INSURANCE

INSIGHTS
The Next Big Wave:
Location Intelligence in Insurance

Web Enabled Channel Rationalization

Insurance Market in Asia

Straight-Through Processing and its

Application in the Insurance Industry
Table of Contents

3 Editor’s Note

5 The Next Big Wave:

Location Intelligence in Insurance
By Govind Seshadri

9 Web Enabled Channel Rationalization

By Satyashree Sai Rout & Manik Vinnakota

13 Insurance Market in Asia

Improving Effectiveness of Bancassurance --
An IT Perspective
By Suseel Kumar Kammara & Saumyajit Ray

17 Straight-Through Processing and its Application

in the Insurance Industry
By Lawrence T. Gillick, Sr., & Bhavesh Mandlas
 n Insurance Insights

Editor’s Note
The Cognizant insurance practice welcomes you to another edition of “Insurance Insight,” a journal that aims
to share our view of emerging technology and business trends in insurance, as well as best practices in
harnessing and deploying IT in the insurance sector. At Cognizant, we have always prided ourselves on the
fact that our primary focus is to better understand our customers’ business needs. This journal underscores
this core belief by focusing on four distinct areas: distribution, transaction processing, location intelligence
and Bancassurance.

In the current article, we focus on four themes:

n Insurers spend approximately 25% of their development budget on improving and streamlining
their existing distribution process. However, achieving suitable economic value from that
investment remains elusive. With the drive for more creative IT products and management in the
insurance industry, e-wholesaling and enhanced agency portals bring a new perspective and
solution to improving the traditional distribution process.

n Conventional transaction processing encompasses multiple steps. Straight-through processing

(STP) is a method of adopting automation as a processing goal. STP brings automation to all steps
in the transaction process, from the initial request to its completion. The concept is readily
applicable across all lines of business and activities.

n More insurance companies are relying upon analytics technology to promote faster and more
effective decision making than ever before. We evaluate location intelligence (LI) technology for
the insurance domain for different scenarios, such as catastrophe modeling and mapping
services, customer self-service portals, claims management, etc.

n Bancassurance has emerged as an important new channel for the distribution of insurance in
Asia. In this article, we discuss the different drivers for Bancassurance, the various models of
Bancassurance and the key IT enablers.

We hope Insurance Insight is both informative and enriching to you in terms of the thoughts and ideas it
presents. We look forward to your feedback and suggestions to help us focus and highlight the themes of
interest to you.

INSURANCE INSIGHTS 3
n Insurance Insights

The Next Big Wave:

Location Intelligence in Insurance
By Govind Seshadri

It has been boom time for Business Intelligence (BI) vendors and solution providers in recent years. More
insurance companies are relying upon analytics technology to promote faster and more effective decision
making than ever before. While the leading BI platforms have proven their efficacy in helping translate raw
data into actionable intelligence, many scenarios exist where two-dimensional spreadsheets and reports
remain in use but often fall short of the mark. This happens especially when users are dealing with relatively
large data sets. The result is more of a human shortcoming than a technical one. Scientific studies have
proved that our short-term memories are generally considered to have a capacity for seven elements at a
time. So, if you are trying to analyze a report with tons of rows and columns, it does not take long before
you feel lost!

The other equally significant factor to consider is that much of the data present within these generated
reports pertains to location -- the spatial environment in which a given business transacts business and
interacts with its customers. This location-sensitive data can pertain to anything that can be associated with
a place on a map, be it a person, business, geographical entity or even natural phenomena like a tornado
or earthquake. Given the location context, it could be a lot more intuitive to visualize and query the data
using a location intelligence platform rather than report-based BI products.

Which brings us to the question, what exactly is location

intelligence?
Location intelligence (LI) can be defined as the capacity to organize data and analyze complex phenomena
through the use of geographic relationships inherent in most information, as well as by leveraging
technologies like global positioning systems (GPS) and Web 2.0. By combining geographic and location-
related data with other business data, organizations can gain critical insights, identify a trend or recognize
a pattern among customer and demographic information, to power better decision making. In fact, this is
the most common application of location intelligence, as indicated by Ventana Research, a leading advisory
services firm (Figure 1).

