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

“The use of IT and especially knowledgebased systems in underwriting has developed through generations of systems. The remaining cases were referred to the underwriters. 22. In addition. it will impossible task to manage transactions such as magnitude. Information display systems allows the underwriter automated access to various sources of information. medical terminology. lists of medications and Thakur College of Science & Commerce .4 crore Thus. • Second Generation: Information Display Systems These appeared in mid 1980’s. in one year . Underwriting of proposals for the life insurance became standardized because of universal adoption of ‘Numerical Rating Method’. 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 . which have progressively increased in complexity.” • First Generation: Screening Systems These were developed by larger companies in the 1970’s to decrease general expenses. Thus.Technology In Insurance5 Quarterly (4. They were design to save the underwriter’s time and thereby improve the productivity.0 x 4) Total 16. there are many other transactions to be handled.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.0 crore 22.

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

• Fifth Generation: Total Underwriting System The fifth of underwriting system encompasses and surpasses the previous system. Their use by the underwriters can help them to manage the mortality expenses by applying consistency to the underwriting process. would be integrated into the entire administrative flow for its greatest impact. which as discussed above. They have been designed to enhance the risk selection process. The system needs multiple components for each of the essential functions. 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. Initial Data Entry Thakur College of Science & Commerce . 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. They integrate all the components discussed above into single system: they also include a management information system for the entire process.

at a regional marketing office or at the home office. Information from the agents report. This involves taking applications and sorting them into two groups. 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”. clean ones and those in need of further processing. This series of knowledge — based systems defines underwriting problems and determines why the case Thakur College of Science & Commerce .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. data may be entered from an agent’s laptop-computer. Screening checks that application need no future requirements . are within certain age and amount limits and have acceptable finances and an appropriate beneficiary. requirements ordered in the field and MIB [Medical Information Bureau] information could also be entered for processing Screening The second component is screening. have all medical and non medical questions answered properly. This is fairly simple processing.

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

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

For underwriting they limit the number of cases that need to be reviewed. Benefits Underwriting system has many benefits.Technology In Insurance11 Impairment Knowledge-Based Systems The next component is the impairment underwriting knowledge-based systems. 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. respiratory disorders. diabetes. Their logic is patterned after the knowledge and thought processes of expert MD’s and underwriters. If underwriters choose. Several companies have developed knowledge — based systems for this purpose and have been very pleased with results. The management from the database of information can create reports. This program deals with impairments such as high blood pressure. Management Reporting This component generates administrative and other reports on the decision made within the system. aviation and coronary heart disease.” Thakur College of Science & Commerce . 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. Information is requested from the record and a rating is suggested. cancer. As an underwriting officer stated.

knowledge-based systems can provide decision-assistance tools in the risk classifications process. 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. Impairment underwriting knowledge-based system is sophisticated decisionsupport tools. Also. Thakur College of Science & Commerce .Technology In Insurance12 Furthermore. For the producer. 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. they do manage these paperwork in the ordering and keeping track of requirements. Knowledge-based system can improve underwriter productivity in other ways with workflow with workflow management tools. without having to be seen by an underwriter. Apart from reducing underwriters work. because requirements are ordered and processed by the system prior to the underwriter seeing the cases. Although these system do not do any underwriting themselves. This is possible because some application can be approved by the system almost immediately. initial underwriting knowledge — based systems decrease the number of times a case needs to be reviewed by an underwriter.

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

sales management etc. 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. and a sweepening impact on reducing the case of various activities. Even though the use of information technology is not new to 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. policy issue and servicing. claim processing. 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. With the arrival of private insurance players. the competition has become more intense and an important role is being played by the insurance sector. 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 .

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

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

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

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

Technology In Insurance19 which shows the enormity of the job. Thakur College of Science & Commerce . 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.

