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PROJECT ON
INFORMATION TECHNOLOGY IN INSURANCE
SUBMITTED BY
Mr. DINESH HARESH NEBHANI
PROJECT GUIDE
Prof. MINAL GANDHI
PROJECT ON
INFORMATION TECHNOLOGY IN INSURANCE
Submitted
In Partial Fulfillment of the requirements
For the Award of the Degree of
Bachelor of Management
By
Mr. DINESH HARESH NEBHANI
PROJECT GUIDE
Prof. MINAL GANDHI
BACHELOR OF MANAGEMENT STUDIES
SEMESTER V
(2009-10)
V.E.S. COLLEGE OF ARTS, SCIENCE & COMMERCE,
SINDHI COLONY, CHEMBUR 400071
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Declaration
I
10)
declare
that
have
completed
this
project
on_____________________________________________
The information submitted is true & original to the best of my
knowledge.
Students Signature
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C E R T I F I C A T E
This is to certify that Mr________________________ Of TYBMS has
successfully completed the project on
__________________________
_____________________ under the guidance of_________________
___________
Project Guide
Prof. MINAL GANDHI
Course Co-ordinator
Mrs. A. MARTINA
External Examiner
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Principal
Dr. (Mrs) J.K. PHADNIS
ACKNOWLEDGEMENT
Before we get into thick of things, I would like to add a few words of appreciation for the
people who have been a part of this project right from its inception. The writing of this project
has been one of the significant academic challenges I have faced and without the support,
patience, and guidance of the people involved, this task would not have been completed. It is to
them I owe my deepest gratitude.
It gives me Immense pleasure in presenting this project report on "INFORAMTION
TECHNOLOGY IN INSURANCE SECTOR". It has been my privilege to have a team of
project guide who have assisted me from the commencement of this project. The success of this
project is a result of sheer hard work, and determination put in by me with the help of my project
guide. I hereby take this opportunity to add a special note of thanks for Mrs. MINAL GANDHI,
who undertook to act as my mentor despite her many other academic and professional
commitments. Her wisdom, knowledge, and commitment to the highest standards inspired and
motivated me. Without her insight, support, and energy, this project wouldn't have kick-started
and neither would have reached fruitfulness.
I also feel heartiest sense of obligation to my library staff members & seniors, who
helped me in collection of data & resource material & also in its processing as well as in drafting
manuscript. The project is dedicated to all those people, who helped me while doing this project.
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RESEARCH DESIGN
PURPOSE OF STUDY
The main reason to select "INFORMATION TECHNOLOGY IN INSURANCE" is to
understand the need of IT in insurance business which makes the business more safe and sound
and to study the development of IT in the insurance industry.
OBJECTIVE OF STTUDY
Understanding & studying the various uses of information technology in different fields
of insurance sector.
To make in depth study regarding current status of IT in insurance.
To study the various changes brought in by IT in the insurance sector through its advent.
Understanding the importance & purpose of IT
Learning the various benefits provided by IT to its employees, organization as well as the
individual.
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RESEARCH METHODOLOGY
DATA COLLECTION
The input for the project has been collected keeping in mind the objectives of the project and
accordingly relevant information has been found. The methodology used is a descriptive method
of the research.
PRIMARY DATA
The data regarding "Information technology in Insurance" was collected through primary data.
Semi-structured interviews were conducted with Rajesh Bedichandani the development
manager of the "LIFE INSURANCE CORPORATION OF INDIA" This was done to understand
the current practices and the style of functioning Information Technology in Insurance
Company.
SECONDARY DATA
The data had been collected by reading various books of IT. The data regarding Information
Technology Introduction, recent trends was collected from their official website on the
recommendation of the personal interview.
LIMITATION
There are no specific books for IT in insurance; it is covered as a small topic in the books
of insurance.
IT is very vast topic to cover.
Less information was available on the internet especially in IT use in private insurance
industry.
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EXECUTIVE SUMMERY
The computing technology, networking technology and advanced electronics together
make today's Information Technology. The convergence of electronics & telecommunication
created by devices like fax, telex which the business world wide has been using extensively over
last three decades. It includes hardware, software, computer interface & storage device and data
distribution& networking.
The use of application of the information technology in wide variety of insurers
operations has now become strategies in the sense that it has direct impact on the productivity of
resources and impact on reducing the cost of various activities.
Insurance organization has three-tier set-up. Operating office (BO / DO), controlling
office (RO / DO), and central office (HO). This department includes the technological manager,
system manager, network manager and operation manager. It is applicable in all the functional
areas of the organization such as marketing, finance, HRM, and R&D.
E-Business is the integration of system, process; organization, value-chain and entire
market using internet based and related technologies and concept. E-Commerce is merely a part
of E-business and is limited essentially to marketing and sales processes. E-insurance derive
multiple benefits to the insurer such as speed of Response Issuance of Policy and settlement of
claim faster, flexible pricing and customized service, 24*7 availability and so on. But it is not
possible to quantify and define the risk under the new atmosphere are secrecy of information,
authentication of information and papers, and keeping the data safe.
The form of service being provided by help lines in the field of insurance are customer
information, EPS, issue of payment of premium facility, call centers etc.
IT in stages of policy includes the IT in payment of premium, Claim Settlement and
Underwriting etc.
Selection of Information technology depends on its scalability, quick to market, easy to
maintain & price affordability. Extensive use of technology is ultimately expected to bring about
considerable amount of standardization of products and process. The emerging technologies are
influencing the delivery channels of financial services. The insurance workforce when provided
with wireless connectivity can access critical information and application anywhere, anytime,
resulting in greater efficiency and superior customer service.