LI platforms typically use a map-based dashboard for visualization. They also provide the ability to create
enterprise mashups, providing business users the ability to overlay seemingly disparate layers of location
data onto a map-based dashboard. The data being mashed up can also be the output of conventional
analytics engines beyond public sources of information, such as census data feeds, etc.

4 INSURANCE INSIGHTS www.cognizant.com

 Most Important Use of Location Intelligence
Analyze customer and
demographic information 45% 26% 21% 8%

Analyze location patterns across

location and non-location data 42% 29% 14% 14%

Understand location-related
patterns in operational data
43% 30% 16% 10%

Present many sources of content

and data on one screen
41% 34% 16% 9%

Identify location
41% 31% 17% 10%
relationships
Provide directions or navigation 37% 30% 20% 12%
to employee or customer
Analyze employees
and office locations 14% 24% 33% 29%

Collaborate via threaded

discussion group on location 11% 15% 28% 46%

n Very Important n Important n Somewhat Important n Not Important

Figure 1: Common applications of location intelligence

Another key feature is the support for spatial queries. For instance, the 9/11 attacks on the World Trade
Center brought into focus the challenge for property & casualty insurers to more quickly and effectively
understand their risk exposures in the immediate vicinity of the attacks. With LI supported spatial querying,
carriers can simply click on a specific target address on a dashboard map to fully understand their exposure,
not only within that building but also within an indicated radius.

LI technology is perfectly suited to the insurance domain, as demonstrated by the following scenarios:
n Catastrophe Modeling and Mapping Services: Using LI software, underwriters can examine
a specific area or “catastrophe zone” that’s historically prone to floods, hurricanes, earthquakes,
wildfires, etc. on a digital map to see how much business is concentrated within, say, a 25-mile
buffer zone. This gives them a clear picture of the potential risk. A risk can be pre-screened by
the underwriter by simply plotting it on the map-enabled dashboard. If the risk falls in the area
shaded red, it means there is already a concentration of risks, and they cannot write it based on
the current guidelines.
If a picture is worth a thousand words, then a map is worth many more! In a homeowner insurance
underwriting scenario, for example, visualizing property information on a map makes a world of
difference, especially as it relates to properties located on the borders of different counties. For
instance, without a visual perspective, it is impossible for underwriters to avoid inadvertently
insuring too many properties within a high-risk zone that may overlap multiple counties.
n Customer Self-Service Portals: LI services can be directly integrated within customer self-
service portals to increase customer satisfaction. For instance, consumers can be directed to an
agent who is located near their residence by enabling them to perform a search based on their
postal code or home address. Providing an intelligent “agent locator” service online can
substantially reduce the amount of phone calls received by the help desk. A carrier’s self-
service portal can also help a policyholder find the nearest authorized auto body or glass repair
facility, including contact information for each shop and step-by-step driving directions.

n Claims Management: The timeliness of claims processing is always an important differentiator

among P&C companies, but especially so when major disasters such as hurricanes occur.

