TYBBI

PROJECT REPORT
ON
ROLE OF INFORMATION TECHNOLOGY IN MARKETING
INSURANCE
For
Submitted in partial fulfilment requirement of bBachelor in Business
Administration
(BBA)
Submitted by:
Nikeshkumar Vinod kumar Kothari
PRN No.:07113500404
Of
035-Agarwal Institute of Management, Vikhroli (E)
Approved Study Centre of
Tilak Maharashtra Vidyapeeth, Pune-411037

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DECARATION

I MR RUCHIR.M.SHAH, student of PRAHLADRAI DALMIA LIONS COLLEGE OF

COMMERCE AND ECONOMICS T.Y.B.B.I (semester VI) hereby declare that I have
completed this project on ROLE OF INFORMATION TECHNOLOGY IN
MARKETING INSURANCE in the academic year 2014-2015 . This information submitted
is true and original to the best of my knowledge.

_______________________

_________________

Internal examiner

Signature of Student
( RUCHIR.M.SHAH)

DATE_______________

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CERTIFICATE

I, MISS KINNARI SINGH. hereby certify that RUCHIR SHAH of PRAHLADHRAI

DALMIA LIONS COLLEGE OF COMMERCE AND ECONOMICS TYBBI semester
VI has

completed

project on ROLE OF INFORMATION

MARKETING INSURANCE in

the academic

TECHNOLOGY IN

year 2014-2015 . The information

submitted is true and original to the best of my knowledge.

______________________

______________________

Signature of coordinator

Signature of the Principal

(Prof. SACHIN VED PATHAK)

(Dr. N.N.PANDEY)

______________________

______________________
Signature of the External Examiner

Signature of the Project Guide

(MISS KINNARI SINGH)

DATE______________________
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ACKNOWLEDGEMENT
The satisfaction and euphoria that accompanies the successful completion of any task would
be incomplete without mentioning the names of people who made it possible ,whose constant
guidance and encouragement crown all the efforts with success.

I am most thankful to my guide , MISS.KINNARI SINGH for

introducing me to such a wonderful and challenging topic because of which i learnt about the
world and especially about the various frauds that take place n detail and for being my guide
in the true sense of the word and for guiding, correcting and motivating me at each and every
moment during my project . I also value her generosity .

I would also like to thank our coordinator PROF SACHIN VEDPATHAK to whom we shall
forever remain in debt for setting the foundation for this course and for assisting in the project
whenever help was required.

Last but not the least; thank my friends, who helped directly or indirectly in completing the
project that will go a long way in my career, the project is really knowledgeable and
memorable one.

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EXECUTIVE SUMMARY
The insurance sector plays a vital role in the economic development of our nation .It acts as a
mobilise of savings, financial intermediary, promoter of investment activity ,stabiliser of
financial markets and risk management.

The competitiveelimate in the Indian Insurance market has changed dramatically over the
last few years. At the same time, changes have been taking place in the government
regulations and technology. The expectations of customers are also changing . The existing
General Insurance companies have to introduce many new products in the market which have
competitive advantage over the product of private insurance. The new insurance companies
are consolidating themselves and innovating new methods of customer delight.

The use and application of information technology in wide variety of insurances operation
has now become strategic in the sense that direct impact on the productivity of resources ,
and a sweepening impact on reducing cost of various activities. The greatest impact in online
technology has been to buyers and sellers e-commerce . E-commerce is attractive both to
buyers and sellers as it reduces search costs for buyers and inventory costs for sellers. The
recent growth of internet infrastructure and ntroduction of economic reform in the insurance
sector have opened up the monopolistic Indian Insurance market to competition from foreign
alliance

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Chapter 1:
IntroductionRole of Information Technology in Insurance Sector
The Need for Insurance Software Solutions
Insurance software solutions have been godsend for the modern day insurance industry with
its rapidly expanding client base not just vertically in the society but also horizontally across
the globe. The business has become far more complex than it has ever been before. With the
increase in awareness and literacy rate across the world, the customers for various insurances
are on the constant rise. The various departments, agents, collection centers now require
instant connection to feed this demand. On the top of it global operations make it mandatory
that the database is updated for every client across the world at the same time. Insurance
software solutions have been specially developed to handle these complex business needs and
demands.
The insurance software system can be of many types. You can get a standard system or a
customized one depending on your business needs. The system is designed to connect the
various departments of the business together - from marketing to claims. This way the
moment a new customer signs up, the details of the policy are fed into the system, payment
details immediately go into accounts, premium durations and period of payment are all
related to customer service, all at one go. Any change in the account is immediately reflected
in all departments. Therefore in the event of claims the data is ready and available for
processing and payment is faster and service more effective.
The introduction of insurance technologies has not only cut the entire processing time by half
but has also made the system more eco-friendly. With all data online and on screen the need
for cumbersome paperwork has really been diminished. Only the most essential documents
are filed manually and in paper while all others along with these are electronically stored.
This just does not mean less paperwork, but also less manual error, precise information
transfer and better back up facilities for the numerous.
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1.1 The Use of Technology in Insurance

The use of technology in insurance improves every aspect of an agency's data management
system and processes. Insurance agents can quickly respond to the needs of customers, using
state-of-the-art technology that can instantly provide accurate information to clients regarding
insurance issues.

1.

Purpose
The purpose of insurance technology is to dramatically reduce the amount of

paperwork dealing with policies and proposals, and effectively meet the needs of
clients in much less time than traditionally expected. Insurance technology eliminates
a great deal of paper handling and travel cost once required by insurance agencies.

Efficiency

Insurance technology allows insurers to increase revenue by automating

service processes that were once exhausting and time-consuming. Now, insurance

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agents can generate more insurance policies, proposals and applications for new
customers, thereby creating opportunities for faster purchasing.

2. Convenience

Insurance technology makes it easier on clients as well. Web-based agency

sites allow clients to complete application processes, sign policies and proposals, and
receive quotes without having to visit the insurance agency in person.

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CHAPTER-2

1. Technology Types
o

A variety of insurance technology software and hardware exist to make an

insurance agent's work easier. Agency Port's BookSmart, AMS Service Transit Server,
PACTaccelerator, TurboStorm and TurboRator Comparative Rating System and
Insurance management systems are a few of the significant insurance technologies
that allows agents to decrease input and output processes, enabling agents to generate
more revenue.

Significance
The impact of technology in insurance cannot be overstated. The large amounts of paper
work, and the time and effort needed for the completions of customer policies, can be
extremely draining, causing agents to work well beyond 40 hours a week. The use of
appropriate technology eliminates many of the past problems and allows agencies to keep up
with the competition.

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CHAPTER-3

Information Technology in the Insurance Sector

Obtaining accurate information as quickly and efficiently as possible remains an integral
component to the framework of the insurance sector.Unfortunately, the dynamically changing
corporate landscape, situated alongside progressively expanding legislation, results in the
need for consistently improving information technology.

1.

Client Data
Insurance carriers maintain accurate and updated client data records.

Information technology must be both secure and comprehensive enough to store

multiple names, addresses, telephone numbers, email addresses and other pertinent
details.

Policy Details
o

For those insurance companies providing policies across multiple lines of

insurance, information technology requirements become even more complex. Details
of each insurance policy, ranging from life, home, auto, boat, liability and business
products, need to be accurately recorded and merged with client data.

1.

Claims Management
o

Investigating, paying and recording claims data is crucial to any insurance

company's financial stability. Information technology plays a vital role in allowing
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carriers to record claims details and share data with police, other carriers, attorneys
and beneficiaries. Advanced computer software ensures important information
remains accessible and updated.
Beneficiaries
o

Life insurance companies utilize database technology to record policy owners'

beneficiary designations. Aside from the personal details of the insured individuals,
beneficiary names, addresses, telephone numbers and death benefit portions are of
monumental importance.

Payment Information
o

Perhaps the most essential area requiring accurate and efficient information
technology is an insurance company's client payment details. Above all else, billing
and invoicing systems generate the necessary revenue to keep the company in
business. Cash flow remains vital to daily operations and without superior information
technology and processing systems, the carrier's financial stability is at risk.

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CHAPTER-4

Technological Innovations That Have Affected Insurance

Technology has changed the face of many industries. Companies are able to
accomplish more with fewer staff, analyze their financial information more accurately
and communicate more effectively. The insurance industry is no exception. Over the
past few decades, technology has dramatically changed the way insurers conduct
business. There are a number of key areas in which insurers have used technology for
a business advantage.

1.

Actuarial Modeling
o

Insurance companies have always based their premiums on the likelihood that
the customer would suffer a loss. Originally, actuaries looked at broad trends and
claims history to establish rates. For example, homes not located near a hydrant or fire
hall were more likely to suffer catastrophic fire damage than those with such
protection. Technology has enabled actuaries to create much more precise models,
tracking trends such as the water pressure found in hydrants in various
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neighborhoods, the quality of training a fire department maintains, and the addition of
a fire alarm to the home. The result is a much more granular understanding of the
risks inherent in an account and the ability to charge an appropriate premium for that
policy.

2. Database Uniformity
Until very recently, most insurance companies were unable to access customer data
efficiently. Companies were plagued with paper files, dozens of proprietary computer
systems within each company and silos of information. The client account used to
issue a policy was often unconnected to the file a claims department would use to
settle a loss. In many cases, the insurer was unaware if a customer maintained five
policies with themor one, as each was stored as separate files. As database standards
become more open, insurers are able to amalgamate this information, gaining a much
better understanding of theirclient. Valued customers receive better service,
personalized
o

materials, multi-policy discounts and faster claims response.

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CHAPTER-5
The Effects of Technology on the Insurance Field
Over the past decade, technology has changed the face of most businesses, improving
communications, managing data more efficiently and changing expectations of customer
service. The insurance industry is no exception. Insurance companies, brokers and agents use
technology to better manage their portfolio of accounts, analyze the price of their policies and
settle claims faster and more efficiently.

1.

Rate Analysis
o

Insurance rates have always been based on an analysis of the factors that cause
an insurance claim. Using information about the insured, or the characteristics of a
risk location, actuaries model that information against their loss experience to identify
trends. These trends are used to set insurance rates based on the likelihood of a certain
policyholder experiencing a claim. Technology allows insurance actuaries to model
possibilities at a much more granular level, using an unlimited number of variables.

Insurance to Value
o

One of the most common mistakes made by both insureds and insurance
companies is under-insuring a risk. Too often, awareness of this problem occurs only
after a claim if filed. New valuation tools tap into information gathered from
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contractors, retailers and trades to set benchmark replacement costs for building
supplies and personal property based on the address of the risk. This information is
combined with factors such as the square footage of the property to better estimate the
cost to repair or replace the location should a loss occur.
o

Remote Claims Adjusting

o

When someone files an insurance claim, a claims adjuster must view and
assess the damage to estimate the repair or replacement costs. Historically, this
process took days as the insurance company retrieved a copy of the policy, assigned
an adjuster and scheduled the meeting. Many companies now use a mobile adjusting
system that allows the adjuster to visit the scene armed with all the information
required to confirm coverage and proceed with settlement. Some insurers can now
settle auto insurance claims in certain cities while the vehicle is still on the side of the
road. Clients benefit from a much faster response time and the insurer benefits from
reduced expenses and improved productivity.

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CHAPTER-6
How Is Information Technology Used in Life Insurance?

As technology improves, the life insurance industry evolves and benefits from new
systems and methods of communicating information about applicants. Information
technology increases the speed and efficiency with which underwriters evaluate new
applicants and analyze aspects of their lives affecting the carrier's proposed financial risk.

1.

Application Submission
o

Many life insurance companies now use digital applications. Advanced

computer software allows applicants and agents to enter pertinent information that
previously had to be hand-written onto paper applications. Digital life insurance forms
reduce the number of errors and omissions, and entirely eliminate problems with poor
or illegible handwriting.

Digital Signature Pads

Life insurance agents who use digital applications can capture client signatures
on portable imaging devices. Small digital signature pads connected to laptop
computers allow applicants to sign forms presented on computer screens, entirely
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eliminating the need to print documents. This reduces paper usage and ensures
information will be transmitted accurately, as opposed to faxing or mailing printed
documents, which can be lost, destroyed or otherwise compromised.

