Case Study

KETAN R. GANDHI 13-23072019-01

Digital Transformation at New India Assurance Co. Ltd.

Atul Sahai was upbeat about opportunities in General Insurance industry in India and growth potential for
New India Assurance Company. He was appointed in Jan-2019 as Chairman and Managing Director. With-
in three months, he understood that rules of the game (competition) had changed in last two decades
and general insurance companies might no longer continue to operate the way they used to in pre-digital
age and remain profitable in the current digital era. He decided to evaluate organization wide
transformation / change projects with major focus on Digital technologies & using IT/ITES services.

He was aware about latest technologies & trends which impacted the company’s operation & competition
in various industry sectors. He wanted to evaluate advancements/changes in Big Data Analytics, Internet
of Things, Machine Learning, Artificial Intelligence, Software as a service, Cloud computing, Business &
social network, computing devices including high tech cell phones, cyber security etc. to find out the best
IT assets, software and technologies which would help to achieve strategic & operational goals. He called
Sonal Mehta, General Manager to study & give a detailed presentation, to prepare final proposal for
board’s approval.

New India Assurance Co. Ltd.

Based in Mumbai, New India Assurance Co. was a public sector general insurance company. It was the
"largest general insurance company of India on the basis of gross premium collection inclusive of foreign
operations". It was founded by Sir Dorabji Tata in 1919, and was nationalised in 1973. Previously, it was a
subsidiary of the General Insurance Corporation of India (GIC). But when GIC became a re-insurance
company as per the IRDA Act 1999, its four primary insurance subsidiaries New India Assurance, United
India Insurance, Oriental Insurance and National Insurance got autonomy.

The company with its registered Head office in Mumbai had about 31 regional offices, 6 Large Corporate
Offices, 447 Divisional Offices, 578 Branches, 27 Direct Agent Branches and 1239 Micro Offices, one Auto
hub, 2 centralised legal hub totalling 2329 offices. New India Assurance operated both in India and foreign
countries (28 countries) i.e. Japan, Hong Kong, Philippines, Thailand, Australia & New Zealand, UK,
Mauritius, Fiji etc. and had given agencies in middle-east countries. In the recent past, it had collaborated
with some of the leading public sector bank of India and Financial Institutions to increase its distribution
network. It employed 17615 people. Refer Annexure – 1 for financial performance of year 2017-18 and
Annexure – 2 for premium collection by top 10 players and year on year change in collection.

©2019 Pmwares. This case is prepared by Sr. Principal Consultant & Corporate Trainer Ketan Gandhi (ketan@kgguruji.com). The
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Atul Sahai – New Chairman
Atul Sahai took charge as the new Chairman-cum-Managing Director of New India Assurance. He joined
New India Assurance as Direct Recruit Officer. In last three decades, he had worked in various
departments and offices of New India Assurance and also in other State-run Insurance Company, The
Oriental Insurance. Sahai had a wide experience in all areas of General Insurance operations and had
enriched knowledge of handling various technical Departments and also Human Resource Management.

With-in six months, he realized that in order to compete & grow in general insurance market in India,
especially against fast growing private companies, he had to take major steps in the areas of customer
service, customer relationship management, efficiency & productivity to reduce cost, improve & widen
customer base. One idea was to reduce costs and improve profitability and doing away with the brick-
and-mortar model that it relied upon during pre-digital age to grow. IRDA published data indicated
industry growth rate was 13%, whereas New India Assurance’s growth rate was 5%.

“Our intermediary expense is around 8-8.5%, while the industry operates at 13%, my vision is to automate
claims settlement. We should automate the claims process. If about 85-90% of our claims are less than ₹
1 lakh, we can easily automate claims of ₹ 50,000, which the regulator permits. Which other technologies
& initiatives we can take?” Atul Sahai Said to Sonal Mehta. Sonal Mehta felt happy that she would be able
to propose new technologies, automation and digitalization now under the guidance of new leader. She
said, she will prepare comprehensive presentation including strategies, focus areas, IT
hardware/software, cost analysis and other change projects. Atul Sahai also wanted to achieve combined
ration less than 105% with-in three years.