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INDEX
SRNO.
TOPICS
PAGE NO
1.
INFORMATION TECHNOLOGY
2.
3.
18
4.
IT IN STAGES OF POLICY
29
5.
6.
7
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39
45
53
CONCLUSION
63
RECOMMENDATION
64
BIBLOGRAPHY
65
Chapter: 1
INFORMATION TECHNOLOGY
INTRODUCTION
DEFINITION
RECENT TRENDS
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INTRODUCTION
Computing technology, networking technology and advanced electronics together make
today's IT. The convergence of electronics and telecommunications created by devices like fax,
telex which the business world-wide has been using extensively over last three decades. The
convergence of computers and telecommunication has generated various computer networks
making the business data transfer feasible. The computers with advanced electronics has
provided the multimedia facilities i.e. apart from the data in electronic format the voice (audio)
and image (video) also can be a controlling input to and output from a computing device.
Hardware:
Development in information technology have been characterized by miniaturization and
reducing cost with improved performance and better reliability combined with shortened product
development cycles, due to advances in clip technology.
The early use of huge computers during the world war two was for military purpose. The
computer technology went hand in hand with the advance in electronics. The computers for
commercial use in 1960s, made use of transistors instead of vacuum tubes in the earlier
computers. The integrated circuit (IC) technology of 1970s from the backbone of latest
computers. With the feasibility of circuits having large scale integration (LSI) and very large
scale integration (VLSI) powerful computers came to the table tops (Micro computers) and then
to laptops and now to palmtops.
Software:
Like the hardware the computer language (software) have also undergone change. The
software transaction from very hard to use machine level language (MLL) through Symbolic
Assembly level Language (ALL). High Level Language (HLL like COBOL, Basic etc), fourth
generation have today reached to expert systems. This has brought the computer closer to
business managers who may not be necessarily computer professionals. With complicated
operating system for mainframes and mini computers the personal computer came handy with
operating system life DOS, UNIX. This changed the concept of huge data processing units. The
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recent additions of user friendly interface like Windows brought menu driven, user friendly
computing to the society.
Word processing and spreadsheets made processes more efficient and one could edit
documents or do calculation faster. But there was no sharing of information.
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RECENT TRENDS IN IT
Hardware prices are declining and micros are becoming as powerful as minis resulting in
an increases of mini/micro users, compare to mainframe.
The need for data communication and networking is increasing. Even heterogeneous
computers are getting linked.
All these developments have led the insurance and reinsurance practitioners to record the use of
IT as an essential and integral part of their work.
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Chapter: 2
INFORMATION TECHNOLOGY IN INSURANCE
INTRODUCTION
SETUP
IT DEPARTMENT IN INSURANCE COMPANIES.
ADVANTAGES
IT APPLICATION IN FUNCTIONAL AREAS.
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INTRODUCTION
The rapid innovation in the field of information and communication technology has
posed serious challenges for the insurance industry in India. The use and application of the
information technology in wide variety of insurer's operations has now become strategic in the
sense that it has direct impact on the productivity of resources and a sweepening impact on
reducing the cost of various activities.
With arrival of private insurance players, the competition has become more intense and
an important role is being played by the insurance sector. Even though the use of information
technology is not new to the insurance sector, yet it may find tight compartmentalization
regarding the use of information technology in various departments of the insurance companies
including the major players since last 50 years. The most visible of these departments are
accounting, policy issue and servicing, claim processing, sales management etc. The innovation
in information technology can be effectively utilized in the following areas:
Therefore the imperative for all the insurers, especially LIC and GIC is to build up
efficient interface between the various departments and segments. This would reduce the paper
work, improve efficiency of service and provide competitive advantage to the insurance
companies.
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SETUP:
Generally the insurance organizations have three tier set-up - operating office (BO/DO),
controlling offices (RO/DO) & central office (HO). The organization & responsibilities of the IT
department & its sub-departments is more or less in the hierarchical order of the various offices.
The IT department at HO is responsible to the chairman/CEO of the organization for
implementing of IT plan. The department is responsible for procuring new technologies,
conducting training & preparing to the CO. the head of the IT department may have the
following managers with their respective tasks:
Technology manager
System Manager
Functional specifications
Evaluation of studies
Network Manager
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Operations Manager
Maintenance of hardware
Training of users
Training of employees- at operating, head & controlling offices on office automation &
networks
Maintenance of networks
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ADVANTAGES OF IT IN INSURANCE:
The insurance industry is service-oriented industry and mainly based on the retail
consumer. So the benefit of storing data is immense. They help study the customers test,
preferences, habits etc. The Indian insurance market is still at the embryonic stage and the
companies who enter first and are customer savvy will be at an advantage. A range of insurance
products is available today to suit the customers with varying life style and needs. So product
differentiation is no longer the key to attract customers. The key is consumer care- improved
service, affordable covers, reduced premium and improved quality.
The insurance company also has both front and back end jobs. The front end jobs include
policy servicing, billing, co-insurance, re-insurance, claims management, financial accounts and
audit. Back end jobs include statistics, data warehousing, risk management etc.
Other back end jobs include managing investment, personnel system and policies, office service,
etc. Today every system in an organization has software made to automate the process. Packaged
software products are used extensively to make presentations, follow up proposals, policy and
client services, commission tracking, task management, underwriting etc. IT has made the life
for a manager so much simpler.
