personal information. Even a small
business may have data on a large number of customers, clients and
vendors. That information can be lost, stolen, or inadvertently disclosed. But
the result is the sameanxious victims, unexpected business costs and
damage to a companys brand and reputation.
Laptop Thefts Increase Risks
The breach of personal information is a serious problem in the US. In the past
two years alonc, data breaches have affected approximately 100 million
Americans, a consumer watch group reports. Some people may have been
affected more than once and not all of them were victims of identity fraud, of
course, but the growing number of data losses points out the continuing
exposure to consumers and businesses.
Personal data may be stolen from physical records, or obtained by fraud such
as the sale of information to a sham company It might be hacked from
computers, mistakenly released or published, even posted to a website. A
key factor in many of the recent high profile data breaches has been the
theft or loss of laptop computers. ln fact, about a quarter of all reported data
breaches may involve missing laptops.
Its not surprising since laptops are a target of thieves. Cyber Angel Security
Solutions, a national security technology firm, reports that 10% of all laptops
are stolen in the first 12 months and 90% of those computers are never
recovered. 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.
Data Breaches Spur New Laws

To fight identity theft, 32 states have passed laws that require businesses to
respond to the breach of personal information under their control. Federal
legislation is pending. Most of the laws require businesses to warn victims
about potential ID theft and fraud. In many cases, the warning must he
issued within days and include the news media. Businesses may have to pay
to monitor personal credit.
Even without a legal requirement, consumer sentiment is pressuring
businesses to take responsibility to safeguard personal information. They
want victims to be notified and informed about the scope of the damage.
They also demand the company provide personal assistance including
identity restoration case management when a data breach occurs.
A data breach can seriously harm tie brand and a; eta business. Although it
can be expensive to notify and assist victims of a data breach, the risk of
notifying people affected can be far worse. In todays environment, a
business that experience data breach must protect itself from both the risk
to its reputation and the cost of providing services to those exposed to
identity theft and fraud.
Data Compromise Coverage Offers Protection
A new insurance product --- data compromise coverage --- us starting to
appear in the market. This commercial lines coverage addresses the issue of
data breaches by helping a business or institution respond. This is important
since ID Analytics National Data Breach Analysis found that early notification
of breached personal information may significantly lower the rate of misuse.
The findings suggest that breach notification could serve as a deterrent to ID
fraud.
Several Forms Now Available

At this time, there are a few data compromise coverage forms being offered.
At least one monoline form appears aimed at large accounts, and at least
one packaged firm is designed for middle marker and Main Street accounts.
One of these combines first and third party coverage and the other is first
party only. With corporate managers citing data breaches as their No. 1
concern in a recent poll, data compromise should he an area of further
development and innovation, in the coming months.
Smaller Companies Can Be Vulnerable
Small businesses can find it most difficult to respond to the breach of
personal information. Yet it is particularly challenging to offer broad and
affordable coverage for smaller businesses. Unlike larger companies, they
may not have the knowledge, staff and resources to inform and protect
potential victims. Smaller businesses might not recover as easily from the
extra expense and had publicity. They should look for data compromise
coverage that will arrange and pay for:
The cost of notifying individuals;
Legal reviews and forensic information technology exercises;
Personal services for eligible insured such as a helpline, credit checks and
case managers for the victims of ID fraud.
Treating Claim Data Carefully
Data
compromise
coverage
raises
sensitive
issues
for
insurance
professionals as well. One is the extreme sensitivity of claim data. How will a
claim be adjusted? How much information do you need? The personal
information of potential identity theft victims cant simply be faxed and
dropped inside an inbox. It requires special handling and careful security
procedures so that insurers are part of the solution, and not the problem.
Another issue is for the insurance industry to take action so that we are not
fooled ourselves. It can and does happen that insurance companies issue
policies to people who are not who they claim to be. Worse yet, insurers may
claim payments to imposters. Identity verification is not always easy, but our
industry must take steps to protect personal information and prevent claimrelated identity fraud.
Insurance Professionals Can Help
It is difficult enough to keep up with developments. As technology continues
to advance, personal information becomes increasingly exposed and new
coverage options for data breaches are evolving. The pain of being an
identity theft victim is driving public reaction to data breach incidents. The
insurance industry can help by taking good care of the data in its own
control, offering high quality services to ID theft victims and developing new
insurance programs for data breach exposures.
INSURANCE AND ELECTRONIC COMMERCE - E-INSURANCE