1.

Motor Vehicle Abstracts

Information technology allows carriers to review a potential client's driving

records digitally in secured online databases.

Criminal Records
Digital information technology allows carriers to obtain and review criminal

records quickly and efficiently. Applicants with undesirable criminal pasts get rejected
immediately, reducing wasted time, effort and money on other analyses that would
have otherwise been conducted while waiting for paper documents to arrive in the
mail.

Medical Information Bureau

o

Every applicant's information, along with the company's subsequent

underwriting decisions, are stored
in electronic databases. Potential clients' names and information are checked against
this database to detect fraud and obtain relevant data discovered by other car.

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CHAPTER-7
Technology: The Insurance Industry's Pivot Point

The insurance industry is wrestling with how to interact with and retain customers in an
effort to drive growth and profitability. Three innovative technologiessocial networking,
telematics, and SOAare essential to companies that want to be industry leaders.
Across the insurance industry, companies are adopting similar and consistent business
strategies as they seek new ways to grow and prosper. Many of the strategies seek to improve
the richness and effectiveness of interactions with customers, which today increasingly have a
technology component. Social networking, telematics and service-oriented architectures
(SOA) are all in the mix and driving this transformation. Facebook, Twitter and YouTubeto
name threeoffer the ability to improve customer interactions, communicate product
information and generate more sales. Telematics may be larger still, as it introduces entirely

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new business models that blend insurance, technology and mobility. SOA is becoming key to
managing the complexity of integrating legacy and new applications.
A.T. Kearney recently completed a study of emerging technologies to isolate opportunities
for capturing strategic advantage. These trends in insurance are part of a broader landscape in
which innovative technologies are significantly driving change across a wide range of
functions and industries. Figure 1 highlights the main trends in five areas: consumer and
employee experience (leading to innovation breakthroughs), applications and
telecommunications (leading to growth and profits), and information management (leading to
improved operations).

CHAPTER-8
The journey toward greater customer centricity

Advances in technology and the accompanying explosive growth in data are empowering
global consumers like never before. To compete in this new era, insurers must understand
how consumers make purchasing decisions and what factors influence their choices.
The Global Consumer Insurance Survey 2012 report Voice of the Customer highlighted the
importance of customer centricity for insurers. Unfortunately, many insurers are not keeping
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pace with changing market dynamics and are far behind other industries in meeting customer
expectations.
Insurers that are responsive, transparent, highly communicative and technologically savvy
customer-centric, in shortwill be the most likely to grow and profit. Through better
customer engagement, insurers can influence persistency, retention and reputation.
Customer centricity not easy
Advances in technology and communication are changing customer behavior, but that doesnt
mean insurers should abandon certain venerable core principles:

Protect the business

Redefine customer relationships

Increase productivity

Diversify revenue sources

Develop new capabilities and partnerships

New technology and explosive data growth have empowered global consumers in new ways,
however, and insurers must understand the new factors underlying purchasing decisions.
There are more than 50 billion connected devices globally, and mobile devices are now the
primary communications node for most consumers. This is dramatically changing operating
models, forcing insurers to focus on where their sales channels add value.
Where insurers fall short
Our Voice of the Customer survey indicates four areas where insurers are failing to meet
customer expectations: service quality, rewarding loyalty, communication and product
transparency.
Customers see insurance value as a balance of price, product features and services. They are
willing to build long-term relationships and purchase multiple productswith customercentric providers. In general, insurers must improve communication, as well as recognize and
reward their relationships with consumers.

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Driven by a transformed regulatory landscape, customers are also demanding clarity and
transparency. Insurers that align to a customer-centric model will find the transition to the
new regulatory environment less painful.
Becoming more customer-focused

Insurers will need to develop new capabilities to transition from existing product and
distribution models to customer-focused ones. These capabilities include customer-centric
operating and maturity models, as well as advanced segmentation and data analytics.
Improving customer engagement via lower-cost digital techniques will also be crucial. Call
centers will play a critical role, and they must embrace new market trends to drive value.
In the illustration above (click the magnifying glass), we compare how four major global
insurers are currently positioned in the five stages of development toward customer centricity.
Customer-centric innovation
To surpass the competition and generate significant growth, insurers must change their focus.
Innovation demands a shift from short-term/tactical to long-term/strategic decision-making.
Tapping into external discovery centers, labs and industry observatories are effective ways
to encourage and embed innovation. Its always valuable to gain insights free from the
existing mindset of the organization.

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CHAPTER-9
THE NEW INSURANCE TECHNOLOGY

1.9 The New Auto Insurance Ecosystem:

Telemetric, Mobility and the Connected Insurers and auto manufacturers worldwide
have set their focus on telematics as the next wave of creating deeper customer
relationships, Resulting in a convergence of new business models for the
connectedLifestyle.

Evolution of a New Insurance Ecosystem continues to rise, players in the

new ecosystem
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Automakers, insurers, service providers must work together to benefit from the
rich customer data that is increasingly available. Doing so will help all constituents offer
value-added services that can potentially drive revenue growth, reduce costs and
improve the bottom line. While in-car

Types of Technology
There are two main types of technology that car insurers use to determine how their
customers drive, in order to decide if they qualify for discounts.
These two technology types are:

Usage tracker tool- With versions used by both Progressive and Allstate, this tool
plugs into the diagnostic port on your car. It collects information on what time of day
you drive, how much mileage you accumulate daily and weekly, and your acceleration
and braking rates. It sends this data back to the insurance company using a cellular
network, and the company uses the information to decide whether you qualify for a
discounted premium.

GPS/Mileage tracking- In this insurance model, the company uses a GPS tracking
system such as OnStar to determine your mileage. If you don't drive your vehicle very
often or very far, you can receive a discount on your yearly premium.

United States Usage

While not exactly a new concept, usage-based technology has been slower to catch on in the
United States compared to Europe.
Part of the reason for this is the state-level regulation in place in the States; insurance
companies have to get approval from each state before they can use the technology.
Another factor slowing widespread adoption of the technology is insurance companies'
caution regarding customer perception of it.
Insurers have to be careful to reassure customers over privacy concerns, and educate the
public on what the technology actually does.
Benefits

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That said, there are several benefits of usage-based insurance, especially for safe drivers and
those who don't drive a lot.
For example, drivers living in a large metropolitan area who use public transportation for the
majority of their commutes could stand to save money on their insurance.
It also puts more control of insurance premiums in drivers' hands, since they can help reduce
their costs by adopting safer driving habits and driving less. At the same time, these costsaving efforts help reduce the number of accidents, traffic congestion, and vehicle emissions.
From the insurance company's standpoint, usage trackers provide a means of more accurate
information in the event of an accident. They can see things that may have led to the accident,
such as hard braking or speed.
This technology can also help reduce fraud, and cuts down on the insurer's costs because
safer drivers mean fewer accident CLAIMS

CHAPTER-10
Insurance Technology Drives Industry Growth
To compete successfully and operate more efficiently, insurance companies are deploying
information technologies such as mobile devices, social media, big data, predictive modeling
and cloud computing.

Maintaining a Competitive Edge

"In recent years, like most businesses, we have shifted our point-of-sale system to a Webbased solution, which allows our independent agents access directly into our policy system in
order to provide their customer with real-time pricing, payments and print documentation, if
desired," says Mike Leather, director of IT operations.
This required IT to provide a reliable and fast infrastructure in order to maintain the agents'
focus on selling Safeway products over those of its competitors. "If agents try to access the
online point-of-sale system and encounter performance or availability problems, they'll move
on to the carrier that has the next-best price and sell that policy to the customer sitting in front
of them," Leather says.
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The company needs to maintain nearly 100 percent uptime for its Microsoft SQL Serverbased point-of-sale application, called SafewayXChange, which agents rely on to provide
quotes to customers, Leather says. Several years ago, a storage I/O bottleneck hampered the
performance of SafewayXChange, undermining sales efforts. As a result, agents complained
of slow response.
The IT team quickly determined that the direct-attached storage system in place was no
longer adequate for its application. It evaluated options and decided to deploy a virtualized
storage area network (SAN), the Dell EqualLogiciSCSI. The system has enhanced
performance and sped up recovery times.
As a result, the firm can support 16 percent more customers and 71 percent more agents, with
no increase in the size of the IT staff. Other benefits include a 60 percent reduction in storage
footprint; 99 percent decrease in complaints about slow performance; 20 percent
improvement in I/O performance; and a 75 percent reduction in tape usage with disk-based
backups, resulting in savings of $6,200 per year.

Using Personalization Technology

Another insurer benefiting from IT initiatives is Humana, a Louisville, Ky., provider of health
benefits. After months of market research, the company learned it needed to improve
customer communications, specifically its explanation of benefits (EOB) statements, which
are sent to Humana's more than five million Medicare drug benefits and commercial
customers.
EOBs are intended to explain the status of benefits claims, but Humana's members found
them difficult to understand and lacking the personal relevance they needed to feel confident
in managing their health care.
Humana launched a project to redesign the EOBs and change them from point-in-time
transactional documents to consolidated summary-level communications that provide
relevant and actionable guidance that's easier to read and understand.

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While the newly designed EOBs were well-received, Humana didn't have the personalization
technology needed to produce the redesigned statements for the volume of customers it
serves. The company sends more than 20 million EOBs each year, and needed a solution that
would allow integration of multiple data sources with tools that make design and document
composition more flexible.
Humana implemented Hewlett-Packard's Extreme product to transform the traditional EOB
statement from a black-and-white document with few graphics and little to no personalized
messaging into Smart Summary, a colourful and visually enhanced personalized document
that helps members make informed decisions about how to manage their health care benefits.
To produce the Smart Summary, HP Extreme draws data from Humana's customer databases
and other sources, and incorporates icons and images, tables, charts and other design images
to visually communicate information such as benefits usage, co-pay amounts, medical
articles, health and wellness coupons, and suggestions on how to lower monthly spending.
"HP Extreme software enables Humana to meet a critical corporate goal: to more effectively
communicate with customers by using personalized, high-quality, highly readable documents
at the lowest cost possible," says Chris Nicholson, service vice president, Strategic
Consultancy, at Humana.
Using HP Extreme, Humana also developed Smart Summary RX, a monthly benefits
statement summary tailored to Humana's Medicare members. Smart Summary RX provides
Medicare enrolees with a record of prescription claims that includes information such as fullcolor pictures of pills, dosage, previous refill dates, prescribing doctor and pharmacy
information

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CHAPTER-11
The history of Information Technology in insurance sector

The insurance industry today is passing through an exciting phase. The lure of the growth
potential has already seen players drawing up aggressive plans for market and the mind share
o0f prospective customers. The life insurance industry in india,which had been nationalised
in the 1950s was liberalised in 1999 based on the recommendation of malhotra committee
report (1993).After passing of the IRDA act 1999, the first private sector life insurance
company started its business in 2001.Todaythey are 15 players in life insurance and 11 in onlife insurance in private sector .This huge expantion is possible mainly through technology
improvement . In 1985, Information Technology (IT)capital investmentsrepresented 52%
approximately of the total capital outlays made by insurance.

INTERNATIONAL TRENDS:-

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The convergence effect of IT is being felt by the insurance industry as well as in developed
countries. The Global online insurance market is expected to achieve an exponentional
growth in the near future. In the life insurance segment alone,the total online business will
grow to $21 billion by 2003.Premium income from then non-life policies will go up by % 18
billion in the next three years. The Gartner Group in a study conducted by them says that in a
year 25% of all customer contract and enquiries for enterprises will come via the Internet , email and online forms. Bance assurance customer service,which has been almost exclusively
done via the telephone (96% of all transactions) will become increasingly e-mail based in the
next four years; decreasing
telephone related service by 28%.Similarly ,by essentionally outsourcing administrative and
cost. Intensive processes such as policy administration to customers, the cost of
administration and servicing the insurance policy also decresases sharply.