The advantages of Information Technology with reference to the insurance business can
be stated as below:
Speeds up nearly every stage of doing business and results m efficient business.
Keeps all interested parties fully informed of market needs and opportunities.
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DISADVANTAGES
IT is rapidly changing and the pace is so fast even expert in this field are finding it
difficult to cope with. This results in hardware and software products becoming obsolete
in ridiculously short periods of time.
Difficulty may arise in finding the right type of personnel to handle the system and data.
A powerful, flexible and adaptable computer system is valuable but it is not a substitute
to experienced people.
Change in technical and business environment will pressurize the need to upgrade the
systems and processes which entails expenditure.
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2. Data warehouse:
Data warehousing technology is based on integrating number information system into a
'one stop shopping' database to achieve vision of making company national in scope, but
regional in focus. Traditionally, the sale of policies and the claim settlement are two separate
areas for the insurance companies. Data warehousing allows managing by profit levels with an
integrated approach rather than by limiting losses. Data mining can be used as a means to control
cost & increase revenue resulting in enormous earning for effective users.
The path of business applications of computers, computer based information systems
(CBIS), encompasses many stages including the very early application like transactions
processing systems (TPS) followed by the management information system (MIS). The
computer applications like decision support systems (DSS), expert systems (ES) and executive
information system (EIS) are still awaited in insurance business. Office automation (OAS)
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happens to be a continuously ongoing, dynamic process for any business. Companies need to
utilized decision support systems by implementing data warehouses that pull information from
existing legacy systems into a customer information database. Such decision support systems
will equip the insurance managers with ability to allow for customized products and services that
are more in line with what customer want.
The recent report of MetLife insurance indicated the performance improvement attributed to
imagine and workflow technology to the extent of 50000 claims document - clearance in 8 hours
in case of dental claim of health insurance service.
5. Mapping:
Mapping technology can be used by insurers to meet different needs, such identifying
loss prone areas or geographic claim analysis. It helps the insurer to analyze the extent of its
network i.e. the insurer can determine whether it has too many or too few agency force in
particular area. Mapping is very convenient way to layer disparate information from various
databases to create pictures.
Maps can illustrate how many buildings are located in flood plain, or whether to
buildings covered by the same insurer's fire policies are close by each other and thus present
potential double loss if fire break out in one of them.
7. Video Linking:
A video linking facility between two remote units of an insurance company and between
an insurer and broker allows underwriters at one place and brokers at other unit to discuss risk
inherent in a proposal face to face.
8. Cat Models:
Catastrophic models use data from recent spate of natural disasters that helps develop
more predictions of insurer's property exposures in future disasters. Using this data curious
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"what- if' scenarios of probable maximum loss (PML) using the best estimate available at an
insurer's exposures are tested. Finally an underwriting policy that limits the company's exposure
to catastrophic losses is implemented.
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MARKETING
The scope for use of information technology in marketing function is tremendous. It may
start from the consumer acquaintance to an insurance product to claim settlement or further
selling of new product or developing consumer for the product.
Information technology can be integrated with almost all the ps of marketing. It may
help in formation and implementation of various marketing strategies including pricing,
promotion and customization strategies. Some of these areas are discussed below.
Consumer awareness:
The use of information technology may be path breaking for the insurance companies
since conventionally the awareness of insurance products in India is low. With the use of
Internet the information about the products and pricing policies can be made available to the
public in few seconds and much transparency in operation can be established. There are
numerous web sites available which can help the prospective customer to compare the insurance
products of various issuers and decide the product suited to his needs. Also, the information
about the new products changes in the existing ones and of course, the information about
various discounts and incentives can be provided at a much faster rate and lower cost.
Customer Services:
In insurance being a service needs high concerns in terms of services. Customer service
requires maximum attention and should span the entire gamut of activities in the purchase of the
products i.e. right from the dissemination of information, documentation to policy
administration and claim settlement. The service quality standards on the new private insurance
players have a threat to the then giants viz.LIC and GIC. The investment in the personnel and
knowledge systems has helped private players companies build significant demine expertise.
The emerging areas if IT applications are:
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1.
Market Research
2.
3.
Customization of products
4.
Easy procedure like premium payments, claims settlements, tracking of brokers and
agents.
5.
6.
Intermediary analysis.
FINANCE:
Information technology can be effectively used for internal management viz. Accounting
treasury management, financial performance reporting etc. and as well as in resource
mobilization, portfolio management, investment planning etc.
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Chapter: 3
INSURANCE AND ELECTRONIC
COMMERCE, E-INSURANCE
INTRODUCTION
BENEFITS
FACTOR AFFECTING E-INSURANCE
E-INSURANCE BUSINESS CHALLENGES
ROLE OF E-COMMERCE IN DISTRIBUTION OF INSURANCE
PRODUCTS
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INTRODUCTION:
Insurers face a complex array of business issues. They now realize that failure to tackle
these issues may lead to losing the market share which ultimately has its impact on the
profitability. To tackle these issues, the insurance companies should take initiatives that have the
ability to provide a higher level of customer service and there by customer higher retention.
Insurers also need to take initiatives that can reduce cost and therefore increase profitability. In
response to growing need to confront these complex issues, innovative insurance websites are
springing up and new technology development is taking place. The insurance industry is
speedily moving its service online. Insurance providers globally recognize that web enabling
their business will make it possible for them to deliver a faster, simpler, more transparent
customer service at a significantly lower cost. The insurance providers are enhancing their
investment in technology, infrastructure and skill to utilize the new opportunities to the core.