Following technological advancements can really enhance the performance of insurance companies. performance. loyalty. including cash value.the length of time we retain policies.Technology In Insurance20 The insurance markets are being revolutionised by technology at a high speed pace. Such historical retention was prohibitively expensive in the past. Database Management Systems The principles of tracking and measuring responses can pay off for the conventional insurance industry. the sale of policies and the claim settlement are two separate areas for the Thakur College of Science & Commerce . customers and agents is most important in insurance companies. exporters. insurer needs to consider many factors. But the need to record and study the characteristics of persistency. allowing cross-border trade to become electronic and paperless. 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. IT and software solutions. Using database technology companies can get a comprehensive. Traditionally. and lost opportunity. 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. but regional in focus. To find more clients. are increasingly on offer to importers. shipping companies and financial institutions. a database with five to ten years’ history is of immense importance. medium and competition. products and agents. In order to find out profitable combinations of households or clients. 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.

The computer applications like decision support systems (DSS). 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. Data mining can be used as a means to control costs and increase revenue resulting in enormous earning for effective users. dynamic process for any business. Imaging and Workflow Technologies The proposal forms may be scanned into an imaging system. Decision Support Systems The path of business applications of computers. expert systems (ES) and executive information systems (EIS) are still awaited in insurance business. Data warehousing allows managing by profit levels with an integrated approach rather than by limiting losses. 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. encompasses many stages including the very early applications like transactions processing systems (TPS) followed by the management information systems (MIS). Office automation (OAS) happens to be a continuously ongoing. computer based information systems (CBIS). 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. It helps the insurer Thakur College of Science & Commerce . Mapping Insurers to meet different needs. can use Mapping technology.Technology In Insurance21 insurance companies.

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

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

such as intellectual property. Thakur College of Science & Commerce . through negligence in their work cause injury/damage to a third party. Legal fees: Fees incurred for litigation arising out of various claims. Insurance companies in India should provide comprehensive protection policies for a business against web-related risks. 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. securities related laws. who. and legal action. 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. Personal injury & advertising Liability: As e-commerce grows.Technology In Insurance24 of laws dealing with the Internet. Many businesses on the internet mistakenly think their internet. these risks can be triggered by worldwide web sites. business interruption losses.related exposures are covered by their existing policies. Essentially. web hosts & web-designers. employee can initiate sexual harassment charges from an employee due to disturbing e-mail content. Errors and Omissions liability: these risks are typically triggered by the programmers. such as hackers and viruses. Director’s liability: Directors and officers often face the risk of litigation due to numbers of factors. such as consumer protection laws. and trade publishers who publish illegal content or content which may be constructed as libel. credit card and employee fraud. and certain provisions in the corporate laws that place additional responsibilities on directors. In addition.

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

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

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

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

Technology In Insurance29 INTRDUCTION Losses due to insurance fraud and abuse affect every business and every risk manager. 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. most of this fraud is never detected. resulting in $24 billion dollars 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. Worker’s compensation claims alone are responsible for about $5 billion in losses each year. saving companies in these Thakur College of Science & Commerce . Unfortunately. The stakes are high: according to the Insurance Information Institute.

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

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

Review is the second step and requires giving human experts the information they need to confirm fraud and abuse. averted future fraud and abuse or successful prosecution). Not surprisingly. 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 . Detection is a statistical game with the goal of improving the odds of finding the target. 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. Without the right tools. We stop wasting effort reviewing false leads. we are left to fish the endless sea of legitimate claims for our rare fraudulent catch. and we prioritize effort to inspect the most important cases first. The process is analogous to fishing for a rare fish in the ocean. 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”.Technology In Insurance32 Detection is the first step and is complicated by a host of technical challenges. a tremendous amount of time and effort can be spent to identify a single case of fraud.

expert claims adjuster or fraud investigator are needed to review suspects. Once the detection system has generated a pool of suspects. A detection system is necessary to uncover suspicious activity in the first place. There is a great potential for insurance organizations to identify more fraud and abuse and identify it closer to its onset. but there is much room for improvement. Other technologies. such as those allowing for the review process. no system can be 100% accurate in selecting fraudulent claims. this paper will focus on the application of technology to the detection problem. a co-worker disgruntled ex-spouse) calling 1800 fraud line. Many tools offered to assist in the fight against fraud and abuse. While these techniques can be important.Technology In Insurance33 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. Thakur College of Science & Commerce . conduct the appropriate investigation and bring the case to closure. 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. 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. visualize or analyze the detailed data behind a case. 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. The experts may use technology to help them navigate through. Because detection has received far less attention than review. Detection can be linked to the “front end” of the fraud-fighting process. In some cases. These are good first steps. 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.g. while review is analogous to the “back end”.