IT DEPARTMENT IN AN INSURANCE SECTOR

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Generally the insurance organisation has three-tier setup Operating

office (BO/OD),Controlling Offices(RD/DO) and Central Office (HO).The
organisation and responsibilities of the IT department and its subdepartments is more or less in the hierarchical order of the various office.
The IT department at HO is responsible to the chaireman/CEO of the
organisation for implementation of IT plan. The department is responsible
for procuring new technologies, conducting training and preparing the
board IT policy framework .The RO and BO are respectively responsible to
the CO. The

Head of IT department may have the following functional

managers with their respective tasks:

Technology Manager:-1.Evaluation and acquisition of new

technologies

in hardware, software ,networking and package

solutions.
2 .Recruitment and supervision of system and network engineers
3 .Conducting of various training programmes

System Manager :-1. Systems analysis and design

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2.Funtional specification
3. Devlopment of application and user manual
4. Assignment of work to project leaders, system analysts and
programmers
5. Evaluation of studies

Network Manager :- Network administration ,systems security

,e-mail etc.
2. Controling and supervision of network administration

Operational Manager :-1.Maintaenance of hardware

2.Job scheduling ,backups and file control
3.Assigning work to operate and DEOs
4.Training of users
5.Controlling of flow of data

11.1 :-Insurance And Electronic Commerce :-E Insurance

E-Insurance ispo-facto, is one of the growth areas in India. Enormous

opportunities are being created bye the internets new connectivity such
as improving customers service,reducing cycle time, becoming more cost
effective, and selling goods ,services, or information to an expanded
global customer base.Globally , insurance on the net has lagged behind
of the total online users only 5% used insurance service online.

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Generally the largest insurers have been focused on static marketing

presence online,encompassing product information , FAQs and quates.
Only a few insurers have added the ability to submit application online.
This lack of participation in the e-business revolution is been across lines.
The Insurance companies attribute two factors for the slow take off . First
and foremost ,insurance is a product that s sold and not bought .The
Internet is perceived to be a buyers medium , with online customer able
to search quickly and for the most competitive price and variety of
products. Insurance is one product that process the greater the difficulties
in using the net as a medium for selling .Insurance is one product ,which
involve personalised selling .The process of insurance sales requires a
series of face-to-face interactions.

To peep into the possibilities and opportunities emerging, out of the

integrations of insurance and information technology, various,
organization have organized seminar and conferences in the Net and
gauge the opportunity for the growing Indian software industry .
According to T.Ramanan of Assocham, life insurance were
among the first to go online with informative content and feature like
actuarial calculators. However, according to him , they have been
relatively slow to embrace online commerce, which currently makes
up about 1%of the total tem life market .Only growth of global online
insurance business augurs well for the Indian IT Sector. The
exponentionalfronth in the online insurance business will unfold
significant

business

opportunities

for

software

companies/consultants.

The opportunity that rise out of this will be both global and local,
because new entrants will have to either fine tune or prepare
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customized packages for the Indian Market. Online insurance will also
help companies reduce cost and keep premiums low, a pre- requisite
in a price sensitive market like India.

TECHNOLOGICAL CHALLENGES:One of the prominent challenges of e-commerce is security. It is

very evident that many users are reluctant to do business on the
internet due to securities reasons. Issues of transmission securities ,
host server security, confidentiality, authenticity and ways to counter
these challenges are covered, in the following topics.
SECURITY:

Database security: The business database security is utmost

important this has to be monitored by security of the work
server and web access.

Web server security:-Security policies should be defined like

who is allowed access, nature of the access and who authorized
such access? Who is responsible for security what kinds of
materials are allowed on server pages?

Password sniffing:- The most significant security risk on the

internet today is the use of plaine text, reusable password that
are sent over the internal and external network .User names
and passwords are the most common ways of authentication
users by many internet protocols, including remote log in, file
transfer, remote e-.mail reading and using plain text ,username
and reusable password .

Network sniffing programme:- Automated tools should be used

to scan your network. These tools check for well known security
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related bugs in network programme such as sent mail and

FTPD . Computers are certainly being scanned by crackers
interested in breaking into the system, therefore , network
scanning programme should be regularly run.

Physical Security :-One can ensure physical security by having

an alarm system that calls the policy , having a key lock on the
computer power supply. These should be adequate protection
against fire , explosions , humidity and dust.

Web access security :- Organization run web servers becaused

they are an easy way to distribute inpeople on the internet . But
sometime this information to isnot require to be distributed to
everybody .Host based restriction can be implemented using a
firewall to block incoming HTTP connected to a particular web
server.
Transmission Security :- Encryption is a key technology to ensure
transaction security various types of encryption technology are:
single key cryption or Private key encryption : a private key is
generated and is send to receiver to aover the network .The
receiver applies the private key to decrypt the message.

PUBLIC KEY CRYPTOGRAPHY:-A key pair, public key and private

key is generated sender sends the message using public key for
encryption . The receiver who is the only person having private key can
receive the message.

VPN-Virtual Private Network : The current firewall technology

include VPNs , a way to enable secures communication across internet.
VPNs are a less expensive alternative and an interoperable standard . A

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VPNs link is very frexible and work with any application that use. TCP/IP ,
unlike SSI .

Privacy:- Privacy is likely to be a growing concern as internet based

communication and commerce increase. Designers and operate of website
who disregard the privacy of user do so at their own peril. User who feel
that their of users has been violated may leave the web . Thus it is
important to protect personal privacy on the web , a record is kept in that
web browser view a page

on the web, a record is kept in that web

servers log file.

Legislation :Can be passed to prevent the internet service provider

from parting with personal information of the service provider client.
Whether or not such legislation passes in the future web surfers should be
aware that information about their , activities may be collected by service
provider, vendor, and site administrator and other on the electronic super
highway.

Proxy Server:-One approach to privacy is to use an anonym zing web

server . These are server that are designed to act as proxy for users
concern with privacy . Using an anonymizer known that you place faith in
the person or organization that is running the service, thats because the
anonymizer know who has connected to it and what pages they have
seen.

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CHAPTER 12
Information technology :insurance
There has never been a time when the effective use of IT has been more
crucial to the success of the insurance industry. The insurance markets are
being revolution by technology at a high speed pace. It and software
soluation , allowing cross-border trade to become electronic and paperless
, are increasingly financial institution. The computing technology , network
technology and advanced electronics together make todays It technology
.The convergence of computer and telecommunication created by devise
like fax , telex which the business world wide has been using extensively
over last three decades,

HARDWARE:-Devepments

in information technology have been

characterized by miniaturization and redusing cost . The early use of huge

computer during world war technology .The It was for military purpose .
The computer technology went hand in hand with the advanced in
electronice . Computer thechnology for commercial use in 1960s , made
use of transaction instead of vaccum tube in use the earlier computer . th
Integrated circuit technology of 1970s form the backbone of latest
computer . with the feasiblelity of circuits having large scale ntergration
(VLSI) powerful (LIS) and very large scale ntergration tables tops and then
to laptops and how to palmtops.

SOFTWARE:- Like the hardware , the computer language (software)

have also understand changes level language through symbolies like
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cobol, basic etc. Forth generation have today reached to expert system.
This has brought the computer closer to business manager who may not
be necessarily computer professional . With operating system for
mainframes and mini computer operating system came handy with
operating system like DOS, UNIX. This change the concept of huge data
processing centre into decentralized data processing unite. The recent
addition of users for friendly computing to the society . Word processing
edit documentation or do calculation faster . But there was no sharing of
information.

COMPUTER INTERFACE & STORAGE DEVICE :-- The dialogue

with computer which is through input and output device has changed its
form and medium . The first output device with computer was the
punched card . Today the typewriter like keyboard or pointing and clicking
device like mouse are in commen use. Digitizers have introduced device
like flexible of translating maps and figures to computer memory. Scanner
have added image capture facilities to computer.

The Need For Information Technology in insurance:The dialogue with computer which is through input and
output devices has changed its form and medium . The first interface with
computer was the punched card . Today the typewriter like keyboard or
pointing and clicking device like mouse are in common use. Digitizers
have introduce the flexibility of translating maps and figures to compute
memory

The

rapid

innovation

in

the

field

of

information

and

communication technology have posed serious challenges for the

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insurance industry in india. The use and application of information

technology in wide verity of insurances operation of has now become
strategic in the sense that it has it has direct impact on the productivity of
resources and a sweetening impact on reducing the cost of various
activities . The innovation in information technology can effectively
utilized in the following areas .

Speedy and correct insurance of documents

Expedition disposal of claims

Quality

Assurance efficiency

Proper building of accounts and statistics

Technologies for Insurance:-The insurancemarkets are being

revolutionized by technology at a high speed pace. IT and software
solution allowing cross-border trade to become electronic and paperless,
are increasingly on offer to exporters , importers ,shipping companies and
financial

institute.

Following

technological

advancement

can

really

enhance the performance of insurance companies .

Group Linking Software:- Group- linking software enables sharing

of information and particularly suits document heavy insurance
business.
Mapping:- Insures to meet different needs, such as identifying loss
prone areas or geographic claim analysis the extent of its network .
the insurer can determine whether its has too many or too few
agency force in a particular area.
Imaging and Workflow technologies :- The proposal form may
be scanned into an imaging system, data may be extracted for
updated to computer and for automated underwriting workflow may
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be implemented . It is estimated that imaging and workflow enabled

underwriting could reduce the time taken to issue a policy as much
as 60% . Under form , photocopies of cheques, faxes , etc. Are al
maintained in a sharable electronic folder folder- neatly indexed ,
updated and available simultaneously to all concerned.
Call Centre Technology:-Good customer service is a crucia
element in gaining, maintaining and retaining profitable customer .
Cal centre concept based on Interaction voice response service is
gaining importance in this aspect.
Cat Modes :- Catastrophic models use data from the recent spate
of natural disaster that help develope more prediction of insurers
property expuresin future disasters. Using this date curious property
exposures of probable maximum oss using the best estimated
available

at

an

insurers

exposures

underwriting policy that limited

are

tested.

Finaly

an

the company exposure to

catastrophic bosses is implemented.

Internet, Extranet and Internet:- Internet is the network
connecting different offices of the same business to permit the
internal data within the business . Extranet is a network allowing the
business to communicate with business partners like suppliers ,
vendors , banners , regulations etc, on the electronic channel .
Internet is a global network

of many computer network . Insures

can browse through many useful sites on the internet.

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CHAPTER-13
Insurance Industry And Use Of Technology

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Insurance industry worldwide is facing the challenge of deregulation,

consolidation and convergence of financial services. An in depth
understanding and insight into their working can transform this challenges
into an unprecendentedopportunity . The aim of such consultancy is to
elaborate the plans to support their business needs with the ultimate goal
of making it a leading financial service provider in its business domain.
The objectives of such consultancys are manifold and scopes of activity
are described are here :Analysis of potential impacts of various IT systems on operating
efficiency
Busibess analysis with ROI for future years
Economic Value Addition analysis with respect of each category of
business
Exploring the use of Internet and Portals for greater business
opportunity
Identification of appropriate quantitative indicators to measure the
productivity gain with the implementation of IT SYSTEM , FOR
EXAMPLE, ANALYSIS OF FIGURES IN THE EXISTING BaANCE Score
Card Key Performance indicate and how improvements can be
augmented through appropriate development of IT
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Identification

right

toos

for

strong

and

efficient

corporate

gaovernance
Development of business continuity and disaster recovery plan
Training and development plans for opperatonand manage staff
Devlopment

of

knowledge

bank

for

streamlining

enterprise

information respository
Mobie technology untethers insurance adjusters from office and
allows them to work more efficiently at the site of a claim.
Digita scanning and electronic distribution save time and effort.
The lack of standardization between

law and insurance firm can

cause headaches.

Figlins experience is one example of how nformation technology s

changing the job for insurance adjusters .These are an estimated 263,000
adjusters in the u.s , according to the U.S.Department of labour .They hep
to determine the benefit for a covered oss, and may work on staff for
insurance companies, as independent contractorfor insurers, or as pubic
adjusters representing building owners. The job cannvolve a car after an
accident, photographing the damage, and estimating the cost of repairs.