According to one survey in London and New York, the insurance industries presently provided
few online restricted services. The survey also indicates that additional areas of growth likely
and are expected to shift to core areas such as claims management.
Presently a large number of insurance companies are using the internet for marketing
purpose which involves customer contact for various purposes like:
1. To educate and inform the people about the product available.
2. To ascertain the customer needs
3. To suggest suitable products.
4. To finalize the transaction.
Unlike the commercial goods, which any buyer would like to see, feel or test before deciding to
purchase, insurance is an intangible product. It is a promise based on the terms and conditions of
the contract. This distinguished feature makes insurance product very convenient to buy over the
internet. Exhaustive, up to date information on all the strength of insurance company can be
provided on the website which can be browsed by the internet user. This will help him to do
business with insurance company at his leisure.
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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 e- insurance will be a cost factor rather than a profit driver, but in
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Business Challenges
Disintermediation increases business:
Study has shown that the cost of distribution decreases with the increase value of
connection. Products with relatively high fixed costs and low value such as travel, credit or
burial insurance are relatively expensive to produce. Customers pay a high price per dollar of
coverage for these products. The internet allows the disintermediation of this relatively high
overhead for these low face value products. This mean that prices can be lowered and more
insurance can be sold by reducing the transaction costs of the exchange.
where their claims are in term of payments, when their next annuity payment is due, and low
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.
Technological Challenges:
One of the most prominent challenges of e-commerce is security. It is very evident that
many users are reluctant to do business on the Internet due to security reasons.
SECURITY:
Database security:
The business database security is utmost important. This has to be monitored by security of the
web server and web access.
Password sniffing:
Protection against password sniffing is to avoid using plain text user names and reusable
passwords.
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Physical Security:
One can ensure physical security by having an alarm system that calls the police, having a keylock on the computer power supply.
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 site who disregard the privacy of users do so at their
own peril.
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INSURANCE MALLS
Insurance malls are growing resource for online insurance shoppers. They offer one stop
shopping facilities. These are certain sites which are provided to compare quotes and products
and facilitate a buying process with participating insurance companies. The malls provide
valuable information regarding various participants, and provide the customer with research
tools and explanations about the various products.
The insurer who like to participate, enter into partnership with these malls. A fee is
charged according to the number of products sold by insurer through these malls. While there are
numerous insurance malls on the internet, the leaders presently in the field are insure market and
insweb.
If the customer decides to purchase the product online then the insure market charges the
insurance company fees whose product is being purchased at percentages on the premium
amount. Currently, the sale from insurance malls is restricted to only a few states.
HELPLINE SERVICE
The development of Helpline is well established and advanced abroad especially in the
UK. A Helpline is defined as the provision of an advisory and/or assistance service via the
telephone. The modus operandi is that the person who provide achieve have an online access to
information relating to the problem in hand, such as a list of trade people, for household claims.
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The respondents are normally well trained and able to make immediate decision so that
appropriate action can be taken swiftly. Helpline are seen as a product of the Information
Technology revaluation. The emphasis in the Helpline is n immediacy, which is the Hallmark of
Help line.
Modem telecommunications.
Benefits of Helplines
Every policyholder will have immediate access to the service at all times anc. whenever
he or she is physically located.
The Helpline staffs are trained to soothe customer and provides quali:~ advice. the
assistance level provided is much more timely than tt:=traditional system
The insurers are benefited, as customers loyalty increase as a result of efficiency and
quality in claims service.
CUSTOMER INFORMATION
The Helpline provide improve management of calls from customer for access to
information. They also help to improve the customer knowledge, exponentially increase the
choice of providers, and allow for individualized product offerings. Clients have different needs,
so it is important to identify the information they require, because this is what they will expect
when contacting a Helpline. It is necessary to continually monitor clients changing information
requirements, to ensure that their needs continue to be met satisfactorily. The necessary
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information must be collected and maintained on a regular basis to ensure that it is a latest as
possible. A system must be developed so that the information can be stored in such way that it
can be retrieved easily and quickly whenever required. Modem telephone switching system can
provide sophisticated options which may enhance Helpline operation such as Auto Attendant
and Automatic call distribution, voice mail and touch tone routing, Telephone options, trunk to
trunk calling and other telephone services. Helpline also play a vital role in claims management.
The insured who incurs a loss due to the happening of the event is in dire need for the rights
advice. Helpline undertake to give them immediate relief, in some cases they give the right
information and advice which can be followed by the insured. Sometimes arrangement to
medical facilities, etc. is also undertaken.
Debit card:
A card that resembles a credit card but which debits a transaction account (checking
account) with the transfers occurring contemporaneously with the customer purchases. A debit
card is a machine readable, allowing for the activation of an Automated Teller Machine or other
Automated Payment Equipment.
The electronic payment system shall include requirements for storage of data by and
communications between the parties. This includes not only the data flows for payments
themselves but also for refunds, account enquiries and settlements. It is also to be noted that it
requires a mechanism by which the necessary security requirements for messages and stored data
are achieved.
CALL CENTERS
A typical call center is a service center that has adequate telecom facilities, trained
consultants, and access to wide database, Internet and other online information support
infrastructure to provide round the clock and year round service. Call centers are normally
operated by large airlines, banks to provide service to the customers/callers, investment banks,
mutual funds, telecom services, companies providing customized and high value services, IT
products companies, among others.