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

Technology In Insurance35 Thakur College of Science & Commerce .

Amongst the most powerful are neural networks. as well as claims that are most unusual.Technology In Insurance36 NEURAL NETWORK TECHNOLOGY Within supervised or unsupervised models.most indicative of fraud. a variety of technologies are available. produce models that are just as accurate as those produced using neural network technology. 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. However. regression) can in theory. In an unsupervised setting. Humans cannot simultaneously consider more than a handful of variables. 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. a neural network can characterize complex behavior patterns to identify those claims that are most similar to each other. Neural networks provide an effective tool for shifting through large amounts of data to identify those patternscomprised of interactions involving multiple variables. The result is a model that can recognize the highly complex and subtle differences between “good” and “bad” patterns of behavior. Traditionally statistical methods (for example. Thakur College of Science & Commerce . Furthermore. maintenance of traditional statistical models is costly.

An abusive solution to the problem requires a comprehensive approach enabled by a variety of technologies that addresses these technical challenges head-on. careful engineering is required to address issues of data being messy. • Understanding raw data The starting point is the “raw mountain of data”. missing or standardized • Behavior from ongoing transactional data Characterizing claim activity involves the summarization of all transactional data (e. or because evidence of abuse may not yet be apparent. Furthermore regardless of what technologies are employed. a system must each claim over and over on an ongoing basis. • Complex pattern in data Identifying which claims are most suspicious requires a comprehensive analysis of many different features characterizing the claim and its activity.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. A Thakur College of Science & Commerce .g. Some of these design issues include. payments or medical service details). • Ongoing reassessment of fraud risk Because fraud may not exist at the time the claim is submitted. 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. Because neural network models are built from data and automatically learn complex patterns within the data. as more examples of abuse become known. a detection system must allow for prioritization of suspects. Indeed. which may be different for different customers and may vary over time.Technology In Insurance38 detection system must be able recognize those patterns of behavior most indicative of fraud. • Limited examples of confirmed fraudulent claims In many cases. they can be efficiently redeveloped. • Prioritization of suspects In order to match work level to staffing constraints. • System Maintenance The system performance must not deteriorate due to changing patterns of activity overtime. • Effective use of detection results In order to effectively use the detection system’s results. match resources with suspects that are most beneficial to review) and tools to review the results should be available (these may already exist). Thakur College of Science & Commerce . model performance can be expected to improve over time. strategies for effective workflow assignment should be determined (e.g. explanations for what makes a claim look suspicious should be provided. One must be able to handle such situations when developing the detection system.. only a small number of known examples of fraud may exist in the historical data.

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

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

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

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

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

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

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

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.Technology In Insurance46 Another issue is for the insurance industry to take action so that we are not fooled ourselves. The insurance industry can help by taking good care of the data in its own control. It can and does happen that insurance companies issue policies to people who are not who they claim to be. offering high quality services to ID theft victims and developing new insurance programs for data breach exposures. insurers may claim payments to imposters. Worse yet. As technology continues to advance. Thakur College of Science & Commerce . 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.

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

Bancassurance customer service. e-mail and online forms. This drastically reduces the costs involved. the cost of administration and servicing the insurance policy also decreases sharply. Customers today expect enhance levels of service due to increased competition. greater customisation of information and improved customer service for the insurance company. by essentially outsourcing administrative and cost intensive processes such as policy administration to customers. decreasing telephone related service by 28%. 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. 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. insurers are mobilising their online sales and customer account management capabilities. In response to these trends in customer preference. However. will become increasingly e-mail based in the next four years.Technology In Insurance48 The convergence effect of IT is being felt by the insurance industry as well in developed countries. 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. The insurance industry is expected to lose market share to banking and other financial institutions. This move towards building Internet based business solutions benefits the insured by providing greater flexibility. which has been almost exclusively done via the telephone (96% of all transactions). what is not debatable is that new private entrants will change the rules of the game for Thakur College of Science & Commerce . Similarly.