INSURANCE INSIGHTS 5
 However, the magnitude of the challenge for a timely response can be formidable in an
emergency. For example, more than eight million Florida residents (over half the state
population!) were affected by Hurricanes Frances and Charley, recently.
Nowadays, information on a hurricane’s path and damaging wind fields is publicly available from
agencies like NOAA on an almost real-time basis. A carrier can then overlay this data on to the
LI platform’s map-based dashboard with the locations of its insured properties to dynamically
determine the PML (Probable Maximum Loss) associated with the event. With this type of LI,
carriers can analyze geographies likely to be affected on a virtually real-time basis to take
preemptive action.
There are multiple other areas where carriers can act preemptively. Claims departments, for
example, can accurately forecast the number of adjusters and inspectors necessary to handle the
incident and optimize their routes using location intelligence. The forecasting can also help predict
if carriers need to add independent inspectors and adjusters and establish contracts well before
their competition, avoiding a rush for hard-to-find adjustors post-event. In addition, the claims
department can go about proactively blocking hotel rooms and car rentals for policy holders who
have replacement coverage much earlier than otherwise, thereby incurring significant cost savings.
Insurance carriers can also adjust claims in areas with no landmarks with LI. For instance, after
catastrophes such as earthquakes and hurricanes, some areas may be completely devastated.
Without location-based analysis, there is a reliance on street signs and landmarks, which may
not exist after such catastrophes. If locations are geo-coded by augmenting them with latitude
and longitude coordinates, an agent can simply use a handheld GPS device to locate the
affected area and adjust the claim without delay.
LI technology can be utilized by carriers to optimize routing and workloads for claims adjustors
through wireless applications. Call centers can queue First Notice of Loss (FNOLs) within their
system, assigning them to the appropriate claims adjustors based on the proximity of the claims
locations. If new, more urgent FNOLs arise, the schedule can be re-prioritized, with new routes and
assignments provided to adjustors in real-time while they are in the field.
n Geo-Analytics for Agents: As mentioned earlier, it is possible to meld LI platforms with
traditional analytics regarding customer segmentation, market penetration, producer and
channel effectiveness for any service area. This would help agents better identify and target the
best business and consumer sales opportunities.
For instance, we could easily indicate to an agent that 100 clients within his service area have auto
insurance but do not have home owner’s insurance. This could prompt the agent to conduct a home
owner’s insurance cross-sell campaign to get more of these customers’ business. This may be
possible even without having a 360-degree perspective of their customers, since auto owner
information can be obtained from a third party such as the DMV.
n Fraud Detection and Incident Tracking: Claims departments can conduct pattern analysis for
fraud detection and provide the carrier with the insights needed to improve underwriting and
rating. LI platforms provide powerful tools to spatially analyze and visualize claims data, making
it possible to identify geographic trends or anomalies that would otherwise not be apparent.
For example, a carrier can quickly identify whether the frequency of claims for a particular area
exceeds expected thresholds just by plotting and analyzing claims data over any given time
period on the map.

Location intelligence platforms have traditionally been proprietary and expensive to acquire and maintain.
It has been expensive to develop point solutions under these platforms. Traditional vendors in this area are
typically vendors of geographic information services (GIS) products, like ESRI. However, with the widespread
availability of SOA-compliant mapping software from companies like Google, Yahoo and Microsoft, as well as
widespread implementation of spatial querying features within many commercial and open-source databases,
it is possible to build a relatively inexpensive LI platform that leapfrogs the capabilities of traditional vendors.

6 INSURANCE INSIGHTS www.cognizant.com

This is exactly what Cognizant’s Insurance Technology Consulting Group (iTCG) has done. Our solution,
Cognizant Location Intelligence Platform Services (CLIPS), is a SOA/SaaS platform built from the ground up,
enabling organizations to enrich their data with location intelligence. For example, each of the tiers shown
in Figure 2 on the previous page is fully interchangeable with open source and commercial components,
allowing a highly flexible architecture.

CLIPS solutions can be accessed by conventional browsers or smart mobile devices like iPhone and gPhone.
Figure 3 below, shows an Auto Garage locator accessed from the iPhone.
ITCG has also created numerous POCs using CLIPS for many of the scenarios described below.
We invite you to explore CLIPS and realize the power of location intelligence.

Mashup Server
Enterprise Data Adapters

External Data Adapters

Visualization

Security
Analytics Server
Security

Geo Analytics

Data Server
Data Services
Data

Figure 2: CLIPS Architecture

Figure 3: CLIPS Garage Locator Application accessed via iPhone

About the Author: Govind Seshadri heads the Technology Consulting Group for Cognizant's Insurance
practice. His responsibilities include driving the technology strategy and consulting agenda for the
practice as well as fostering key CIO/CTO client partnerships. He can be reached at
govindkolar.seshadri@cognizant.com.

INSURANCE INSIGHTS 7
n Insurance Insights

Web Enabled
Channel
Rationalization
The challenges faced in conventional product distribution require innovative
technology solutions to optimize cost, rationalize channel structures and
enable more targeted customer segmentation. In this article, two forward-
looking solutions are recommended.

By Satyashree Sai Rout & Manik Vinnakota

The global insurance industry is facing serious challenges with respect to the traditional policy distribution
process. Insurance distribution is undergoing a structural change, with commoditization of insurance
products and fragmentation of consumer segments. Insurers spend approximately 25% of their development
budget1 to improve and streamline their existing distribution process, but achieving suitable economic value
from that investment remains elusive. Moreover, distribution-related costs are rising over time, as can be
observed from Figure 1 on the following page.