In the field of insurance, call centers are helpful in answering complex questions from
policyholders and independent insurance agents, and often use a personal computer to access
insurance information. They are used to handle calls from customers, claimants, and other
parties who have a claim report. They handle correspondence from policyholders and
independent agents to rate Insurance policies correctly. The call center secures basic information
from customer, including where, when and how the loss occurred, who was involved and if any
one was injured. They enter this information into their computer system and then forward the
information and caller to a claim representative in an office near to the caller. They solve
problem and help people, and treat customer with respect, courtesy and positive attitude
WEBSITES AND PLACING GUIDELINES
Helpline are being established to place new guidelines useful to the customers, the
agents, the intermediaries with regard to changes in law, practice of insurance, other related laws
and practices which have a bearing on the insurance activities and impact on the customers.
Data warehousing is a prime example of the industries move towards strategic thinking.
The concept relates to the electronic storage and dissemination of data. The conjunction of data
warehousing applications with Web technology is a key trend, providing insurers with wide data
distribution capabilities at relatively low cost and using this infrastructure to provide database
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incorporating image, text, picture presentation, etc. to a defined user group. Such sites are also
designed to provide guidelines to the agents and other intermediaries.
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Chapter: 4
INFORMATION TECHNOLOGY IN STAGES OF INSURANCE
POLICY
IT IN PAYMENT OF PREMIUM
IT IN CLAIM SETTLEMENT
IT IN UNDERWRITING
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Automated payments are electronic payments which are authorized by the customer in
case of recurring bills. In the case of insurance industry also automated payments can be made
by the both the parties.
Direct payments require the consumers to sign an authorization form for each company
whose bill is to be paid electronically. This form authorizes the designated company to collect
the funds for amount of the bill from the consumer's check or savings account on the date
specified.
PC banking allows the insurance consumer to initiate electronic payments from their
personal Computer. Many PC banking programs also allow the consumer to access account
information, such as personal account balances, account activity or to initiate transfers between
accounts. Current savings or lending rates or other general financial information may also be
available.
Point-of -Sale and Debit Cards aloe the customers to pay an insurer electronically when
making a purchase using an ATM or debit card. Point -of - Sale is a common method of
payments at gas stations and grocery stores. Point - of - sale and debit cards provides consumers
with an alternative to writing cheque or payment cash for purchases. These transactions are
generally completed faster than purchase made by a cheque. Foe many consumers Point- of Sale
and debit Cards provide an attractive to carrying large sums of cash to make purchases.
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The nature of insurance requires that the seller of the product is informed of various
characteristic of the buyer (or more accurately, of the risk being insured).
The regulatory landscape which governs insurance sales is extensive and complex. The
law which governs insurance sales is extensive and complex. The laws which govern insurance
industry in various states being different, the insurance company performing selling of its
products in different states needs to comply with the regulations of the different states. This
makes the sale of insurance products globally difficult due to lack of uniformity in laws and
regulations governing the industry.
The insurance laws in general have not kept up with the pace of technology and are
presently inadequate to regulate the sale and delivery of insurance products over the internet the
insurance industry has been slow in embracing the information technology. Presently the
technology needed to initiate, process and complete the contract is not sufficient.
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The insurer aims at selling the claims as quickly and efficiently as possible and reduces
cost by minimal interaction with the consumer and the outside third parties.
The insured desired that the claim be settle as quickly and as painlessly as possible.
Failure to meet these requirements at the claim stage will significantly reduce the chance of his
renewal with the same insurer. Hence time is of essence in such case.
Often insurers offer to replace goods and services rather than make settlements is cash.
This may result introduction in cost. Through the e-enabled insurance the insurers can prenegotiate discounts with suppliers and cut down on frauds and inflated claims.
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IT IN UNDERWRITING SYSTEM:
A total underwriting system needs to address the entire decision making process of
underwriting, which starts at the time an application is completed and does not end until a
policy is issued. The system needs multiple components for each of the essential functions.
Screening:
The second component is screening. This involves taking applications and sorting them
into two groups: clean ones' and those in need of further processing. This is fairly simple
processing. Screening checks that applications need no further requirements, have all medical
and non-medical questions and have acceptable finances and an appropriate beneficiary.
Approved cases are sent directly to the administration system.
Initial Underwriting:
Applications that are not approved by screening flow into the next component, initial
underwriting. This series of knowledge-based systems defines underwriting problems and
determines why the case required further processing. It checks for age and amount requirements
and examines the financial, non-medical and medical aspects of the case, as well as the
interaction among them. It decides if there is sufficient information to deal with the problems, it
has defined. For instance, if a proposed insured admits to a minor illness two years ago, the
system will allow the case to pass through for most ages and amounts, unless the provider of the
service was unusual. However, if there is a history of angina, the system will not try to approve
the case but will refer it to an underwriter. Prior to its referral, the system determines
requirements, such as an APS or ECG, and identifies the appropriate underwriting guidelines. In
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this way the initial underwriting deals with cases not needing an underwriter's attention and
preprocesses those it cannot approve.
Requirement Processing:
Since underwriting is an iterative process with information from many sources being
reviewed at different times, a total underwriting system permits information (from requirements
such as the medical examination, blood pressure, etc.) to be entered into the system directly
from the provider or by home office personnel. Processing requirements are similar to initial
underwriting, except that discrepancy processing is done by comparing the details of the
information from the application with those received later. In this way, data from different
sources is compared to uncover new problems. If there is significant history or physical finding
on the examination that was not admitted on the application, it is noted and the appropriate
work-up is ordered. If no problems are discovered, cases can be automatically approved without
consulting an underwriter.