New IT Project
She interacted with leading Digital Transformation solution companies. She observed that in the insurance
industry, big data was the name of the game. Insurance big data analytics gave valuable insights into all
facets of company operations and performance – from consumer behavior to underwriting practices to
the ROI of marketing campaigns. Companies that want to leverage that information into actionable
insights turn to big data analytics.

“In 2019, insurance big data analytics will be more than just crunching numbers. Trends indicate we could
see new strategies for insurance big data analytics that will help companies do even more with their
information. Here are some of the latest trends in big data for insurance, and how you can use information
you can already access to get ahead of your competitors.” Akshay Panchal, Sales Head, AlphaBeta
Analytics informed her.

1) Machine Learning
One of the most pressing issues for insurance companies was how to most efficiently and
accurately sift through the troves of data they collect. There simply wasn’t enough manpower or
hours in the day to maximize the ROI on insurance data and glean actionable insights from that
information. That was, until the advent of machine learning came along. With machine learning
capabilities, insurance data analytics tools would run at a higher rate of speed with improved
accuracy and efficiency. Not only could machine learning be used on historical data sets that
insurers already have, but their power could also be used to be proactive in business operations.
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With machine learning, insurance big data analytics could be used to improve, among other
things: Pricing strategies, Promotional content, and Claims

2) Data Privacy
Massive amounts of data would be at Insurance Company’s disposal. New laws and regulations
were changing how insurance companies and their analytics teams could operate. The General
Data Protection Regulation (GDPR) became law last year in the European Union, triggering a
worldwide examination into consumer data protection. The GDPR outlines what consumer data
could be collected and how, and similar laws were passed in other countries.

3) IoT
The need for more data security and regulation was largely due to the vast amounts of data
available. With the creation of the Internet of Things (IoT), we created virtually incomprehensible
amounts of data – 2.5 trillion quintillion bites of data are now generated every day. To put that
into perspective, 90% of the world’s data had been generated in the last two years. The IoT and
its role in big data analytics in insurance is essentially limitless. It gives insurers access and insights
unlike anything they had before, and can impact all areas of business. IoT insurance data would
be used to improve (1) Risk assessment (2) Marketing campaigns (3) Claims processing (4) Claims
leakage (5) Product pricing etc.

4) Unstructured Data
The most common data used in insurance analytics was what is known as structured data. This
data would be volunteered directly by consumers, like name, address, gender, age, etc., that
might be entered into standard forms and tables. This data was easy, accessible, and usable, but
it wouldn’t paint the whole picture. The new frontier for insurance data analytics would be
unstructured data. Unstructured data includes things like social media data, multimedia, or
written reports. New technology, like the IoT, had created a method for unstructured data mining
and analysis, creating an even more robust profile of customers and consumers. Social media data
had even been used in insurance fraud detection and for communicating with customers. Big data
that encompasses this info contains a major, formerly missing piece of the analytics puzzle.

Sonal Mehta was thrilled after interaction with few companies & going through technical details about
how to Leverage Insurance Big Data Analytics from them. The insurance industry as a whole was
dependent upon forecasting risk and reward, and one way many insurers did that was with predictive
analytics. Predictive analytics would help to precisely calculate: (1) Pricing and risk selection (2) Claims
triage (3) Emerging trends

Sonal Mehta was aware that having good data was one thing; knowing how to maximize its usefulness
would be something else entirely. The insurance industry would require absolute speed and accuracy,
especially with data in future. Sonal Mehta felt that making best use of these tools would give customers
the experience they expect, while transforming business practices with next-generation big data
technology.
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Big Data Solution
Collecting huge and complex data sets & processing them requires specific tools and applications. Part of
the complexity lies in the fact that the data volume was very large and was mostly unstructured. To
address challenges like data restructuring, data storage & processing supplier proposed followings;

Apache Hadoop: Apache Hadoop to tackle unstructured data. Hadoop is a free and open source
framework used to store data and process data. Thanks to its data replication, Hadoop provides high
availability. Hadoop implements MapReduce framework, which allows large data processing by
distributing the computation on several nodes. Hadoop is a very mature big data solution, it has been
used by several companies. Hadoop allows big data agile development.