For insurers to realize the highest value from distribution, they must reexamine how they refine key functional
areas. Also, insurers must approach distribution with a technology solution that is flexible and cost-effective.

In this article, we will discuss e-wholesaling and enhanced agency portals as two potential options to
streamline operations using Web-enabled solutions.

E-wholesaling
Insurers have been working to get advisors to consult and sell better, but returns on these investments
have not materialized. In fact, the increased expenses in the layers of wholesalers and advisors are
undermining insurers’ profitability. At the same time, customers -- mostly in the high net-worth individuals
(HNI) segment -- are not able to find any differentiation in services offered to them.

In the conventional mode (Figure 2A), internal wholesalers of the insurer share knowledge and key details
about the products only with designated external wholesalers. External wholesalers, in turn, spend most
of their time in field visits to educate consultants and brokers (i.e., financial advisors) on various available
products.

Figure 2B on the following page presents a distribution model where internal wholesalers are equipped
with Web-enabled communication tools and are actively involved in providing product information to
financial consultants with speed and convenience. This, in turn, frees up time for the external wholesalers

1.“Improving Insurance Distribution Profit Margins with Modern Technology” by Tower Group

8 INSURANCE INSIGHTS www.cognizant.com

 Acquisition Expenses Rising Faster Than Income
120

115

110
Index

105

100

0
2002 2003 2004 2005 2006 2007

n Acquisition Expenses n Gross Earned premium

Source: ACLI Life Insurers Fact Book

Figure 1: US Life Insurance Market Distribution Cost Analysis, 2002-07 (2002 Baseline Year)

to work more efficiently and exclusively on improving relationships with current and potential producers. It
also saves travel-related costs. These external wholesalers can also reach out to the HNI customer segment
in conjunction with financial advisors and thus play a key role in improving customer management.
To develop an effective e-wholesaling strategy, the firm must first finalize its distribution objectives. It also
requires adopting an IT strategy that is more holistic in nature and allows functions across the supply chain
to access technologies that work in conjunction with each other.

E-wholesaling: Level 1
An e-wholesaling solution should be developed and implemented in a phased manner to target customer
needs in different segments. Level 1 should be geared toward strengthening marketing channels for the
mass market of retail investors that account for 90% of investors but 10% of the assets. At this level, e-
wholesaling will provide speed and access to a mass market that does not require a high degree of
sophistication in support of commission sales. It will comprise the following elements: collateral (e.g.,
prospectus, marketing materials, etc.); call desks (webcasts, PowerPoint presentations, e–mail
communications, more timely and robust performance updates, etc.); sales desks (targeted customized
sales support, etc.) and Web-enhanced conventional wholesaling.

E-wholesaling: Level 2
The next level of e-wholesaling should be more focused on the advisory practice. It should be geared toward
10% of the investors who have 90% of the assets and who are far more discerning and sophisticated.
These tools will greatly reduce the labor intensity for high-level comprehensive expert advice. Moreover,
the barriers to entry for financial advisors to provide high-level advice will be removed. It should comprise
the following tools: Electronic Asset and Liability Study; Estate Planning Optimization; Electronic
Investment Policy Statement; and Electronic Performance Monitor.
A study by Financial Research Corp. that examined 19 mutual fund houses in the U.S. found that e-
wholesalers average three times as many sales contacts with banks and broker-dealers per week as field
wholesalers. The average cost per presentation for an e-wholesaler is $44, versus $372 for a field wholesaler.

Agency Portals
The next tool available to insurers to optimize operations using the Web is agency portals. Carriers have
to take their agency portals to the next level. Technology advances are showing financial professionals that

INSURANCE INSIGHTS 9
 Figure 2A Figure 2B
Insurance Insurance
Organization Organization

External Internal External E-Wholesalers

Wholesalers Wholesalers Wholesalers

Financial Financial
Advisor Advisor

Customers HNIs & Institutional Retail Customers

Customers
Relationship Building Level 2 Tools
Sales & Marketing Level 1 Tools
Web-enabled Tools

Figure 2: E-Wholesalers integrated into the insurance distribution channel

it is possible to make business processes more efficient. This has led to a new set of “needs” from agents
and brokers on carrier-sponsored portals.