Workflow Tools:
Underwriters need certain tools to process their cases administratively. A total
underwriting system provides these. They include front-end tools, back-end tools and status
functions. The front-end workflow tools keep track of cases, their requirements and
underwriting problems. The in-tray function accesses cases electronically assigned to the
underwriter. Rather than getting a stack of files, the underwriter now deals with an electronic
stack of case. For each case there is a detailed underwriting status with identifying data, as well
as underwriting problems and their actions. Other tools allow the underwriter to manipulate,
track and change the underwriting problems and requirements of a case.There are also an
electronic notepad for the underwriter; this can be integrated with an electronic mail system for
field communication.
The back-end workflow tools assist in the final administrative details of a case: forms to
be signed, post-issue requirement preparation, reporting of MIB codes and the process of
requesting reinsurance.
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The status function lets non-underwriters to review the selected case information. An
agents status reveals the data from the application, as well as the requirements and whether
they have been received.
Information Display:
The information display component gives on-line access to underwriting guidelines with
several types of automated searches to improve the access of information. It also makes
available other underwriting references, such as medical dictionaries and drug references.
Management Reporting:
This component generates administrative and other reports on the decisions made within
the system. Reports can be created by management from the database of information.
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BENEFITS
Underwriting systems have many benefits. For underwriters they limit the number of
cases that need to be reviewed, because the system is able to process them without intervention.
In this way the technology improves the work of underwriting by eliminating unnecessary
routine cases. Several companies have developed knowledge-based systems for this purpose and
have been very pleased with the results. As an underwriting officer stated "This gives the
underwriter to deal with more complex and time-consuming cases which was one of the reasons
for installing the system. Furthermore, initial underwriting knowledge based systems decrease
the number of times a case needs to be reviewed by an underwriter, because requirements are
ordered and processed by the system prior to the underwriter seeing the case.
For the producer, service is greatly improved. This is possible because some applications
can be approved by the system almost immediately, without having to be seen by an
underwriter. One company that has integrated this type of system with its field offices is able to
electronically approve applications in less than 15 minutes. Also, the sales process can be
helped by determining all requirements (both those required for 'age and amount' and those
necessary for a specific cause) immediately so that producers do not have to contact an
applicant a second or third time for additional information.
Knowledge-base, systems can improve underwriter productivity in other ways with
workflow management tools. Although these systems do not do any underwriting themselves,
they do manage the paperwork in the ordering and keeping track of requirements. Such tools
decrease the clerical work of underwriters and improve the workflow in underwriting
departments by eliminating unnecessary paperwork.
Apart from reducing underwriters work, knowledge-based systems can provide decisionassistance tools in the risk classification process. Impairment underwriting knowledge-based
systems are sophisticated decision-support tools. They assist in the determination of ratings by
prompting 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 underwriters in very
complex cases.
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Chapter: 5
SELECTION OF THE RIGHT TYPE OF IT SYSTEMS FOR AN
ORGANIZATION
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INTRODUCTION
Purchasing a new IT management system, be it for risk management or claim
management system is not an easy task. Faced with thousands of different applications and
choice, how does a buyer know what to buy? This process calls for two steps followed:
First, the buyer must understand the types of system available in the marketplace and
their price.
Second, the buyer must know the organizations needs and select the application that will
a)
b)
c)
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d)
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(1)
(2)
(3)
(4)
Information ASPs:
Many Application Service Providers offer insurance-related information directly to the end
users or as background services integrated with primary applications. To cite an example,
iiX, ChoicePoint, and ADR provide access to underwriting reports through browsers and the
Internet as well as integration with policy systems. Fair, Isaac offers Internet access to its
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scoring systems.
(5)
(6)
Certificate On-line:
A few new companies provide the online evidence of insurance services (certificate of
insurance, evidence of property insurance, and auto insurance ID cards). Service offered by
these companies are interesting because they use the ASP concept for bettering the
operational environment for all parties concerned with evidence of insurance activities.
(7)
Claim On-line:
Another group of system solution ASPs concentrates on claims problems, hosting a crossentity process that can include the insured, agent, broker, carrier, adjuster, state government,
and even salvage buyer.
(8)
(9)
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Access to application and solutions not available in a local version (with cross entity
Access to software and data only when on-line, which potentially creates
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Chapter: 6
MOBILE AND WIRELESS APPLICATION IN THE
INSURANCE INDUSTRY
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INTRODUCTION
Wireless data communications, commonly referred to as wireless, is the latest wave of
technology slated to push business in new directions. The securities and banking sectors of the
financial service industry and are again leading in the initial use of wireless technology.
However, insurance firm have an advantages in managing their remote workers utilizing
advanced technology. The insurance firm can also take an advantage of opportunities to enhance
claims handling and customer relationship management by using wireless communications.
In the recent years, significant changes in the insurance industry have been forcing
companies to find better ways of doing business. Like other financial services providers, insurers
are identifying new methods of generating revenue, supporting existing business processes, and
integrating emerging business processes. Insurance firms are seeking new technologies to
facilitate the success of e-business. Increasingly, these organizations are looking towards mobile
and wireless solution to help boost productivity, reduce cost and keep clients satisfied, all the
while providing a substantial Return on Investment (ROI). Wireless devices, including Webenabled wireless telephones and Personal Digital Assistance (PDAs), are among the devices that
forerunners in the industry are using to help meet these goals and achieve success in the efinancial world. Empowering insurance agents and claims representatives with anywhere and
anytime access to critical information results in greater efficiency and superior customer service.