IT IN GENERAL INSURANCE:- The customer expectation have reached

an all time high . The opening up of the market has brought in competition
in the market ;and the customer decides the price of the product and
service level offered . The position tend to get critical with the detariffed
regime ahead . The insurance compnies it transacted . Customer retention
, profitability , increasing the value of the way insurance business is
transacted . This is where IT has its major role to play .When one can buy
anything from air ticket to pizzas online at a pace and time of his
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convenience why cant one buy insurance online? Why waste time visiting
the office of insurance company unless the asset to be insurewd is a 20year-old motorcycle . The levels offered in other in other areas like private
banking with those offered by his insurance company.

We need to change the way the business has to change . The IT

intervention should be carefully developed to achieve the desire effect. It
should benefit all those concern namely the customer, the underwriter,
and various intermediaries, and accrue benefits for future .Technology is
playing a vita roe in the conduct business , irrespective of size of its
operation and the line of activity . It provide management with vita data
and information , and

enables them to take crucial decision based on

reliable data. It needs no emphasis that role of information technology is

much more critical in such classes of business where the need for
information base is vital for its success in the long run .Acquisition of
technology

suffered

from

an

inherent

disadvantage

of

becoming

obsolenscent very soon. Hence , it is a very crucial decision for the

management to invest in new technology . The IT intervention should be
carefully deployed to achieved the desired effect. Company the result of
different models and thereby developing different kind of product at a cost
which enables and insurance industry to sustain its business , therefore ,
requires intervention of of modern day technology.

INTERNET

BUSINESS

MODEL

SECTORE ONLINE MARKETING:-

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IN

THE

INSURANCE

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Virtually all insurance company have website. In the simplest case the
webside it used onyu for product information. In more sophisticated cases
insurers use their website as an additional channel for online sales of
traditional product or of specialized internet product .some insurer operate
only on the internet without agencies or agent .

ONILINE PORTALS: On portals web visitor can choose between many

campaniesoffering

simiar or supplementary product . For example in

finance service .Thematic portal are website linked to specific

events

which may make purchase of an insurance policy necessary for example

wedding , parenthood and retirement.

ONLINE MARKET PLACES:- Online market place also called aggregators or

navigation help to identify suitable insurance offers- either by broker or by
independent comparisons.

ONLINE RISK MARKET:- Online market place are mainly to be found in

business to business market. They act as between trading partnersusualy insurers, reinsurers and corporate client seeking to swap large
risk .

ONLINE REVERSE AUCTION:- The internet may also be used by clients to

ca for tender from insurance companies. An example, could be an
automobile association using a reverse auction to find the most
favourable car insurance for its member.

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COMPETITION:-The private and Foreign

entrants in the insurance

industry made others difficult to retain in the market. Higher customer

aspiration lead to new expectation and compel him to move towards the
insurer who provides him the best service in time. It becomes less viable
for them even to maintain the functional networks or competition
standards and service . To survive in the industry they are analyse, the
emerging requirements of the policyholder/insureds and they are in the
forefront in providing essential service and ntroducingnoveproduct .
Thereby they become niche specialists, who provide the right service to
the right person in right time .
In December 2007 ,the private players n the life insurance
business have increased their market share to 23.93 percent. Among
them ICICI Lombard is ranked first , following by Bajaj Alianz and FFCO
Tokyo.

The healthy competition in the sector enabled the state owned

insurance of our mother country to reduce its market share to 76.65
percent in ife and non-life business respectively

. Moreover, private

insurer have planned to increase their market share in the next years.
The public insurer have to enrich its approach to with hed its share.The
Indian information technology sector has been instrumental in driving the
nations economy onto therapid growth curve. According to the NasscomDeloitte study, the IT/ITES industrys contribution to the countrys GDP
has increased to a share of 5.2 per cent in 2007, as against 1.2per cent in
1998.

Further, the IT and BPO industries are poised to clock revenues worth US$ 64 billion by the
end of fiscal year 2008, registering a growth of 33 per cent with exports expected to
cross US$ 40 billion and the domestic market estimated to clock over US$ 23 billion,
according to a study. Simultaneously, the Indian IT services market is estimated to remain the
fastest growing in the Asia Pacific region with a CAGR of 18.6 per cent.
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Indias IT growth in the world is primarily dominated by IT software and services such as
Custom Application Development and Maintenance (CADM), System Integration, IT
Consulting, Application Management, Infrastructure Management Services, Software testing,
Service-oriented architectureand Web services.

CHALLENGES AND POSITIVES:

Can we stay Competitive? In the recent past we have seen that the Globalization 3.0 has
resulted

in

Outsourcing

and

Off-shoring

spreading

to

various

other

countries

like China, Vietnam, Philippinesand the Eastern European countries. In the wake of such
competition can we still remain competitive? The answer is pretty much yes. We know that
our assets are the talented pool of people who are not only competent technically but
also linguistically better at English compared to the other competitors. Also the government
support, labor pool, infrastructure, educational system, cost, political and economic
environment, cultural compatibility, global and legal maturity, and dataand intellectual
property security and privacy give Indian IT companies and edge. But contradicting this is
the Nasscom survey, which states that majority of the graduates coming out of the colleges
today are unemployable. We need to introduce training programs in colleges to train the talent
pool of students not only technically but also on soft skills. The training should also be
imparted to the faculty to generate a better equipped talent force. These measures have
already being taken by the IT companies, which also helps in reducing the training costs
incurred by the IT companies after recruitment.
Dependency on the US: In the wake of the Sub-Prime crisis and subsequent economic
recession in the US, the companies there started cutting down costs and one of them being IT
expenditures. Because the majority of the IT companies in India have an export driven
business model and majority of it is to the US, the companies have been facing a lot of heat.
Some of the clients of these IT companies have gone bankrupt; some others have incurred
heavy losses (Citigroup, Bear Sterns, and HSBC etc.) The IT companies should therefore
explore options in Europe, the western Asia and Asia-Pacific and reduce direct dependency
on the US.
Though it seems paradoxical but recession in the US is only going to make the Industries
over there outsource more, primarily to reduce their costs by efficient application of IT,
cheaper labor and cost effectiveness.
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Indian IT firms outsourced and Off-shored! : It is observed that competitive markets have
emerged in Latin America, Eastern Europe and South East Asia. Moreover there are
emerging economies present in these areas like Brazil, Russia etc. The IT companies have
already forayed in these countries for two primary reasons: First, it provides them to take
advantages of cost-effectivenessin these areas due to new talent pool, Lower wages and
greater advantage by making their exports cheaper and competitive. Second, places
like Mexico have emerged as a major outsourcing and offshore development centre for the IT
companies due to the proximity to their major business clientele in the USA. This not only
provides cost-effectiveness, but also helping the client in round the clock service providing
environment.
Rupee Appreciation and FII: In the wake of US crisis it was observed that the rupee
appreciated due to the weakened US economy, Federal bank interest cuts and subsequent FII
inflows in the country. Due to this IT companies in India incurred lower profit margins. On
the flipside it surely gave them a wake-up call to effectively utilize the resources and bench
strength. FII inflows and FDI in the IT sector surely helps in rolling out further expansion
plans but excess FII also make the exports incompetent. So the govt. should take steps to
manage excess FII inflows into the country and hedge the export driven sectors against the
rupee appreciation.
IT SEZs: To further make the IT fraternity competitive, the govt. should take steps to
develop IT Sezs. This will reduce the excess tax burden on these IT companies.
Moreover STPI (Software Technology Parks of India) have already enabled the IT
companies and new startups to carry out the documentation and licensing and tax payment
hassles through a single window system. Moreover the govt. should also relax norms
for DTA (domestic Tariff Areas) to promote IT spending in the country itself at a lesser cost
leading to development of the country.
Diversification In Verticals: In the wake of US crisis, one of the Indian IT company suffered
major drop in profits because majority of its clientele in the BFSI (Banking Financial
Sector and Insurance).This was the sector which took the brunt of the recession. And the
company BFSI clients cut down on their IT spending leading to lower profits. Thus the
companies should balance their presence in various verticals which will surely make them
immune to unforeseen events.
Telecom and 3G: The roll out of 3G of mobile phones in India should be seen as a positive
development for the IT companies. In the long run it is going to provide basic communication
facilities in the rural areas of the country. Unlike the US where 3G brings luxury, In India it is
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going to provide basic communication and broadband access to the rural youth. This will
result in dissemination of information and creating further talent pool for the country. We
have already seen the IT industry moving to Tier-II and Tier-III cities to tap local talent and
maintain cost-effectiveness. Moreover Growth in Telecom industry also demands greater IT
application in terms of VAS (Value Added Services), Telecom Billing Solutions, IVRS etc.
Domestic Markets: Dalian in China has been growing as the major IT hub there. If actually
compared Chinas IT spending is five times that of India, most of it being domestically. This
could be also seen in the organization of retail sector in China showcasing the presence of
Retail majors like Wal-Mart there. Hence IT companies should also focus more on the
domestic markets with major projects lining up inside the country as well for instance
the Railways ERP project, the BSNL systems integration, networking projects, IT work
from ministry of finance and private telecom companies,banks and others are offering
multi-year contracts that are over US$ 100 million. Moreover multinationals have been lining
up in India further strengthening the IT growth in India.

Capgemini, Europes largest consulting and computer services firm is gradually moving
its internal support services to India.

After sourcing IT applications from some IT firms last year Wal-Mart will now expand
its existing operations given Indias impressive IT capability to cover more firms and
augment its work in the United States.

Intel-the globally renowned chip maker is looking to invest more than US$ 1 billion in
India over the next three years in partnership with Indian and foreign hardware firms to
prepare light weight personal computers.

Cisco posted over 100 per cent year-on-year growth in its SME business in India.

Oracle is expecting over 100 per cent growth in India for its CRM business on the back
of increased technology awareness and need for cost-effective customer servicing.

Yahoo! Inc and Tata Sons subsidiary firm Computational Research Laboratories
(CRL)have entered into a joint agreement to make available-EKA, a supercomputer (the
fourth fastest) in the world for cloud computing research in India.

Dell India witnessed 80 per cent sales over last year with revenues to the tune of US$
700 million.

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Worlds leading chip designer firm ARM is expanding its India design centre to make it
the largest outside Britain.

IT biggies like Microsoft, IBM, Cisco, Oracle and a host of other IT entities are working
overtime to tap the smaller and medium businesses

Products and Services

This section describes the primary products and services offered by insurers: first PC products,
then LH products, and finally other, non-insurance services. Property and Casualty Products
PC insurers offer insurance products in many different lines; the primary ones are:
Automobile coverage for personal injury (Personal Injury Protection or PIP, un/underinsured motorist bodily injury), automobile damage sustained by the insured (collision,
comprehensive, un/under-insured motorist property damage), and liability to third parties for
losses caused by the insured (bodily injury liability, property damage liability). Homeowners
insurance covers the house and other structures on the property, as well as personal
possessions inside the house, against a wide variety of perils including windstorms, fire and
theft. Homeowners insurance also covers additional living expenses (the cost of living
elsewhere while the house is being restored after a disaster) and accidental injuries caused to
third parties and/or their property. Coverage for flood and earthquake damage is excluded.
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Workers compensation coverage for benefit payments to employees for work-related