Easy integration through open standards

The top area that causes anxiety among many distribution partners is dealing with proprietary company
systems or Web sites. Agency and brokerage professionals yearn for the ease of doing business. It's
become an increasingly important factor in their decision to place business with a carrier. As the 2006
AUGIE (ACORD-User Groups Information Exchange) Agency Technology Survey results point out (Figure 3),
insurers need to build their agency portals on open industry standards.

Real-Time Processing Capabilities

As real-time inquiry capability has matured, and more and more agents and brokers are taking advantage
of it, the industry needs to focus on real-time processing that includes new business processing, change
request processing and quoting (Figure 4).
Quoting or sales illustration systems should become more than just a tool to help life insurance agents
meet regulatory “truth-in-selling” rules. Many carriers still use standalone sales illustration tools as a part
of their sales presentations to customers. Going forward, quoting systems should be able to integrate new
business modules with advisory components to provide customers higher levels of insight during the
decision-making cycle. The same solution should be integrated further with other policy administration
systems for comprehensive customer management.
Overall, the real-time processing should be in line with straight-through processing (STP) norms to ensure
that resulting systems are based on industry standards and achieve paperless transactions. Going paperless
will drive considerable benefits to the producer and insurer in a number of ways, including but not limited
to customer service, sales focus, time savings and increased productivity.
Technology-aided solutions such as e-wholesaling and new-generation agency portals provide ample
opportunities to rationalize the distribution channel. The real challenge is how quickly insurers sense
changing business dynamics and re-align their business objectives to introduce the right solution at the right
time. It is not recommended to bring in every possible solution to achieve some competitive advantage; a certain
amount of deep introspection at each layer of the supply chain is required to identify which one(s) should be
targeted. The solutions described above should be approached in a phased manner, keeping the IT and
operations strategy in mind. All solutions may not be economically viable for medium- or small-level enterprises.

10 INSURANCE INSIGHTS www.cognizant.com

 4%

Extremely likely
19% 14%
Very Likely

Somewhat Likely
35% 28%
Not Very Likely

Not at all Likely

Figure 3: Intermediaries preference to choose a carrier whose

systems are built on open industry standards

Real Time Processing

New
Quoting Business
Real Time Changing Processing
Inquiry Needs…
Change Request
Processing

Figure 4: Real Time Processing Focus areas

Collaborative capabilities brought in through Web technologies in information, operations, sales and
marketing can establish distinct distribution advantages over competitors. This will help insurers build a
rationalized distribution channel and realize higher value through:

n Improving operational efficiencies.

n Decreasing distribution channel management costs.
n Expanding into new markets quickly.
n Reaching new distribution channels easily.
n Increasing agent retention (captive agents) and distributor loyalty (independent agents).
n Driving more revenue to agents and insurers.

Satyashree Sai Rout is part of the Cognizant Business Consulting group with expertise in the Life Insurance
domain. He has been part of a number of consulting and business analysis engagements for North American
clients. Apart from Insurance, he has good knowledge in ITIL framework and IT Infrastructure Management.
He holds certifications from LOMA and AAPA in addition to a Masters degree in Management.

Manik Vinnakota is part of the Cognizant Business Consulting group with expertise in the Life Insurance and
Annuities domains. He has carried out a number of technology and process consulting engagements for
North American insurers and has wide knowledge of insurance operations, policy administration, annuities,
retirement plans and business analysis. His areas of interest are Distributor/ Agency Management,
Requirements Engineering and IT Transformation. He holds certifications from LOMA, AAPA and IBM
Rational, in addition to a Masters degree in Management.

INSURANCE INSIGHTS 11
n Insurance Insights

Insurance
Market in Asia
Improving Effectiveness of
Bancassurance --An IT Perspective
By Suseel Kumar Kammara & Saumyajit Ray

The insurance market in Asia has witnessed significant growth in the last decade. Market reforms across
Asian countries during the late ‘90s attracted foreign investment, fueling economic development and helping
to improve insurance penetration ratios. Due to deregulation in these markets, a number of new insurance
companies have been established. As the competitive landscape expanded and the cost of acquisition
(through the traditional tied agency network) increased, insurers explored innovative distribution channels
such as corporate agency, Bancassurance, Retail Assurance and Internet direct sales to expand their reach.