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

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

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

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.

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

g. displays information about LIC and its subsidiaries. LIC (Nepal) Ltd. Website LIC’s website. www. 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). Status. This enables the customer to view his policy data and pay premium from cur branch of an MAN city. Loan Amount. Interactive Voice Response Systems (WRS) IVRS. LIC has given its policyholders a unique facility to pay premiums through Internet absolutely free and view their policy details on Internet premium payments.licindia. This information could also be faxed on demand to the customer. Divisional Offices and also all Branch Offices are also In Insurance56 Network on any given working day.. Zonal Training Centres. there were 91 centres in India with more than 1200 branches networked under WAN. Accumulated Bonus etc.. The addresses/e-mail IDs of its Zonal Offices. LIC Housing Finance and their products. Maturity payment due.C. 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 . Overseas Branches. enables customers to ring up LIC and receive information (e. As at May 2002. Management Development Centre. functional in 58 centres all over the country.) about their policies on the telephone. LIC (International) E. next premium due. LIC Mutual Fund.

Technology In Insurance57 general public on various products and services offered. Restricted by system silos and patchwork processes If your company is like most carriers. causing them to look for other alternatives or abandon the process altogether. Branch addresses and other organisational information. Agents waste time and money shuffling forms. further increase costs. Info Centres It has also set up call centres to provide information about our Products. paper-based processes. This lack of integration creates islands of information. instead of closing business and prospecting for new customers. enable the users to provide policy details and accept premium payments. As a result. such as re-keying data and handling huge volumes of mail. Policy Services. customers are put off by frequent poor service. 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. The resulting inefficiencies dramatically impact your organization’s ability to put the customer first and efficiently meet the needs of policyholders and agents. you have legacy system silos and patchwork processes for various product lines. • 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. These KIOSKS. which necessitates extensive manual handling and staff paperwork. Thakur College of Science & Commerce . Back-office burdens.

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

• Electronic distribution eliminates postal delays and costs. and improves response times by eliminating back-office handling. • When wet signatures are required. Adobe Document Services also offer a flexible front end. • Agents and brokers can present intelligent forms to clients—in an offline mode—by using the free Adobe Reader. Thakur College of Science & Commerce . you can print forms out and then easily revert back to an intelligent. Build data validation and calculations into all application processes. Adobe also partners with industry leaders such as IBM and Documentum. so that you can extend Adobe supported insurance solutions throughout your enterprise.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. 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. automated process while maintaining full integrity of the original form data. Beyond the wide range of benefits delivered by the solution. so you can adapt easily to the latest regulatory policies.

decreasing document preparation time and expense. PDF files look like the original documents. offering customers and agents the look of paper with the added efficiency of fillable forms. they are ideal for archiving and retrieval. while ensuring higher quality packages.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. Reviewers Thakur College of Science & Commerce . With free Adobe Reader software. Multiple policyholder documents can be dynamically converted and combined into a single Adobe PDF file. your internal staff as well as independent brokers and agents can access documents and forms as needed. And since Adobe PDF files are searchable.

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

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

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

will rely on large relational databases. restructuring policy and their efficiency in providing the large amount of insurance services with the help of technology as their technology as their tool. will require connectivity rather than be self contained. The supporting technology require will be real time.Technology In Insurance64 CONCLUSION The technology in insurance has grown through their performance. rather than batch. Thakur College of Science & Commerce . Therefore both need to be integrated in order to provide quality service & also to tap the insurance market. 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. but now should they do it. Insurance companies that are enabling to react to their customer’s demands will lose market share to their competitors that can. will be interactive. The question now facing insurance companies is no longer if they should take advantage of the internet. longitudinal rather than episodic. Today’s consumers do not like to wait.

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