injuries, deaths and diseases, regardless of fault.
Commercial multiple peril package coverage including most property and liability coverage
except workers compensation, automobile insurance, and surety bonds. Professional liability
covers physicians, surgeons, dentists, hospitals, engineers, architects, accountants,
attorneys, directors, and other professionals from liability arising from error or misconduct in
providing or failing to provide professional service. Fire and allied lines coverage for fire,
windstorm, hail, and water damage (but not floods). Inland marine coverage for property
that may be transported from one place to another, as well as bridges, tunnels and other
instrumentalities of transportation.Ocean marine coverage for ships, cargos, and
freight.Accident and health covers loss by sickness or accidental bodily injury, including
disability income insurance and accidental death and dismemberment insurance. Fidelity
insurance protects employers for loss due to embezzlement or misappropriation of funds by
an employee. Surety insurance a three-party agreement in which the insurer agrees to pay a
second party or make complete an obligation in response to the default, acts, or omissions of
an insured. Of the above lines, private passenger auto insurance is by far the most significant
one. According to the Insurance Information Institute,4$159 billion out of $440 billion of net
PC premiums written in 2008 were for private passenger auto insurance. The second biggest
category is homeowner multiple peril, with net premiums written of $57 billion. Other
significant lines include other liability (coverages protecting against legal liability resulting
from negligence, carelessness, or failure to act; $39 billion), workers compensation ($37 )
Insurance Information Institute, The Insurance Fact Book 2010. 21 billion), commercial
multiple peril ($30 billion), commercial auto ($24 billion), fire ($1 billion), and medical
malpractice ($10 billion). There are also many relatively small lines, which are primarily
commercial. Overall, the totals of commercial and personal lines are similar ($225 billion
versus $215 billion, respectively, in 2008).
Life and Health Products
Traditional life policies provide primarily death benefits, although many contracts have
significant saving elements or contain living benefit clauses. The products offered by life
insurers also include life-contingent annuities as well as pure investment contracts. Health
insurance contracts provide reimbursements for medical expenses or income in the case of
disability. According to the Insurance Information Institute,5direct premium written in the LH
insurance sub-industry were approximately $684 billion in 2008. About 51% were paid for
annuities (32% ordinary individual, 19% group), 25% for life (20% ordinary, 5% group), and
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24% for accident and health (13% group, 11% other). Approximately 60% of the individual
annuities premiums paid in 2008 were for variable products. Life Insurance Policies There
are many variants of life insurance contracts. Some contractsincluding term and whole life
are used exclusively or primarily to provide protection against premature death. Others
such as endowment and universal lifecombine protection against premature death with a
type of savings vehicle. Term insurance provides protection for a fixed term (e.g., 1, 5, or
15 years). If death occurs during the policys term, a fixed amount is paid to the beneficiary.
There are no other benefits or cash value build-up. Guaranteed renewable term insurance can
be renewed without proof of insurability (but often at much higher rates), while under other
types of term insurance the insured must once again undergo an underwriting process (e.g., a
medical examination). Whole life provides for the payment of the face value of the policy
upon death of the insured, regardless of when it may occur. Premium payments are typically
level during the insureds life. Because life risk increases with age, whole life contracts
involve overpayment of premiums in the early years and underpayment in the latter years,
and so accumulate cash value that may be borrowed against. Endowment insurance the face
value of the policy is paid to the insured or beneficiaries either at the end of the contract
period or upon the insureds death. Universal life a flexible premium policy that combines
insurance protection with a type of savings vehicle (cash value account), which typically
earns a money market rate of interest. Death benefits can be changed during the life of the
policy within limits, generally subject to a medical examination. The cash value account is
reduced periodically by mortality and administrative charges, and the policy lapses if the
account balance is not sufficient to cover the charges. 5Insurance Information Institute, The
Insurance Fact Book 2010. 22 Variable life contracts that allow the insured to invest the
premiums in one or more underlying portfolios offering different levels of risk and growth
potentials, which are usually held in separate accounts. Unlike whole life, the cash value of
the policy is not guaranteed, and poor investment performance can lead to a reduced cash
value, a lower death benefit, and possible lapse of the policy without value. Some life
contracts combine fixed and variable features. Variable universal life a universal life policy
that allows for flexibility in investing the premiums (see variable life). Life-Contingent
Annuities and Investment Products Annuities are either life-contingent or pure investment
contracts. Annuities can also be classified as either fixed versus variable, immediate versus
deferred, or qualified versus non-qualified. Annuity contracts also differ in the guarantees that
they offer. In addition to annuities, insurers sell investment contracts which take on various
forms. The following is a short description of the primary forms and classifications of
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annuities and investment contracts. Life-contingent annuity a contract that pays a periodic
benefit over the remaining life of a person (the annuitant) or the lives of two or more persons
(joint and Survivor life).Livecontingent annuities are essentially the reverse of life insurance.
These contracts expose the insurer to longevity risk, which can be used to offset the mortality
risk exposure of life insurance. Investment contract a contract that does not subject the
insurer to a significant insurance risk of contractholder mortality or morbidity. Annuities with
specified periods of payment (period certain annuities) are an example of investment
contracts sold by insurers. Guaranteed Investment Contracts (GICs), which are similar to
banks certificates of deposits, are another example. Fixed annuity an annuity whose
premiums paid earn a pre-determined rate of return (during the accumulation phase) and
which pays predetermined income amounts (during the disaccumulation phase). Variable
annuity an annuity whose value or income payments vary according to the performance of
investment funds that are selected by the contract owner from a list offered by the insurer
(typically separate accounts). Some annuity contracts combine fixed and variable features.
Deferred annuity annuity during the accumulation stage or when payments are not
scheduled to start in the near term.
Immediate annuity an annuity designed to begin making payments right away or within a short
time after purchase. Qualified annuity an annuity used in connection with employersponsored plan such as 401(k) plans, defined benefit plans, or section 403(b) plans. These
annuities are referred to as qualified because contributions are generally deductible to the
employer and taxed to the employees only when received (at retirement). Non-qualified
annuity an annuity that is not part of a qualified retirement plan, and which is therefore
purchased with after-tax dollars (see definition of a qualified annuity).

1.3 Distribution Channels

Two distinct classes of insurance distribution systems are used in the US: direct writing and
agency (independent) writing. Direct writing arrangements include companies that sell
through employees (direct marketers), companies that use exclusive or captive agents (i.e.,
agents
constrained to represent the products of only one insurer), and companies that sell through the
internet, telephone or mail. Under direct writing arrangements, the insurer owns the customer
list
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and thus benefit from any residual profits that arise from the insurance transaction. In
contrast, under independent agency, the agent or broker may represent the competing
products of several
insurers and generally has ownership rights to the customer list. Agency ownership of the list
means that the insurer cannot replace the agent or contact clients directly without the agents
permission. Moreover, the agent has the unrestricted legal right to move the business to
another insurer. From the insurers perspective, independent agency writing is generally more
costly than
direct writing (e.g., Barrese and Nelson 1992). On the other hand, independent agency
writing requires smaller upfront investments and involves lower fixed costs compared to
direct writing.
It therefore provides two benefits: (1) ability to grow when the resources required for direct
writing are unavailable, and (2) low operating leverage and hence low profit sensitivity to
fluctuations in volume.The distinctions between direct and agency writers, and between
agents and brokers, are often blurred. Since the 1990s, many insurers have been using
multiple distribution channels to reach potential customers. Similarly, while in theory agents
(whether captive or independent)represent the insurance company and brokers represent the
customers, in practice brokers often have significant ties to the insurance companies with
which they place the business. According to the Insurance Information Institute,6agency
writing dominates direct writing in life lines. In 2008, agency writing accounted for 92% of
the life market share (56%)independent, 36% affiliated), direct writing accounted for 3%, and
sales by banks, financial advisors, professional groups and other non-traditional channels
accounted for the remaining 5%
(primarily variable annuities). While agency writing has accounted for more than 90% of life
lines throughout the last decade, the share of independent agency writing has steadily
increased
throughout that period. In 1999, independent and affiliated agents had similar market shares.
In contrast, in PC lines, independent agents steadily lost market share from the early
1980s through the early 2000s, but have gained in recent years. The PC market shares of
direct and independent writing are currently about 50% each, compared to about 60%
independent and
40% direct in the 80s. Within PC lines, direct writing dominates in personal lines with about
70% market share, but agency writing has a similar lead in commercial lines.

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The loss of independent agency PC market share was most notably in personal lines;
independent agency share of commercial lines has remained relatively stable. The increase in
direct writers share in personal lines has been attributed to investments in advertising,
technology, standardization and mechanization, which significantly reduced the cost of
insurance
production (Regan, 1997). These investments, however, are not as cost-effective in complex
commercial lines, because of the increasing number of variables that must be accounted for. 6
Insurance Information Institute, The Insurance Fact Book 2010. 26 Additional explanations
for the relative strength of independent agencies in commercial
lines relate to the benefits of having an intermediary in the transaction. Businesses and other
policyholders with high search costs due to product complexity are willing to pay an
independent
agent to search for an appropriate insurer from among those the agent represents (Posey and
Yavas 1995). Moreover, due to its ownership of the customer list, the agent is likely to invest
in
performing risk assessment, which is particularly important for complex contracts (Regan
1997). Independent agency is also valuable when intervention in disputes between insurers
and
policyholders is potentially beneficial, because the independent agent can credibly threaten to
move the business to other insurers if the dispute is not resolved favorably. This benefit of
intermediation is likely to be particularly high in non-standardized business lines (e.g.,
Cummins and Weiss 1992).olvency Regulation Regulators use three primary systems to
monitor insurers solvency: The Insurance Regulatory Information System (IRIS), Financial
Analysis and Solvency Tracking (FAST), and Risk-based Capital (RBC).Insurance
Regulatory Information System The Insurance Regulatory Information System (IRIS) has
been used since 1972 to help insurance regulators evaluate the financial condition of
insurance companies. IRIS ratios provide a comprehensive method for screening and
analyzing the financial position of insurance companies. State insurance commissions use
IRIS ratios as an initial screening system tidentify firms for further regulatory scrutiny. A
usual range is developed for each ratio, which encompasses results expected for the
majority of companies during a normal year. Because

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Insurance 2020: Turning change into opportunity

THE KEY STEEPS IN INSURANCE
We have explored the five STEEP drivers to identify 32 factors that we believe will have an
impact on the insurance industry (see Figure 2). STEEP factors have an impact on all sectors
of insurance personal, commercial and individual life, annuities and retirement but not all
changes will affect insurers positively. Economic growth, for example, in the short to medium
term will be stronger in emerging economies. Forward-looking insurers in developed
countries, however, can still grow in their local markets by exploiting socio-demographic and
technological trends, while at the same time targeting emerging markets for growth.
Similarly, insurers from emerging economies have an opportunity to reshape insurance
products for their local markets while expanding on the global stage to build their technical
expertise. Although no one can predict exactly what STEEP changes will occur in the next
decade, we believe five key megatrends will influence the insurance sector. There are many
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more to consider (review the scenarios described in Figure 3) and with our research in place
we are happy to walk you through them, but in this publication we will focus on: Social:
The balance of power is shifting towards customers. Technological: Advances in software
and hardware that transform big data into actionable insights. Environmental: The rise of
more sophisticated risk models and risk transfer to address the increasing severity and
frequency of catastrophic events. Economic: The rise of economic and political power in
emerging markets. Political: Harmonisation, standardisation and globalisation of the
insurance market.The key STEEP drivers Figure 2: STEEP drivers and factorsSource: PwC
analysis Social Customer Behaviours Social Networking Customer Expectations Risk
Awareness Healtalent Drain Stakeholder TrustDemographic Shifts Dynamics of the Middle
Class

New

Family

Structure

ResponsibilityEconomicUrbanisationNew

Dependency

Ratio

AgingCorporate

Growth

Social

OpportunitiesFiscal

PressureInflation/DeflationRisks Sharing & TransferSocial Security & BenetsDistributor

ShiftPartnershipsTechnologyInformation & AnalysisDevices & Sensors Software &
Application

Medical

AdvancesEnvironmentalClimate

Change

&

CatastrophesSustainabilityPollutionPoliticalRegulatory ReformGeo-political Risk ,Rise of

State-Directed
Capitalis ,TerrorismTax TreatmentSharia Compliance (Takaful)
Technologica:Advances in software and hardware are transforming big data into actionable
insights As the insurance industry reaps productivity gains from the most recent wave of
automation, new technologies are significantly enhancing operational efficiencies, increasing
revenue opportunities and improving the customer experience. The important new
technological developments for the insurance industry are: The growth in smartphones and
tablets, coupled with cloud computing, which provide constant access to the internet. The
explosion of computing power and storage, enabling the accumulation and analysis of
extremely large amounts of data. The growth in active sensors and devices connected to the
internet. Big data: The growth of internet connected devices and sensors, which are projected
to reach 50 billion by 2020,4 will have a significant Impact on the availability of real-time
information a trend often referred to as big data. Insurers who can exploit this information
for better pricing, underwriting and loss control will have a distinct competitive advantage
over their peers. To harness the big data trend, global investment in advanced analytical
techniques is increasing in order to develop the capabilities to process large volumes of
unstructured and multimedia data, such as continuous real-time video, life blogging and
social chatter. These advances will lead to software and eventually hardware that can
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translate big data into actionable insights. Advances in Artificial Intelligence techniques,
such as machine learning, natural language understanding and intelligent decision-making
will allow insurers to advance from using technology for transaction processing to decisionmaking. Today, analytical techniques are used for making ad hodecisions using structured
data. By 2020, the use of unstructured data (e.g. social media, devices, video and audio) will
complement structured data, allowing insurers to make strategic forward-looking decisions.
From a reactive to a preventative business model: Commercial insurers are already using
connected devices and sensors to develop risk and loss management and improve
productivity, but we also envision life and health insurers using them as well. By 2020, a
number of biotechnologies will be available at the nanoscale, providing the ability to embed
devices and sensors unobtrusively within the human body. The nanotechnology drug delivery
market is expected to grow at a CAGR of 21.7% between 2009 and 2014, and reach almost
$16bn by 2014.5 Such nanotechnologies have the potential to dramatically improve health
outcomes through enhanced monitoring and preventive control of chronic disease.