On a global basis, there is mad rush of companies willing to enable their
business. E-insurance is one of the growth areas in India. Enormous
opportunities are being created by the Internets new connectivity such as
improving customers service, reducing cycle time, becoming more cost
effective, and selling goods, services, or information to an expanded global
customer base. As entire industries are being reshaped and rules for
competition are changing, enterprises need to rethink the strategic
fundamentals of their business in order to be successful. Globally, insurance
on the net has lagged behind other financial service products such as
banking and brokerage. Of the total online users only 5% used insurance
service online.
This lag was due to lack of relevant and adequate content. Traditional
insurers, while leveraging on new information technologies, have been slow
to utilise the Internet as an alternative distribution channel. All the largest
insurers
have
been
focused
on
static
marketing
presence
online,
encompassing product information, FAQs and quotes. Only a few insurers

have added the ability to submit applications online. This lack of participation
in the e-business revolution is seen across lines. The insurance companies
attribute two factors for the slow take off. First and foremost, insurance is a
product that is sold and not bought. The Internet is perceived to be a buyers
medium, with online customers able to search quickly and for the most
competitive prices and variety of products. Insurance is one product that
cannot be easily commoditized. The more personal the selling process, the
greater the difficulty in using the net as a medium for selling. Insurance is
one product, which involves personalised selling. The process of insurance
sales requires a series of face-to-face interactions.
International Trends
The convergence effect of IT is being felt by the insurance industry as well in
developed countries. The insurance industry is expected to lose market
share to banking and other financial institutions. Customers today expect
enhance levels of service due to increased competition. This customer
demand is likely to result in non-traditional access to specific information.
The global online insurance market is expected to achieve an exponential
growth in the near future.
The Gartner Group in a study conducted by them says that in a year 25% of
all customer contacts and enquiries for enterprises will come via the internet,
e-mail and online forms. Bancassurance customer service, which has been
almost exclusively done via the telephone (96% of all transactions), will
become increasingly e-mail based in the next four years; decreasing
telephone related service by 28%.
In response to these trends in customer preference, insurers are mobilising
their online sales and customer account management capabilities. This move
towards building Internet based business solutions benefits the insured by
providing greater flexibility, greater customisation of information and
improved customer service for the insurance company. This drastically
reduces
the
costs
involved.
Similarly,
by
essentially
outsourcing
administrative and cost intensive processes such as policy administration to

customers, the cost of administration and servicing the insurance policy also
decreases sharply.
E-Insurance in India
The intriguing question before all associated with the insurance industry is
that will it be possible for private companies or even public sector monoliths
to sell insurance online in India in the near future? Insurance companies will
probably have to wait for Internet penetration to increase and the still
ambiguous e-commerce rules to take concrete form. However, what is not
debatable is that new private entrants will change the rules of the game for
the Indian insurance business, both in the life and the non- life segment,
unfolding opportunities for software engineers and professional agents.
To peep into the possibilities and opportunities emerging out of the
integration of insurance and information technology, various organisations
have organised seminars and conferences in the recent past to explore the
possibilities of selling insurance on the Net and gauge the opportunities for
the growing Indian software industry.
According to T. Ramanan of Assocham, life insurers were among the first to