Compared with the beginning of this century, when Bancassurance was virtually non-existent, it accounted
for 28% of life insurance premiums and 2% of non-life insurance premiums in 2005. Lured by Bancassurance’s
low initial investment, insurers embarked on it as a favorable alternate distribution channel.

Drivers for Bancassurance

In countries such as China, India, Indonesia, Japan, South Korea and Thailand, deregulation in the financial
services industry allowed banks to partner with insurers to distribute insurance products (hence the term,
Bancassurance). Banks are increasingly looking at Bancassurance as an opportunity to augment their
revenues with minimal investment in human and physical assets. Insurers are choosing the Bancassurance
route to escape from the high cost of captive agents and reach out to the huge untapped customer base of
banks, at the same time leveraging the existing bank customer relationships.

Bancassurance – A Win-Win Proposition

n Alternate revenue source with minimum investment
Bank n Enhanced customer satisfaction though cross -selling bundled products

n Augment revenue using partner’s existing distribution network

Insurer n Reach out to untapped customer base
n Leverage customers’ trust in partner when entering new market

12 INSURANCE INSIGHTS www.cognizant.com

Bancassurance Models
To effectively leverage the distribution channel, insurers have designed customized products to suit the
banking customer’s needs. They have also entered into diverse partnerships/ alliances with banks to unleash
the strength of the channel.

JV and fully-owned financial service group models are well-integrated and hence able to sell complex
products, while distribution agreement and strategic alliance models are not. Simple products and bundled
products tied with the financial products (e.g., credit insurance bundled with personal loans) are a natural

Bancassurance Models
Joint Venture Fully Owned Financial
n Common management and higher degree Services Group
of commitment from both parties n Developed through acquisition or
n Profit sharing arrangement based formation of subsidiary
PRODUCT COMPLEXITY

on stake in JV n Modalities similar to JV with even

n Sharing of bank customer data for lead higher integration

INTEGRATION
generation and underwriting
n Insurance advisors assist bank staff in
setting complex products

Distribution Agreement Strategic Alliance

n Can involve multiple insurers or banks
n Banks serve as distribution points for
insurance
n Commission based income for banks
n Insurer responsible for underwriting
and product design
n Insurer retains underwriting profit
n Exclusive bank-insurer relationship
n Banks responsible for distribution
and assist in product design
n Principally commission-based income
for banks
n Insurer responsible for underwriting
n Limited sharing of underwriting profit

Figure 1: Bancassurance Models

choice for the distribution agreement and strategic alliance models.

Integration – Key driver behind success!

Studies conducted in Europe indicate that an integrated Bancassurance model leads to greater sales
efficiency and significantly greater administrative efficiency than a non- integrated model.

Level of integration between the processes, systems and cultures of the bank and the insurer improves the
effectiveness of the channel in the distribution of the products and establishing/improving customer
satisfaction. The level of integration also helps address challenges that impact the performance of a
Bancassurance channel. These include banks’ lack of experience, business cultural differences (demand-
oriented environment vs. proactive sales culture and incentivized compensation); customer ownership; and
divergent regulatory structures and pressures.

While insurers embark on multiple initiatives to improve the level of integration, IT initiatives play a major
role in accelerating time to market, bridging communications gaps and improving customer satisfaction.

IT – A key enabler!
During the early stages of a Bancassurance relationship, IT’s role is limited, as participants are hesitant to
make significant investments before exploring the channel and realizing tangible benefit. With time, as
confidence in the channel increases, IT plays an increasingly important role in achieving a higher level of
integration by bringing disparate systems and processes closer to improve channel effectiveness. Key IT
initiatives that help reinforce the strengths of the Bancassurance channel include:

n Higher level of integration: Disparate functional systems need to be tightly integrated to

simplify the sales management process and enable faster decision making. These systems
include sales illustration, application capture and data entry, rule-based underwriting tools,
workflow applications and sales reporting systems.

INSURANCE INSIGHTS 13
 n Rule-based processing and PoS (Point of Service) enablement: Automation of application
data validation and underwriting rules at the PoS to enable straight-through processing and pre-
approval of policies for enhanced customer satisfaction with faster processing of the
application.
n Web enablement: Various functions need to be Web-enabled, including form fill-out, data
entry, underwriting and reporting. In addition, maintaining online repositories of product
brochures and marketing materials ensures ease of access, as well as consistency and accuracy
in data collection. It also helps bridge the insurance knowledge gap of bank sales personnel.
n Data mining: Sharing of customer data between banks and insurers through effective use of
CRM and data mining helps with better lead generation and identification of cross-selling
opportunities.
The figure on the following page represents an ideal-scenario technology platform that addresses business
drivers that help a Bancassurance channel achieve optimum efficiency.