Insurance and Technology

Over the last two decades the financial services sector has seen
widespread use of technology in its day to day core activities. The banking
and insurance industries have automated their entire processes to help
serve their customers better. Insurance and technology has gone hand
in hand to make the complex layers of the insurance business faster and
smoother all the way from the automated underwriting systems to the
claims processing.
Automated underwriting systems chiefly deal with the approval or
rejection of loans. Automation in this area has proved to be advantageous
in many ways like faster clearance of loan applications, reduced
processing costs and time, and higher chances of loan approvals.
The automated underwriting systems work in accordance with data
from credit rating companies. Based on the primary information of the
applicant and its credit rating these systems analyze the various risk
factors that the system is programmed to look for and either approve or
reject a loan application.
Systematic and customized programs uses integrated insurance software
right from the stage of buying insurance to disbursal of claims and reinsurance. Not to forget the interactive systems that aid consumers in
online policy buying and premium payment. There are different types
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of insurance company software that analyze the risk factors to quote

the insurance premium a particular insurance holder would have to pay.
The widely used and acclaimed claims management software has eased
and simplified the complex multi-level decision making for insurance
claims managers. They also help in reducing a lot of paperwork. Data from
all departments are instantly updated and made available across
segments which transfer information in seconds. Therefore, the required
paperwork electronic or otherwise gets done in a jiffy. It helps insurance
companies in faster claim settlements and thereby gathering increased
customer support and loyalty.
These integrated systems work across the segments, whether it is health
insurance, life insurance or property insurance and bring alignment
between the insurance company, insurance agents or brokers and the end
consumers. The data collated from these software systems also help the
insurance companies in generating mandatory regulatory reports.

Technology for fraud control:

Fraudulent practices like staged accidents or unjust loan approvals have been
frequently heard of. With the humongous amount of data collected and available
to the companies today, the right use of technology like automated underwriting
systems and claims management software can help keep a tab on such
fraudulent practices.
The merge of insurance and technology has not only brought far reaching
advancements in the industry but has also streamlined services along with
lessening the risks of fraud and malpractices.

Insurance Technology That Makes Our Life Easier

Almost all people today consider insurance as a necessity for themselves
and their businesses as this is a smart and easy way to protect their
investments and finances. Thats precisely why it is wise to stay as much
educated on the topic of insurance technology as possible, since it is able
to benefit all processes connected with our insurance. Since new
technology emerges and develops every day, we need to be aware of the
latest products and in this article we will tell you about the insurance
technology that can help make our life easier.
In the past when the insurance industry was still developing, the
insurance brokers visited people at their houses and offices, offering
different kinds of insurance at higher prices. Today, the modern
technology allows people to compare the different insurance policies and
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get insurance within minutes by completing a few steps online, thus both
the insurance company and the customer save time. Another great
feature that has been recently developed allows you look in the Internet
and find information about your monthly statements and adjust them
accordingly with one click only.
The advancement of technology has enabled more people today to open
accounts to purchase different services and goods online and this allows
them to buy and sell different products without the need of personal
meeting. However, this great opportunity has a hidden danger in it called
identity theft. Luckily, there is a specialized technology developed to
protect people against such hazards, and there are some insurance
companies that even provide identity theft protection and in case a
problem arises, they make the necessary steps to resolve these problems
the best possible way.
The technology, which is developed to help insurance companies, allows
clients to do their researches comparing the prices of different insurances
carriers, and decide which one to choose for a particular coverage. They
can find the best coverage that suits their lifestyle and avoid the types of
coverage, which might be more expensive and do not meet their specific
needs.
Even the underwriting processes have become significantly shorter now
compared to a few years ago, making the coverage almost instant and
when the customers need instant help and attention; they can use the
same technology real-time to resolve their problems. This was impossible
before the advent of this technological innovation that allows completing
the insurance coverage in just 20 minutes instead of waiting for up to 3
months.
Technological advancements offer great benefits to all kinds of industries,
including banking and insurance industry, where customers can see how
these great innovations save them money and time. Making use of the
modern technology in your personal or business life will definitely make
your life easier and keep your happiness insured for a long time to come.

Insurance Technologies: Importance of

Technologies in Insurance
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Introduction of technology in the insurance sector has improved every

aspect of the industry. Technologies play a major role in data management
process of an insurance agency by providing flawless services from
underwriting policies, producing documents to collating various ratings
and data. The state-of the-art implementations offers instantaneous
accurate information about different insurances to the clients. Insurance
firms regularly spend a part of their yearly premiums on modern
technology that aids in enhancing the overall performance of the
organization. Insurance technologies help the insurance agents to
immediately respond to the requirements of the customers and
technology has managed to cut back the annual expenditure of the
organizations.
The basic purpose of insurance technologies is to reduce the
paperwork of proposals and policies and address the customer services
effectively in a shorter time than any other traditional methods.
Information technology in insurance has made it easier for the customers
too. Online availability of the insurance agencies allow the clients in
dealing with application procedures, signing proposals and policies as well
as in receiving quotes without even visiting the insurance office in person.
The best part of technology in insurance is that it helps the firms in
reducing the costs by eliminating the mail rooms, paper files as well as
the data entry clerks. The elaborate underwriting, data processing and the
rating take place online and the customers or brokers receive the emailed
policy documents within no time. This online advantage, however, comes
with a price. The system requires a substantial initial investment in its
primary stages but the owner certainly gets his returns on investment
over the years that come equipped with superior services and response
timings.
Various innovative technological applications allow the insurers to
recognize the risks and opportunities easily. The modeling device
examines the loss histories and compares them with the risk
characteristics while it searches for correlations. Such insurance
technologies help the insurance companies to charge higher prices for the
higher-risk client base and lower prices for the safer opportunities.
There is a variety of insurance technologies available in the market. The
hardware and the insurance software should be chosen depending on
the business necessities of the insurance agencies. Different insurance
management systems and comparative rating systems enable the firms to
generate more revenues by decreasing the span of output and input
procedures.Insurance technologies have made insurance services mobile
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with the availability of smart phones and such devices. Insurance

companies use these devices to provide faster services like view policies,
obtain quotes, and report claims through live chat application. Such
improvements would have been impossible if there were no insurance
technologies available within the industry.

CHAPTER-14

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Insurance & technology to better serve Emerging

Consumers
II. The bank in your hand: providing financial access through mobile phones Mobile phones
deserve their reputation as a game changer: they now greatly outnumber landline
connections, with customers using a wider range of communication and payment mechanism
than anyone could have expected. As low-cost collection/transmission of payments is a key
requirement for access to insurance, mobile payments could be the next big enabler for
insuring new customers.The International Telephony Union estimates that mobile networks
are now available to 90 percent of the worlds population, and 80 percent of the people living
in rural areas. Mobile phones are nearly ubiquitous and more and more business is done on
them. As mobile phones penetrate where there is no main street, banks are on phones and
have antennas.Today, more than 108 million people use simple mobile phones to pay bills
and transfer money4. This number is expected to more than triple by 2014, when the total
transaction value is expected to reach USD 245 billion. In developing countries, mobile
payment systems can offer the best access to the financial system. With operators acting in 53
countries, the concept of mobile payment has spread quickly. SMS remains the dominant
mobile payment technology. Its wide presence and ease of use makes it the technology of
choice, especially for consumers in developing markets. And some companies have realized
the opportunities of Near Field Communication (NFC) payments, where contactless cards
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facilitate financial transactions.Branchless bankingIn recent years, no example of branchless

banking has created more enthusiasm than M-PESA, the mobile payment service offered by
Safaricom. Started in Kenya, it is just over three years old and already counts 57 percent of
the Kenyan adult population as clients.
M-PESA converts over 20,000 stores and other existing retailers into places where customers can
deposit and make payments thats 20 times the number of bank branches in the country5.
The Gates data shows M-PESA reaching 70 percent of all households in 2009. M-PESA
sometimes overshadows the success of a different approach to branchless banking found in
Brazil that relies not on mobile phones but on point-of-sale (POS) devices deployed to
agents. Following a ramp-up of agents by state and private banks, Brazil could claim by 2005
that every municipality in the country had a financial service point, changing the geography
of financial inclusion. Based on these and several other promising pioneers, donors are
investing large sums in branchless banking.Benjamin Lyon from FrontlineSMS:Credit
expects that with over 108 million mobile money users worldwide, payments over the phone
will become standard in many developing regions. As he explains, mobile payment systems
such as FrontlineSMSCredit use commonly available technologies like SMS and USSD (dialcode commands). 4Gartner 2010: Gartner Says Number of Worldwide Mobile Payment Users
to Reach 108.6 Million in 2010, 5Financial Access Initiative, Blog, October 28 2010, MPESA Marches On, guest post by Jake Kendall of the Gates Foundation, AlexandreBadolato,
former Director of Garantech, suggests that the value of mobile phones is not only in their
convenience but in the flexibility in payments they offer. With a regular income being the
exception rather than the rule for emerging consumers, it is worthwhile for insurers to review
their handling of late payments: We have seen companies which did not allow flexible
payments. As a result, 20 percent of their customers were canceled and removed. Other
companies could reduce their cancellation rate to 2 percent by being more flexible and
accepting late payments. Customers in both companies were basically the same. During the
interviews, 10 out of the 30 participants mentioned the use of mobile payment as
a technology trend that will help emerging consumers to gain access to the financial system.Brian
Richardson, CEO of Wizzit, innovates in multiple directions simultaneously. His company
uses mobile phones to establish new access to a full bank. WIZZIT bank accounts are offered
to clients by Wizz-kids, people from the community where the clients live and work. The
Wizz-kids provide the initial explanation of the account and help customers sign up. In
many cases, Wizz-kids maintain a relationship with the customers and keep their contacts up
to date on available offers. The bank accounts themselves are linked to the customers mobile
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phones which they can use to send money to other accounts. Financial transactions, such as
payments to other WIZZIT customers or bank accounts, are cheaper than those of their
competitors. By combining technology with social marketing and training, Wizzit learns
quickly about what works and what doesnt in serving its customers.Despite the rapid recent
growth of mobile phones as a tool for financial access, regulatory conditions can be a
constraint in some regions. For example, mobile payment solutions are restricted by
regulation in India and will only free up in early 2011. Ken Banks from kiwanjanet, who
offers platform solutions for mobile services, complains that most of the mobile payment
schemes are not compatible with each other. He draws comparisons to SMS, which in earlier
times didnt work between different providers. However, once SMS could be sent regardless
of the provider, it took off. In the end, mobile banks can be more easily accessed than
physical banks because customers are familiar with and trust their phones. Vijay Aditya, cofounder and CEO of ekgaon: Nobody writes about teaching people to use a mobile phone in
emerging markets. Nobody went to a remote place in Africa to teach women how to use
mobile phones. They learn on the usage of it. That learning by using is a present reality for
low-income people. As with banking, learning by doing seems to be an important strategy for
insurers seeking to expand their distribution to reach existing demand.Trillions of SMS sent
globallySMS sent per second SMS advertising and sale Simple mobile technology is also
used to market services. It may offer an efficient way to target customers on an individual
level and understand demand more precisely. C. V. Prakash, CEO and Founder of Gradatim,
suggests that: Advertisements could run via SMS. 600 million people in India have
cellphones. Messages can be sent out to customers this way. You might not explain the whole
product but you could inform them about social gatherings where information is distributed. I
know a lot of MFIs that are telling people about
community meetings. But Camilo Tellez cautions on challenges with new productsIt will
be possible to sell via SMS and push advertisement. The problem is that you still have to
explain what the product is, as the idea of insurance is not known to everyone in developing
markets. DelwarHossain Azad, Head of Financial Services at Grameenphone mentions the
use of a reminder notification to customers prior to the payment date. Since most customers
in emerging markets withdraw money from their accounts as soon as they get paid, the
accounts are normally empty. Whereminded via notification, the client knows that they have
to ensure sufficient funds are in their mWallet account to pay for the premium.SMS triples in
three years