go online with informative content and features like actuarial calculators.
However, according to him, they have been relatively slow to embrace online
commerce, which currently makes up about 1 per cent of the total term life
market. Only 12 per cent of insurance companies globally sell policies online.
Experts expect the percentage of term life sold over the Internet to increase
from I per cent to 15 per cent by 2003, which in monetary terms works out to
$21 billion. Although traditionally term life insurance has been sold through
independent agents, the big shift will become manifest sooner than later.
And more importantly Indians cannot watch from the sidelines as this
paradigm shift in the insurance sector takes place. In the non-life sector,
automobile policies are popular over the Internet. Premium income, points
out the paper, is expected to rise to $18 billion from about $1 billion
currently. The growth of global online insurance business augurs well for the
Indian IT sector. The exponential growth in the online insurance business will
unfold significant business opportunities for software companies/consultants.
The opportunities that rise out of this will be both global and local, because
new entrants will have to either fine tune or prepare customized packages
for the Indian market.
Online insurance will also help companies reduce costs and keep premiums
low, a prerequisite in a price sensitive market like India. The government,
however, will have to address problems relating to bandwidth on an urgent
basis to make online insurance a reality in India. Other major challenges to
face Indian insurers will be to design and develop strategies for delivering
services to well segmented customers. The third challenge lies in developing
the right combination of customer segments and applicable distribution
channel strategies.
Most Web sites offer contact numbers of their branch officers where we can
get further details of the products on offer. The Agent locator feature,
available on maxnewyorklife.com, iciciprulife.com and on bimaonline.com
help one locate an insurance agent most accessible to you based on a search
facility. One would expect downloadable proposal forms on insurance web
sites, but these are missing in most cases. Only Iicindia.com seems to offer
downloadable proposal and claim forms for a few of the schemes.
Benefits of Electronic Insurance
E-insurance provides multiple benefits to the insurer and the existing and
prospective insured:
Information collected is better and cheaper
Speed of response Issuance of policy and settlement of claims is
faster
Provides new ways of doing business in competitive market
Flexible pricing and customised services
Global accessibility i.e. lapse of physical boundaries
Increased sales without additional sales force
Immediate premium collection and funds transfer
Reduced cost per transaction
24x7 availability i.e. round the clock availability of information
Real time knowledge base building
Major Factors Affecting E-insurance

Growth of net: it is estimated that India would have about 150 million net
users by 2010. These figures represent a huge buying potential.
Competition pressures: insurance companies because of competitive
pressures would be driven into Internet rather than a clear ROT justification.
Customer: the availability of net-based services will be a huge factor for
customer retention.
Cross sells: when linked with other financial products, a portfolio approach
to investment, savings and risk coverage will increase cross sells and
customer loyalty and retention.
Costs: in the beginning c-insurance will be a cost factor rather than a profit
driver, but in the long run it will be a cost reducing factor.
E-Insurance 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
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
agents business. The Internet does not necessarily imply the death of the
agent. Many insurers are examining their agents role in the process and arc
also developing direct contacts with the insured through their web presence.
Agents could enhance their advisory role to consumers as their paper and
money processing functions diminish.
Technological Challenges
One of the most prominent challenges of e-commerce is security. It is very
evident that many users are reluctant to do business on the Internet due to
security reasons:
Database Security: The business database security is utmost important. This
has to be monitored by security of the web server and web access.
Web Server Security: Security policies should be defined as who is allowed
access, nature of the access and who authorises such access, etc.
Password sniffing: Protection against password sniffing is to avoid using plain
text user names and reusable passwords.
Network Scanning Programs: Automated tools should be used to scan your
network. These tools check for well-known security related bugs in network
programs such as send mail and FTPD.
Physical Security: One can ensure physical security by having an alarm
system that calls the police, having a key-lock on the computer power
supply.
Web Access Security: Host based restrictions can be implemented using a

firewall to block incoming HTTP connections to a particular web server.
Transmission Security: Encryption is a key technology to ensure transaction
security.
Privacy: Privacy is likely to be a growing concern as internet-based
communications and commerce increase, Designers and operators of web
sites who disregard the privacy of users do so at their own peril.
INFORMATION TECHNOLOGY AND LIC

LIC has been one of the pioneering organisations in India who introduced the
leverage of Information Technology in servicing and in their business. Data
pertaining to almost 10 crone policies is being held on computers in LIC. The
computers were introduced in 1964 in LIC. Unit Record Machines introduced
in late 1950s were phased out in 1980s and replaced by Microprocessors
based
computers
in
Branch
and
Divisional
Offices
for
Back
Office
Computerisation. Standardisation of Hardware and Software commenced in