AWS is service provided by Amazon, used to store large amounts of data accessible online for other
hosting applications. AWS has many advantages such as security, reliability, flexibility, and scalability. AWS
is now very popular among companies, making the skills in this technology very on-demand.

Cloudera offers a centralized data storage making data analysis easier, software needed is delivered in
single package reducing considerably installation time.

NoSQL database: To deal with any types of data, the database should adapt to the absence of structure.
The specificity of this kind of database is that no specific schema is required to store data in the database.
The most popular NoSQL databases could be are: Apache Cassandra, Oracle NoSQL, HBase, MongoDB,
Amazon SimpleDB

Tableau is an analytics tool transforming data into insights.

Talend Big data Integration: it is a big data software solution including graphical tools and components
that generate code allowing big data software development team to work with other big data software
solutions and technologies like Apache Hadoop, and NoSQL databases etc.

Development Process
Supplier proposed Big data applications could be built on the top of existing platforms and systems and
would follow following process:

Design and infrastructure: designing the architecture of the big data application to be implemented.

Hardware and network configuration, and implementation: Once the application to be built would be
designed, hardware and software configuration would be finalized.

System development, integration, & training: Application development would start following big data agile
development methodology. Starting from an assumption, line of codes are written, every data can lead
to new assumptions that lead to new lines written. It is really important to work in a very small increment
developing one single assumption at a time, the assumption is analyzed, developed into actionable
business information. Being Agile is really important because learning from feedback is one important
aspect, concept and advantage of big data.

Test of integrated system and launch in the production environment: the output developed from
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assumption is tested and if the test is positive it will be pushed into the production environment.
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Team Members & their charges
For a pilot project for first six months, supplier has estimated following team members;

4 System administrators working full time 1 month charging $70/hour

4 developer engineers working full time for 6 months charging $80/hour

4 database analysts and/or DBA working full time for 1 month charging $90/hour

2 data analysts working full time for 6 months charging $65/hour

1 big data project manager working full time for 6 months charging $100/hour

1 QA tester working full time for 6 months charging $70/hour

Sonal Mehta also obtained quote for manpower from Europe, Eastern Europe and local Indian companies
and found rates were 20%, 60% and 70% less than USA based supplier. American companies provided
similar solutions to US based insurance companies, whereas European and Indian companies had
experience in retail & telecom sector.

Sonal Mehta knew that industry was based on prediction and characterized by a high-risk activity profile.
Insurance industry in India was becoming more competitive and consumer behavior too was changing.
She got convinced that adopting IT technologies and solutions was no more a choice, it was mandatory to
invest in accurate & effective ways to predict consumer behavior and minimize risk. Big data and
predictive modelling would also help in creating new insurance products, which will also help to make
business model more scalable.

Sonal Mehta decide to include major benefits of data & data analytics (1) Assess company’s risks and
vulnerabilities (2) Fraud detection (3) Improved customer experience (4) Deeper customer insight & (5)
Automation opportunities. She worked day & night during last four weeks to study, research, interact with
suppliers and internal team members to collect as much information as possible to enable her to prepare
a business case and submit her recommendation. Would you help her in preparing a business case?

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Annexure – 1

1) Gross Written premium ₹ 26554 crore

2) Profit before tax ₹ 2725 crore

3) Profit after tax ₹ 2201 crore

4) Net worth including fair value ₹ 38301 crore

5) Investments at Market value ₹ 64819 crore

6) Asset base ₹ 76904 crore

7) Solvency Ratio 2.58

Annexure – 2

Gross direct premiums underwritten of top 10 non-life insurance companies, market share & year-on-
year change

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