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* Estimate
The total number of SMS sent globally tripled between 2007 and 2010, from an estimated 1.8
trillion to a staggering 6.1 trillion. In other words, close to 200,000 text messages are sent
every second.
Assuming an average cost of USD 0.07 per SMS, SMS traffic in 2010 is generating an
estimated USD 812,000 every minute (or around USD 14,000 every second).
In 2009, SMS revenue accounted for 12 percent of Chinas largest mobile operators total
revenue.
The Philippines and the United States combined accounted for 35 percent of all SMS sent in
2009.9In Brazil, Vayon helps insurers get to market through SMS. The customer receives an
SMS offer and then can respond in kind to start the purchase of life, home or funeral
insurance products. A call center follows up after the customer purchases a product via SMS
to complete the transaction so that the customer is well informed and all regulatory
requirements are met. Valdemir Navarro, Vayons CMO, says that all scenarios allow
insurance companies to selmicroinsurance products with efficiency, low cost and market
penetration. Navarro says that while most of the elderly population is not used to these
channels, the younger generation gets more and more comfortable with buying this
way.Implications for insuranceMobile payments and advertising enable insurance sales and
service for customers that were prohibitively costly to interact with before:
Signing up customers and collecting client information in hard to reach or remote areas in a
standardized way using mobile phones;
Collecting premiums from customers on a regular and convenient basis;
Allowing clients access to policy data, including the payments realized, and submit changes to
policy details;
Paying claims directly to customers through mobile payment methods.Mobile payments are not
yet available everywhere and work much better in some countries than others. This offers
the opportunity to gather early experiences in front-runner markets, and prepare for business
once mobile payments reach a higher penetration on a global scale.10

III. Infrastructure for everywhere: solar power and wireless networks Low-income clients
in re

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Low-income clients in remote areas were once cut off from the modern economy laying
electricity or phone lines over hundreds of kilometers was just too costly and provider lacked
resources. Solar power, other renewable energies and breakthrough technologies like standalone ATMs can now bring even the remotest villages on line and within the reach of
insurance companies.Technology infrastructure in emerging markets has developed unevenly.
While ATMs, Internet kiosks, wireless networks, and 3G data services are plentiful in
wealthier urban neighborhoods, they are rare in rural settings and in urban deserts places
without formal economic activity. Things that seem natural, like communicating over the cell
phone or withdrawing and deploying money at the next ATM, can become a hurdle when
excluded from key infrastructure. This exclusion affects the financial sector as well: One of
the biggest challenges in the area of microinsuranceis to solve the inclusion issue, explains
FranoisXavier Hay, from MACIF, as microinsurance exists because of exclusion that is,
people lack access to insurance facilities.Unlike the train tracks which first connected towns
in developed markets decades ago, the new, inclusive infrastructure is laid wirelessly with
solar-power and satellites. This connects communities and people more effectively. With
these innovations to deploy infrastructure in less populated areas, consumers will gain access
to basic technologies such as mobile networks and financial services at a reasonable
cost.Getting infrastructure in remote areasV. Vijay Babu, CEO of Vortex Engineering, has
designed a low-cost, solar-powered ATM in India which runs profitably even in sparselypopulated areas. Vortex Engineering solved several problems inherent to developing ATMs
for rural areas. First, the machine had to be energy efficient and run with off-grid electricity
here, supplied by solar power. It also had to accept and dispense notes and develop a cooling
system. While ATMs might only be used for cash transactions in the beginning, Mr.Babu
envisions the devices will be used to sell insurance products in the future with the customers
bank account debited for premium collection. Education about insurance products may have
to happen outside the ATM network, however, his ATMs would be the channel to execute
the sale.

IV. Rich media for poor communities: expanding high-quality services

While mobile communication first evolved around spoken and written text,
rich media allows for the exchange of a much broader range of visual
and ambient informationRich media is digital content that goes beyond
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plain text. Photo, audio and video become easier and cheaper to transfer
as bandwidth increases and compression techniques improve. Interactive
channels enable two-way communication, allowing clients to choose
content and provide information on their needs and demands. Rich media
can also open new avenues for providing services in remote areas.Two
factors have driven the rise of devices that carry rich media, like
smartphones or tablets: smaller, cheaper devices and higher capacity
data connections. These allow recording and transfer of video, audio, and
application data in real time. The devices are more advanced than regular
mobile phones and offer cameras, GPS navigation, and access to the
Internet. Although they are still too expensive for customers in developing
countries, prices are dropping and many emerging consumer households
are expected to purchase a smartphone instead of separate computers
and phones. Production costs for mobile phones have decrease by around
90 percent over the last 10 years and the GSMA reports a similar trend in
the area of smartphones. Jonathan Jackson, Founder & CEO of Dimagi says
Regarding technological limitations, you might have Edge connection in
most parts of Africa, but you wont have 3G. Using the Internet or video
would hence be too hard. Now, many countries are building up their 3G
networks so in five years the conditions will be better and the issue will be
solved.Real cost of phonesDevices in figure are the RIM 850, which went
on the market in 1999 with basic browsing, and the Samsung B100, one of
todays cheapest. Source: CGAP and DFID Focus Note: Scenarios for
Branchless Banking in 2020, N:57, October 200914In developed markets,
smartphones are becoming a new service channel. Apples and Googles
concepts of app stores provide a unified and simple way of developing
mobile services and distributing them to customers. Most of these
services today are targeted at entertaining the user, getting emails, the
latest news on Facebook or Twitter, but the potential of these devices has
not been fully explored yet. Business processes implemented on
smartphones and sales agents using them to offer services or sign
documents electronically are expected in the near future. Similarly,
insurers will need to send out claims adjusters less often when they can
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direct rural customers to take pictures and send documents over

smartphones. During the interviews 12 out of 30 participants mentioned
smartphones and even tablet PCs as a major technology trend for
emerging markets. Some of these participants noted that the devices will
enable new services and applications such as remote medical diagnosis.
The quality of health services may be improved and costs reduced when
connecting medical experts with patients in remote places.

V.

The

Internet

of

Things:

connecting

the

physical

and

the

virtualComputers and the physical world were once clearly separated.

With the Internet of Things, however, virtual communication is being used
to close that gap to preserve digital information in low-tech environments,
get tangible products in clients hands and to monitor insured assets.The
basic idea of the Internet of Things (IoT) is that virtually every physical
thing in this world can be connected to the Internet (ITU, 2005) with data
devices. Such objects are often called smart because they can act
smarter than things that have not been tagged with technology. For
instance, a consumer good could be considered to be smart when tagged
with a bar code. More advanced solutions might feature a timetemperature indicator that can be used to derive and communicate the
products state of quality, carbon footprint, or origin. The Internet of
Things vision is not new. However, it only recently became relevant to the
practical world, mainly because of the decline in the size, cost, energy
consumption, and hardware dimensions of these devices over the last
decade. As a result, the boundaries between real world objects and their
virtual images are starting to blur.During the interviews Mark Davis from
Esoko

mentioned

that

the

morefinegrainedtheinformationis,thelessarethechancesforfraudininsurance
.IoTtechnologiesep to provide a more fine-grained level of information for
insurers. They offer a high-resolution view of the world by using sensory
information and giving an identity to objects of any kind. Technologies that
help to identify objects vary from simple barcodes to small RFID (Radio
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Frequency

Identification)

sensors

that

carry

unique

number

to

distinguish products or objects on an item-level. Six of the 30 participants

mentioned IoT technologies during the study, and gave detailed examples
how to use them to overcome challenges in microinsurance.Make
insurance a tangible productThe use of low-cost technology to identify
objects dates back decades to the introduction of barcodes, scratch-cards
and, later smartcards containing small microchips. RenataRego from
Zurich Financial Services Group reports on the simple and eye-catching
use of pre-paid cards, or scratch cards, to sell insurance in Mexico and
Bolivia. Sold at kiosks, gas stations and supermarkets, the card offers a
tangible insurance product and can also be used to gain discounts in
pharmacies and other retailers. Just like pre-paid phone cards, each card
has a unique number. Customers provide this number to a call center
which records their personal details and activates the insurance policy.
Syngenta Foundation for Sustainable Agriculture, UAP Insurance, and
telecom operator Safaricom have reported on a more advanced use of IoT
technologies to sell insurance in Kenya. Farmers there can minimize their
risk of drought or excess rain by paying an extra 5 percent for a bag of
seed, fertilizer or other input from local agro-dealers. The dealers have
been equipped with a camera phone that scans a bar code at the time of
purchase, which immediately registers the policy with UAP Insurance over
the mobile data network. After the purchase, an SMS message is sent to
the farmer's mobile phone confirming the purchase of the insurance
policy. Some 30 weather stations in the region have been renovated with
solar-powered automated systems

capable of broadcasting regular

updates on weather conditions and rainfall. When drought or other

extreme condition (including excessive rain) is indicated by a particular
station, all farmers registered with that station automatically receive
payouts

directly

via

the

M-PESA

mobile

money

transfer

service,

eliminating the need to file individual claims. In September 2010, the

program paid out 100 farmers without a lengthy claims process. The
payouts were commensurate with the farmers projected losses. For
example, a calculated 15 percent decrease in yield based on rain
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shortfalls recorded at the weather stations triggered a payment of 15

percent of the insured value. The largest 17payout was for 2500 Kenyan
Shillings (Kshs) or about USD 30. That is the equivalent of about 12 kilos
of high-yielding maize seed, which is enough to plantone acre. Farmers
who received a payout are now encouraged to insure more of their inputs
in future, since a quick payout leads them to trust the insurance and the
benefits they receive. The accuracy of the weather box technology and
the high levels of customer satisfaction has encouraged more agricultural
companies to participate in the program Identify triggers and claimsIoT
technologies are not only used to simplify the sale of insurance or
handling claims. The ability to give any object a unique identity is being
used to counter fraud. For example, IFMR Trust Holdings and HDFC Ergo
GIC applied this technology to cattle insurance in India in 2010. If a cow
from an insured herd dies, the insurance company needs to ensure that
the animal was actually part of the insured group. This is hard to check
and has led to fraud. One way to overcome this hurdle is by attaching
small RFID sensors to the cow. This small electronic device carries a
unique number which is connected to the insurance policy. If the
identification number from the chip is matched with the numbers that are
part of the insured cattle, the payment to the customer can be made
without delay6.A government-supported health insurance scheme in India
uses IoT technology to provide insurance to low-income people. Health
policies

are

distributed

through

grassroots

organizations

and

communitybased agents. Rishi Gupta, Director and CFO of FINO which

provides the technology for the 6Examples see: by taking photos and
recording their fingerprint information. This information is stored on
asmartcard and handed to the customer. Each smartcard has an approved
limit of USD 600 from the insurance company. In case a customer requires
medical treatment the hospitals ask for the clients smartcard and checks
if there is enough money left on the account. After the treatment, the
entire payment process is done electronically: the costs for the treatment
are deducted from the customers smartcard and an invoice is sent
electronically to the insurer. The system is now running in more than
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5,000 hospitals in India and the government aims to cover 100 million
households in this way. This is a highly-subsidized government scheme:
clients pay only USD 0.50 of the total premium of USD 12 and the
government picks up the rest. However, it points the way to a technologysupported pre-approval process and electronic payment system that could
also be used in financially sustainable schemes.