1990s. Standard Computer Packages were developed and implemented for
Ordinary and Salary Savings Scheme (SSS) Policies.
Front End Operations
With a view to enhancing customer responsiveness and services, in July
1995, LIC started a drive of On-line Service to policyholders and agents
through computers which enables policyholders to receive immediate policy
status report, prompt acceptance of their premium and get Revival
Quotation, Loan Quotation on demand. Incorporating change of address can
be done on line. Quicker completion of proposals and dispatch of policy
documents have become a reality. All 2148 branches across the country have
been covered under front-end operations. So LIC claims that all its 100
divisional
offices
have
achieved
the
distinction
of
100%
branch
computerisation. New payment related Modules pertaining to both ordinary

and SSS policies have been added to the Front End Package catering to Loan,
Claims and Development Officers Appraisal to reduce time lag and ensure
accuracy.
Metro Area Network
A Metropolitan Area Network, connecting 74 branches in Mumbai was
commissioned in November, 1997, enabling policyholders in Mumbai to pay
their Premium or get their Status Report. Surrender Value Quotation, Loan
Quotation etc. from any branch in the city. The System has been working
successfully. More than 10,000 transactions are carried out over this Network
on any given working day. Such Networks have been implemented in other
cities also.
Wide Area Network

All 7 Zonal Offices and all the VLN centres are connected through a Wide
Area Network WAN). This enables the customer to view his policy data and
pay premium from cur branch of an MAN city. As at May 2002, there were 91
centres in India with more than 1200 branches networked under WAN.
Interactive Voice Response Systems (WRS)
IVRS, functional in 58 centres all over the country, enables customers to ring
up LIC and receive information (e.g. next premium due, Status, Loan Amount,
Maturity payment due, Accumulated Bonus etc.) about their policies on the
telephone. This information could also be faxed on demand to the customer.
Website
LICs website, www.licindia.com, displays information about LIC and its
subsidiaries. LIC (International) E.C., LIC (Nepal) Ltd., LIC Mutual Fund, LIC
Housing Finance and their products. The addresses/e-mail IDs of its Zonal
Offices, Zonal Training Centres, Management Development Centre, Overseas
Branches, Divisional Offices and also all Branch Offices are also provided. LIC
has given its policyholders a unique facility to pay premiums through Internet
absolutely free and view their policy details on Internet premium payments.
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
general public on various products and services offered. These KIOSKS,
enable the users to provide policy details and accept premium payments.
Info Centres
It has also set up call centres to provide information about our Products,
Policy Services, Branch addresses and other organisational information.
INSURANCE APPLICATIONS WITH ADOBE
Break free of paper-based processes
Insurance companies tell us that they are hindered by slow, paper-based
processes. Agents waste time and money shuffling forms, instead of closing
business and prospecting for new customers. Back-office burdens, such as
re-keying data and handling huge volumes of mail, further increase costs. As
a result, customers are put off by frequent poor service, causing them to look
for other alternatives or abandon the process altogether.
The challenge is to find a way to streamline the application processdriving
down costs while helping to drive additional revenues and profitsbut it
hasnt been easy.
Restricted by system silos and patchwork processes
If your company is like most carriers, you have legacy system silos and
patchwork processes for various product lines. This lack of integration
creates islands of information, which necessitates extensive manual handling
and staff paperwork.
The resulting inefficiencies dramatically impact your organizations ability to
put the customer first and efficiently meet the needs of policyholders and
agents.
Applications for new insurance take an hour or more to complete.
Customers have to supply the same information repeatedly
A seemingly endless stream of paper flows from desk to desk and
department to department, often back stepping more than once.
Frequent data errors and broken process steps require timetime that
costs you money.
Studies have shown that paper-based processes are expensiveup to an
estimated $150 to print, scan, fax, copy mail, and process each insurance
application. In addition, growing regulatory requirements add to the burdens
that your headquarters faces, forcing you to update systems and disclosures
to remain in compliance. All this leads to slower service, unhappy customers,
and dissatisfied agents and brokerswho just may decide to take their
business elsewhere.
Adobe can help remedy the situation. The Adobe solution for insurance
application helps you improve service while reducing costs, meeting
policyholder needs, and increasing agent loyaltyso you can dose more
business.
Get faster, more accurate processing
The Adobe Intelligent Document Platform accommodates both paper forms
and electronic documents, simplifying the collection and sharing of
information, and minimizing time-cons tuning back-office tasks.
Agents, customers, and call center representatives need to enter data
only once.
Renewal forms and other documents can be automatically populated,
dramatically reducing time-consuming and error-prone re-keying.
Adobe Document Services simplify underwriting and risk appraisal by
allowing ratings and not to be made right on the form for review by all
partieswithout altering the original document.
Electronic distribution eliminates postal delays and costs, and improves
response times by eliminating back-office handling.
Agents and brokers can present intelligent forms to clientsin an
offline modeby using the free Adobe Reader.
When wet signatures are required, you can print forms out and then
easily
revert
back
to
an
intelligent,
automated
process
while
maintaining full integrity of the original form data.