Mobile and wireless solutions are also creating existing opportunities for competitive
differentiation and growth in other key areas of insurance industry, such as client self-service,
and e-commerce. In the ensuring discussion, the need and business advantage of wireless
application will be broadly discussed focusing on the global as well as Indian insurance industry.
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even changes to their daily book of business. This helps field agents to make informed decisions
about clients needs.
The emergence of new mobile computer or Pocket PC is a breakthrough, as it can be
used in virtually any remote selling environment; it has the computing power to run real
applications; and it is much easier to use. This implies large opportunities in mobile applications
for the field force in farm, food and crop Insurance.
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CUSTOMER APPLICATION
With the rapid diffusion of wireless technology and availability of mobile services at less
cost, the use of mobile phones by the public is growing tremendously. This provides
unprecedented opportunities for the insurance firms for better customer service. With mobile
device, the clients could be empowered to make inquiries about their policies and payments,
submitting and status tracking on claims, receiving quotes and locating nearby agents at any
time, all that greatly increase client satisfaction and loyalty. It also facilitates clients to send email to agents or claims adjuster instantly, and even receives news; confirmations, changes alerts
and offers on reduce products on a timely basis.
WIRELESS E-COMMERCE:
As the technology that enables the wireless revolution matures, Insurance companies
need to ensure that their e-commerce infrastructure are prepared for this new access channel and
at the same time, they hone their tactical plans for wireless e-service delivery. From Web-enable
wireless telephone to PDAs, these devices offer the mobile consumer the ability to interact, and
transact, with Financial Service Providers. They are viewed as one of the means of implementing
an enterprise customer relationship management strategy, designed to provide business to
customer (B2C) functionality for personal lines insurance and Business to Business (B2B)
functionality for commercial insurance. Mobile commerce functionality includes a wide variety
of channel option like allowing clients to access their policy information, perform service
activities and interact with the insurance provider or an agent.
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In the claims processing area, though the wireless applications could not be completely
exploited at least the initial processing of the claims (i.e. submitting the claim request) could be
handled instantly with wireless, saving considerable time and reducing the processing delay to
some extent. The insurance companies can effectively market their products by advertising or
selling offers through Short Message Service (SMS) to the customer.
The payments of premium could be streamlined well by sending regular alerts to the
mobile customer, at least. In addition, the field force could be contacted instantly by the office
administration wherever they are in the field at any time.
TECHNOLOGY OPTIONS:
The success and widespread use of wireless technologies is due to the convenience and
portability, improved quality and reliability, increased speed, decreasing cost for the user and the
increased geographical range of the communication fields. There are a myriad of wireless
technologies available today that can enable insurers to effectively manage their mobile
activities.
The key is to focus on areas of a business where true mobile needs exits, and where
existing wireless applications can yield immediate benefits. Although there has been a lot of
hype associated with wireless technologies, the focus should not be on the technology, but rather
on what it enables the users to do.
Wireless LAN and WAN technologies enable companies to set up fully functioning
command centers onsite, enabling instant processing of claims reimbursements, and better, more
-informed customer service. The mobile phones are best used as a way to push information to
users via preselected criteria. Personal Digital Assistants (PDAs) and other handheld devices are
useful in claims notification, processing, and capturing assessment data and related multimedia
content.
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INTRODUCTION:
The Life Insurance Corporation of India (LIC) is the largest Life insurance company in
India and also the country's largest investor; it is fully owned by the Government of India. It also
funds close to 24.6% of the Indian Government's expenses. It was founded in 1956.
Headquartered in Mumbai, which is considered the financial capital of India, the Life
Insurance Corporation of India currently has 8 zonal Offices and 101 divisional offices located
in different parts of India, at least 2048 branches located in different cities and towns of India
along with satellite Offices attached to about some 50 Branches, and has a network of around
one million and 200 thousand agents for soliciting life insurance business from the public.
HISTORY:
The Oriental Life Insurance Company, the first corporate entity in India offering life
insurance coverage, was established in Calcutta in 1818 by Bipin Behari Dasgupta and others.
Europeans in India were its primary target market, and it charged Indians heftier premiums. The
Bombay Mutual Life Assurance Society, formed in 1870, was the first native insurance provider.
Other insurance companies established in the pre-independence era included:
Indian Mercantile
General Assurance
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The first 150 years were marked mostly by turbulent economic conditions. It witnessed,
Indias First War of Independence, adverse effects of the World War I and World War II on the
economy of India, and in between them the period of worldwide economic crises triggered by
the Great depression.
The first half of the 20th century also saw a heightened struggle for Indias
independence. The aggregate effect of these events led to a high rate of bankruptcies and
liquidation of life insurance companies in India. This had adversely affected the faith of the
general public in the utility of obtaining life cover.
The LIFE INSURANCE Act and the Provident Fund Act were passed in 1912, providing
the first regulatory mechanisms in the Life Insurance industry. The Indian Insurance Companies
Act of 1928 authorized the government to obtain statistical information from companies
operating in both life and non-life insurance areas.
The subsequent Insurance Act of 1938 brought stricter state control over an industry that
had seen several financially unsound ventures fail. A bill was also introduced in the Legislative
Assembly in 1944 to nationalize the insurance industry.
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OBJECTIVES:
Spread Life Insurance widely and in particular to the rural areas and to the socially and
economically backward classes with a view to reaching all insurable persons in the country and
providing them adequate financial cover against death at a reasonable cost.
adequately attractive.
Bear in mind, in the investment of funds, the primary obligation to its policyholders,
whose money it holds in trust, without losing sight of the interest of the community as a whole;
the funds to be deployed to the best advantage of the investors as well as the community as a
whole, keeping in view national priorities and obligations of attractive return.