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CASE STUDY

Big Data Still Needs a Human Touch

BY JAMES CATTERMOLE, HEXIGO

09.20.13

2:02 PM

In July, I brought my 15-month-old and 4-year-old sons to a medical center in Palo Alto. Eight weeks
earlier, I had moved to California to launch my company Hexigo in the U.S., and it was time to see a
doctor so my family could have health insurance.
At the Palo Alto Medical Center, we handed over documents from our insurance company detailing
what tests had to be done before we could get coverage. It turned out the insurance company required
my baby and toddler to get their cholesterol tested which required drawing blood from their little
arms.
Now, anyone with a grain of common sense knows that a toddler is not going to test positive for
cholesterol problemshow many 15-month olds have a heart attack from cholesterol?

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Stunned, my doctor called the insurance company to ask what in the world they were thinking. A
representative on the phone, who was clearly reading the standard company policy, insisted the doctor
had to test for cholesterol in order to get my kids insured.
Why were my kids subjected to completely unnecessary, and painful, medical testing? For that matter
why are some of our experiences with businesses becoming less pleasant than a trip to the DMV (a
welcome to America rant I can save for another occasion)?
The answer is that as companies come to rely more heavily on data, they risk applying data-driven
solutions without any regard for common sense and the human experience.
If you look at the entire U.S. population, yes, testing cholesterol levels is good practice for
determining the right price for coverage. This after all is a country where more than one third of adults
and 17 percent of kids are obese, according to the CDC. This costs the US more than $147 billion per
year. As an insurer, you want to charge a premium if the data suggests youll be paying for a
customers triple bypass or stroke in a few years.
However, testing babies for cholesterol is not something a human being comes up withit is clearly a
decision driven by machines and, one can only assume, was missed by rational human beings. It is big
data run amok, decision-making without the human touch.
The hype will have you believe that any company that doesnt leverage (the favored term) big data
will fail. Amongst this noise, one critical fact gets overlooked: big data is only as useful as the human
decisions behind it. Its the people who interrogate the data, make hypotheses, test conclusions and
then determine the final direction that make big data succeed or fail. One of these data scientists,
however, overlooked the fact that babies and toddlers dont have cholesterol problemsthey dont
need to be subjected to expensive, unnecessary testing.
The expression big data has become so over-used that most people dont know what it means
anymore. Is it processing huge volumes of data, is it business intelligence or is it filling spread sheets
and rifling through reams of information? Is it the technology or the processes? Confusingly, it seems
to be all of these things lumped into one.
The most common interpretation of big data is the systematic analysis of huge volumes of data to find
patterns and behaviors that are not readily apparent. It is finding that diamonds in the rough.
Big data has rapidly created an entire sub-industry that generated $11.59 billion in 2012, according to
the research community Wikibon. By 2017, they predict the big data market will be worth $47 billion.
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The International Data Corporation (IDC) reports, that the digital world will grow 300-fold between
2005 and 2020 to contain 40 trillion gigabytes of data. Yet, only one percent of this data is currently
being analyzed.
Unsurprisingly, consulting companies are creating big data practices, start-ups are launching data
crunching systems by the boatload and data scientists are apparently the new rock stars of IT.
Companies are crunching numbers in virtually every industry. Insurance companies use data to
analyze risk, financial institutions predict stock movements, agricultural firms track weather patterns
and crops yields and amusement parks now map how kids run laughing and screaming from ride to
ride.
It was Albert Einstein who said, Not everything that can be counted counts, and not everything that
counts can be counted. Just because we can analyze mountains of data, it doesnt necessarily mean
that we will find anything useful or use it to create value once we do.
Most scientific research involves postulating a hypothesis and then using data and experiments to
dispassionately prove or disprove it. Once the first set of data is analyzed, the scientist reviews the
findings and then adapts the tests so that the next set of data challenges the original findings. The raw
data only has meaning so far as it relates to the hypothesis.
Thus, the human element of data science in business is deciding what to analyze, what data to use and
how to translate results into a business practice.
In order to execute a big data strategy, companies need to focus on the human decision making
elements just as much as the technology. Businesses as well as scientific communities know that the
best decisions come from cross-discipline or cross-department collaboration. This is insurance against
groupthink and burning cash on data projects that have no potential value. The quality of decisionmaking needs to be as high quality as the data itself.
All of us know from personal experience that big data can lead to results that are not only imperfect
but downright baffling. Pandora sometimes plays bad songs, airlines email special deals departing
from airports 1000 miles away from your city, or your credit card provider suddenly deems you a
fraud risk for no reason.
Time and again, we see the results of big data unmediated by the human touch and common sense,
whether were shopping online or trying to get health insurance for our kids. In the effort to create
value companies instead create big data embarrassments. Human beings and human-oriented
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decisions must play a fundamental role in any big data strategy or companies risk alienating their
customers and damaging their brands.

users Can Adopt Advanced Mobile Technology

Mobile is more than mobile apps: Advanced cellular-based technology provides insurers with
opportunities for better service and underwriting.
SEPTEMBER 18, 2013

It's been said time and again (and again) how the insurance industry, with its cautious nature,
tends to lag other industries in hopping on the next-big-thing technology bandwagon.
However, unconventional applications of big data and predictive analytics will sooner than
later become the norm in all industries, including insurance. Those applications will provide a
new perspective on what we think of as the more foundational technology of risk
management and analytics. Here are two examples that show how our personal, business, and
online lives are only becoming larger parts of business platforms now and in the future:

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Telematics, while seemingly cost-prohibitive for some carriers, is gradually gaining ground
and breaking new ground. How? Take a look at a recent Ernst &Yount report, "The Quest for
Telematics 4.0." A few interesting observations:

The U.S. will continue its lead with sales of approximately 16 million new cars with
embedded telematics by 2025

the global telematics market is poised to hit approximately 104 million new cars with
some form of connectivity by 2025

the penetration of integrated telematics will be driven by the growing importance of

smartphones and regulations for driver safety
Why insurers must stop worrying and learn to love smartphone telematics
While the origins of telematics are in safety and security, other functions, such as remote
diagnostics and Internet radio, are adding to the value proposition. These are enabled by
cellular, Bluetooth, and Wi-fi technology embedded in cars. Further fueling this trend is an
explosion of smartphone apps that may be relevant in a car. Pay-as-you-drive may be just the
first of other insurance-specific functions that ultimately may include many more
competitively advantageous offerings that boost customer service and reduce costs.

Chris Perini, Verisk Analytics

Aerial imagery will soon be a viable alternative to exterior inspections and save insurers on
the annual $100 million tab for them, according to Verisk analysis of carriers and their
inspection programs. But that advancement won't address internal inspections. Can
technology come to the rescue? Yes, with smartphones.
A smartphone can guide insurance buyers through a short tour around
their homes to take photos and document the necessary information to complete an internal
inspection. They can take photos of the kitchen, the breaker box or fuses, heating/AC unit,
water heater, or any other component for which an insurer needs a visual image. Time
stamping and geocoding embedded in the photo will ensure the photo is current and taken at
the property address.

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Platform Integration Earns Alliant Insurance Services a

Spot On InformationWeek 500 List of Top Technology
Innovators
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Focus On Implementing Best-In-Class Technology Solutions Has Led to Improved Customer

Service and Increased Revenue

We now have an environment of 24/7 customer service, a complete view of

client information, and enhanced collaboration and tools for our clients and
employees.
Newport Beach, CA (PRWEB) September 25, 2013
Alliant Insurance Services, Inc. the nations largest specialty insurance brokerage firm, has
announced that it was recently selected to the prestigious InformationWeek 500 list, an
annual ranking of U.S. companies that employ the most innovative use of information
technology in their businesses. This year marks the companys first appearance on the
InformationWeek 500.
Alliant is among some 40 companies in the insurance industry to be named to the list and was
recognized for its innovation in platform integration. Completed in 2012, the multi-year
platform integration strategy was designed and implemented to replace a number of outdated
systems with best-in-class technology solutions, leading to greater operational efficiencies,
added value for clients, and increased sales of insurance products and services.
We now have an environment of 24/7 customer service, a complete view of client
information, and enhanced collaboration and tools for our clients and employees, said Ilene
Anders, Chief Information Officer of Alliant, who spearheaded the project. Our integrated
technology platform has become a differentiator for Alliant, allowing us to improve our
internal servicing and create customized, client-facing technology solutions rooted in this
platform. As a result, we have seen a measurable impact on revenue.

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Clients of Alliant will benefit from the companys investment in technology through a
number of means, including on-demand visibility and access to insurance documents, a direct
connection to service teams, and improved communication channels. Added Anders: Not
only does Alliant now have a centralized, global view of each client, but our producers and
service teams can engage even more efficiently with our clients to meet their insurance, risk,
and employee benefits needs.
Rob Preston, Editor-In-Chief of InformationWeek, said the theme of this years
InformationWeek 500 is digital business. Its a movementrooted in data analytics, mobile
computing, social networking, and other customerfocused technologiesthat is turning
companies and industries on their ear. Every enterprise is now a digital businessor needs to
become one fast. The organizations in our ranking are leading the way InformationWeek
identifies and honors the nations most innovative users of information technology with its
annual InformationWeek 500 listing. Unique among corporate rankings, the InformationWeek
500 spotlights the power of innovation in information technology Additional details and the
full list of this years InformationWeek 500 honorees can be found atAbout InformationWeek
For more than 30 years, InformationWeek has provided millions of IT executives worldwide
with the insight and perspective they need to leverage the business value of technology.
InformationWeek provides CIOs and IT executives with commentary, analysis, and research
through its thriving online community, digital issues, webcasts, proprietary research, and live,
inperson events. InformationWeeks awardwinning editorial coverage can be found.
About Alliant Insurance Service Headquartered in Newport Beach, CA, Alliant Insurance
Services, Inc. is one of the largest insurance brokerage firms in the United States and has a
history dating back to 1925. Alliant provides property and casualty, workers compensation,
employee benefits, surety, and financial products and services to some 20,000 clients
nationwide, including public entities, tribal nations, healthcare, energy, law firms, real estate,
construction, and other industry groups. More information is available on the companys web
site at

Marketing Information Systems in Insurance Companies

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Abstract:
The case examines the growing potential of the insurance
business worldwide and the need for improving operations
to survive in the new insurance environment.
It also throws light on the growing need for a Marketing
Information System (MIS). The various advantages of an
MIS for insurance companies are also discussed in the case.
In addition, the role of an MIS in auditing sales and other
operations is examined.
Issues:
Understand the changing business scenario in the insurance sector worldwide
Understand the importance of a Marketing Information System (MIS) for insurance
companies
Keywords:
Growing, potential, business, worldwide, operations, insurance environment, growing need,
Marketing Information System, MIS, insurance companies, auditing sales

CONCLUSION

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From the above project study it could be understood that the evolution of
information technology was a boom for insurance sector. Information
technology helped the insurance sector to tackled the market and delight the
customer expectance.

The competitive element in the Indian Insurance market has changed

dramatically over the last few years. At a same time changes have been taking
place in information technology .The expectations of customers are also
changing. The new insurance industries are consolidating themselves and
innovating new methods of customer delight.

Questionnaire

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1. What kind of role the IT does play in marketing insurance?

2. What kind of IT technology use in insurance?

3. How technology innovation affected in marketing insurance?

4. How is information technology used in marketing insurance?

5. What are the technological challenge do they face?

6. How IT helps in the growth of insurance sector?

REFERENCE

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BIBLIOGRAPHY
(1) Information technology in insurance sector-K. VISHANATHAN.

(2) New era of information technology in insurance- RAMRAO JADHAW.

WEB SITES REFERED TO:

(1)www.insurancetech.com
(2)www.scibd.com/doc/30556517/technoogy_in_insurance
(3)www.property casualty 360.com/technology
(4)www.insurancetech.com/summit2012

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