Build data validation and calculations into all application processes. Support
for eXtensible Markup Language (XML) and ACORD XML standards helps
efficiently integrate this information into your enterprise applications. Adobe
Document Services also offer a flexible front end, so you can adapt easily to
the latest regulatory policies, to minimize the business disruption and
expense of compliance.
Beyond the wide range of benefits delivered by the solution, Adobe also
partners with industry leaders such as IBM and Documentum, so that you
can extend Adobe supported insurance solutions throughout your enterprise.
Adobe PDF: Key to streamlining the insurance application process

Adobe Portable Document Format (PDF) provides a secure, reliable way to
distribute and exchange documents and information. PDF files look like the
original documents, offering customers and agents the look of paper with the
added efficiency of fillable forms. This familiarity helps to increase the
acceptance of your self-service channel and maintains better consistency
between online and offline processes. Multiple policyholder documents can
be dynamically converted and combined into a single Adobe PDF file,
decreasing document preparation time and expense, while ensuring higher
quality packages. And since Adobe PDF files are searchable, they are ideal
for archiving and retrieval.
With free Adobe Reader software, your internal staff as well as independent
brokers and agents can access documents and forms as needed. Reviewers
can easily add comments without altering the original, and agents as well as
customers can see and respond to these comments, avoiding redundancy
and saving cycles. Password protection and other built-in security features
can be added to control access and ensure data integrity at every step. This
efficient workflow translates into to faster reviews and underwriting, and
improved service.
The Adobe solution for insurance application improves the quality of your
service to agents, brokers, and customersmaking it easier for agents to sell
more
policies,
decreasing
abandonment
rates,
and
enhancing
your
profitability.
The application process is simplified and back-office tasks are
automated, improving cycle time and reducing the costs of acquiring
and servicing customers.
Revenues increase because you and your agents and brokers can
efficiently handle more business.
Your headquarters gains better
control
over
costly,
disruptive
compliance issues.
Personal information gathered from policyholders is safeguarded,
ensuring privacy and maintaining transaction integrity with customers
and partners.
To streamline the insurance application process and improve backoffice efficiency, turn to Adobe.
MICROSOFT AND THE INSURANCE INDUSTRY
For many drivers, the seemingly endless round of phone message and paper
work that follow traffic accident can make the job of resolving on insurance
claim feel as damaging as the accident itself. For insurance carriers auto
claims processing which involves handling estimates adjustments repairs
billing, and more is no less time-consuming, expensive, and frustrating.
Today, innovative technologies from Microsoft are transforming from the way
auto insurance claims are processed. Based on the power of the
Microsoft.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. Streamlining the flow of data and bringing new levels of
efficiency to the business of claim processing.
Process claims is a leading software provider to the insurance industry,
offering a broad range of property and casualty solution that span heavy
equipment, commercial, personal and specialty lines. A Microsoft certified
partner, process claims deliver solutions that automate solution that
automate communication and information flow, and yield rapid return on
investment. By harnessing the power of Microsoft .NET framework and its
own data transformation technology and industry expertise, process claim
solutions provide data transformation an d mining, business intelligence,
work flow management, assignment automation, appraisal management and
trading partner integration.
Last year, process claims facilitated settlement of $4 billion in claims. The
issue of data integration is critical for all parties involved in resolving auto
insurance claims. In addition to insurance companies there are companies
that depend on data to provide rental car services, supply parts, facilitate
salvage processing, determine vehicle valuation, and more.
Process claims end to end material damage management systems provide