Conduct business with utmost economy and with the full realization that the moneys
Act as trustees of the insured public in their individual and collective capacities.
Meet the various life insurance needs of the community that would arise in the changing
Involve all people working in the Corporation to the best of their capability in furthering
the interests of the insured public by providing efficient service with courtesy.
Promote amongst all agents and employees of the Corporation a sense of participation,
pride and job satisfaction through discharge of their duties with dedication towards achievement
of Corporate Objective.
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MISSION
"Explore and enhance the quality of life of people through financial security by providing
products and services of aspired attributes with competitive returns, and by rendering resources
for economic development."
VISION
"A trans-nationally competitive financial conglomerate of significance to societies and Pride of
India."
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LIC has been one of the pioneering organizations in India who introduced the leverage of
The computers were introduced in 1964 in LIC Unit record machines introduced in late
1950's were phased out in 1980's replaced by microprocessors based computers in Branch &
Divisional offices for back office computerization.
packages were developed & implemented for ordinary & salary savings scheme (SSS) policies.
As awareness of quality service began growing among policyholders in India also, LIC
of India had to think of many applications of information technology offices, which are servicing
centers, were equipped with computer systems.
Training of employees also was organized on a large scale. Several software packages for
A cash module was introduced, operating which, the cashier, while sitting at his desk, is
enabled to print and issue official receipts on the spot to policyholders when they tender money
towards premiums, the entire operation taking a few minutes.
A new business module was introduced which enabled even underwriting operations to
be computerized.
It brought a complete integration of all activities connected with the processing of new
business from proposal to adjustment of first premium to ultimately issue of policy documents.
Similarly, loans and surrender value module, policy revival module, claims module were
also introduced.
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Now a revival quotation, a policy quotation, or maturity claim intimation letters are
generated on the computer. All these gave tremendous boost to the efficiency in rendering
service to policyholders.
Up gradation of technology also helped in another direction. Several reports, which could
be used as management information systems, get generated for use by managers at all levels.
This helps management to review performance against prescribed indices and to take
With a view to enhance customer responsiveness & services, in 1995, LIC started a drive
of On-line service to policyholders & agents through computers which enables policyholders to
receive immediate policy status report, prompt acceptance of their premium & Revival
Quotation, loan Quotation on demand. Incorporating change of address can be done online.
Quicker completion of proposals & dispatch of policy documents have become a reality.
All 2048 branches across the country have been covered under front end operations.
So LIC claims that all its 100 divisional offices have achieved the distinction of 100%
branch computerization.
New payment related Modules pertaining to both ordinary & SSS policies have been
added to the Front End Package catering to loan, claims & development officer's Appraisal to
reduce time lag & ensure accuracy.
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LIC's website, www.licindia.com displays information about LIC & its subsidiaries LIC
(international) E.C., LIC (Nepal) Ltd,. LIC Mutual Fund, LIC Housing Finance & their products.
The addresses/e-mails Ids of its zonal offices, zonal training centers, management
development center, overseas branches, divisional offices & also all branch offices are also
provided. LIC has given its policyholders a unique facility to pay premiums payments.
The web page has been made interactive with features like 'On-line Premium
Calculation', 'On-line Bonus Calculation', 'Online Forms', etc., The site also includes a feature on
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'Frequently Asked Questions by Non-Resident Indians'. The page 'Contact Us' provides all email addresses of I the offices to aid communication.
These web sites also serve as a virtual community for insurance professional with
features such as the latest insurance news, career opportunities, insurance education, message
board for discussions and events in insurance sector.
INFORMATION KIOSKS
LIC has set up interactive touch screen based multimedia KIOSKS in prime locations in
metros & some major cities for dissemination information to general public on various products
& services offered.
These KIOSKS enable the users to provide policy details & accept premium payments.
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INFO CENTERS
It has also set up all call centers to provide information about the products, policy
services, branch addresses & other organizational information.
All these applications have definitely brought a great amount of satisfaction to
policyholders. The steps taken by LIC of India during the past 5 to 6 years are an indication of
the important role that information technology can play in ensuring a very high quality in the
servicing operations of a life insurance company. Several private life insurance companies also
are utilizing the latest technology available including creating their own websites. A few private
web sites like Bima online also have been established.
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CONCLUSION
From this study I would like to conclude that the insurance market is being
revolutionized by technology at a high speed. There is a paradigm shift in the way insurance
business is being carried out today. IT is being increasingly used as an enabling tool to carry out
insurance business more effectively.
IT includes computing technology, networking technology & advanced electronics. The
convergence of computer and telecommunication has generated various computer networks
making the business data transfer feasible. Because of IT insurance companies are able to
provide various quality services to their customer such as EPS, issue of payment premium
facility and so on and thus it make their customers satisfied. But, there are prominent challenges
faced by insurance company i.e. Security. Many users are reluctant to do business on the internet
due to security reason. It is also argued that internet related technology were not fully available
to the nationalized insurance companies.
So further I like to conclude that insurance related technology should developed in
nationalized and international level so insurance business will grow more rapidly and more
effectively.
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RECOMMENDATION
total managerial responsibility and should adopt appropriate strategies for its implementation.
IT should be used as a tool to increase the companies' competitiveness and its prosperity.
A good web site should develop so that consumer can actually transact its business.
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BIBLOGRAPHY
BOOKS:
WEBSITE:
www.licindia.com
SEARCH ENGINE:
www.google.com
www.altavista.com
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