the vital link between all of these parties. Utilizing Microsoft visual studio,
.NET, 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.
Typically, when a driver reports an accident, 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. After receiving the claim the
appraiser downloads is it to an estimating application, writes the estimates,
adds digital photos, and sends the package back to the carrier through the
process claims browser-based application suite.
The ability to utilize XML and web services has established process claims as
a market place leader. Not only does the solution streamline claims
processes. It also extent and enhances the value of existing legacy system
functionality through seamless integration with outside services.
And because legacy system can access this new functionality transparently,
Training and support costs are minimal. Process claims claims port system
focus on areas of material damage to reduce loss-adjustment expenses,
increases efficiencies, and improve customer satisfaction, and they are
configured to meet the specific business requirements of individual insures.
Today, innovators are taking advantage of technologies like this to automate
business processes and transform insurance claim processing.
CONCLUSION
The technology in insurance has grown
through their performance,
restructuring policy and their efficiency in providing the large amount of

insurance services with the help of technology as their technology as their
tool.
The supporting technology require will be real time, rather than batch,
longitudinal rather than episodic; will require connectivity rather than be self
contained; will be interactive; will rely on large relational databases.
Todays consumers do not like to wait. Insurance companies that are
enabling to react to their customers demands will lose market share to their
competitors that can. The question now facing insurance companies is no
longer if they should take advantage of the internet, but now should they do
it. 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.
Therefore both need to be integrated in order to provide quality service &
also to tap the insurance market.
BIBLIOGRAPHY
Books:
Insurance & Risk Management Dr. P.K. Gupta
Technology & Insurance ICFAI
Magazines:
The Windows Magazine
Insurance Journal
Websites:
Insurance & Technology http://www.insurancetech.com

Network Magazine India http://www.networkmagazineindia.com
Microsoft Corporation http://www.mircosoft.com
Adobe Systems Incorporated http://www.adobe.com
Wikipedia http://www.wikipedia.com
How Stuff Works http://www.howstuffworks.com

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Technology in Insurance

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Technology In Insurance1

management, the practice of appraising and controlling risk, has evolved as

Evolution of Policy Bond

addressograph machines were introduced. Policy particulars were embossed

policyholders. The companies also had Unit Record Machines otherwise

Thakur College of Science & Commerce

There were two types of cards, namely:

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modes. The number of premiums

transactions during a year will therefore be as under-

Thakur College of Science & Commerce

First Generation: Screening Systems

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Initial underwriting system extend the capability of the first generation

Components of a Total Underwriting System:

requirements ordered in the field and MIB [Medical Information Bureau]

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Impairment Knowledge-Based Systems

Thakur College of Science & Commerce

Impairment underwriting knowledge-based system is sophisticated decisionsupport tools.

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They assist in the determination of ratings by promoting the user for

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NEED FOR INFORMATION TECHNOLOGY IN THE INSURANCE SECTOR

Speedy and correct issuance of

Quality Assurance &

integration of all activities connected with the processing of policy

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Thakur College of Science & Commerce

TECHNOLOGIES FOR INSURANCE

advancements can really enhance the performance of insurance companies.

performance, loyalty, and lost opportunity.

Call Centre Technology

Technology & Cyber Insurance in India

opportunities in the insurance industry are up for grabs. One important

Cyberspace is a risky place. Companies conducting business over the

developers, all contribute to the difficulty of developing a single risk profile.

IT APPLICATIONS IN FUNCTIONAL AREAS

Thakur College of Science & Commerce

strategies. Some of these areas are discussed below:

Thakur College of Science & Commerce

Impact of Technology on Insurers

Thakur College of Science & Commerce

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The variety of technologies that can be employed can perhaps be best

Thakur College of Science & Commerce

DETECTION & REVIEW

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NEURAL NETWORK TECHNOLOGY

Thakur College of Science & Commerce

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INTERNET & INTRANET

an e-mail id, which is his address in the net.

Any doubts with regard to proposal, benefit, premium, taxation, medical

Thakur College of Science & Commerce

DATA COMPROMISE COVERAGE

Thakur College of Science & Commerce

Data Breaches Spur New Laws

Several Forms Now Available

INSURANCE AND ELECTRONIC COMMERCE - E-INSURANCE

encompassing product information, FAQs and quotes. Only a few insurers

administrative and cost intensive processes such as policy administration to

According to T. Ramanan of Assocham, life insurers were among the first to