The importance of IT in a Bancassurance channel increases with an increase in the level of integration.
While managed services provide minimum support to run the channel, marginal integration aims to improve
productivity of the bank employees and sales staff deployed at bank branches. A fully integrated IT model
enables development of customized insurance products, driving greater underwriting profits and cross sales
through CRM implementation, and driving higher revenue.

Conclusion
Bancassurance has emerged as an important new channel for distribution of insurance in Asia. Players are
developing confidence in the channel with an increase in both life and non-life premiums generated. In the
coming years, increased investment in IT is expected as insurers take the natural next step to achieve
higher levels of systems integration to further improve channel effectiveness.

Integration Roadmap for Bancassurance System Integration

High Full Integration

n Sharing of customer data
n CRM and data mining

n Auto underwriting at POS for

STP and pre approval

Marginal Integration
Medium n Illustration application at POS
n Application data entry by sales staff
n Electronic form fill up using web

Managed Service
n Minimal investment in IT
Low n Physical transfer of forms to insurer

n IT used for commission calculation

and disbursement

Time
Figure 2: Roadmap for Bancassurance System Integration

14 INSURANCE INSIGHTS www.cognizant.com

 Bank Program Licensed
Managers Bank Rep Client

Web Web Web

Compensation Financial Institution Insurance Platform

Sales Tools Application Automated

Policy Entry Underwriting
Policy Info
Admin
Sales Application Manual
Reporting Status, History Underwriting
Financial
Reporting
Web Web

Source: Celent Call Center Underwriter

Figure 3:
Source: Bancassurance Global Update: Lessons from Around the World in China, India, Europe
and US, Celent, March 2008.

Suseel Kumar Kammara is part of the Cognizant Business Consulting group and has worked on multiple
technology and process consulting assignments for Insurance Clients across North America and Asia/
Pacific. He has a wide knowledge on insurance operations and has played a key role in setting up and
managing domain Centers of Excellence (CoE) for Underwriting and Agency management.

Saumyajit Ray is part of the Cognizant Business Consulting group and has deep understanding of the New
Business, Underwriting and Policy Administration processes. He has been a part of several key consulting
and business analysis assignments for clients across Asia-Pacific and North American regions. He currently
manages the Center of Excellence for New Business and Underwriting at Cognizant.

References
• Bancassurance Global Update: Lessons from Around the World in China, India, Europe, and US , Celent,
March 2008
• Analysis of Bancassurance and its status around the world, Scor, October 2005
• New Trends in World Bancassurance, Milliman, 2004

INSURANCE INSIGHTS 15
n Insurance Insights

Straight-Through
Processing and its
Application in the
Insurance Industry
By Lawrence T. Gillick, Sr., & Bhavesh Mandlas

In response to the growing need of insurance carriers to respond to shifts in the marketplace, Cognizant has
become a major player in straight-through processing (STP) for insurance products. Our model of straight-
through processing for insurance carriers can be applied to all distribution types.

Cognizant insurance consultants understand that achieving top-level returns on technology investments in
the insurance marketplace is an ever-increasing challenge. Certain technology investments – including
integration of data across systems, business process management (BPM), customer relationship
management (CRM), service-oriented architecture (SOA), Web, portals, e-mail and interactive voice -- can
provide carriers with the power to deliver service excellence while they meet business unit objectives, such
as increasing productivity and sales, as well as retaining existing customers. –

When business units gain insights into effective utilization of these IT improvements, they can drive vital
changes in their activities, led by requirements studies. The traditional view of a paper-driven environment
has been changed as IT replaces every step in the long stream of transaction processing. Today’s insurance
operations are increasingly entering into the long-promised, but not yet achieved, realm of a paperless
environment.

Cognizant consultants have worked alongside and partnered with technology vendors to bring customized
IT solutions and services to insurance carrier operations. As partners on multiple projects, we’ve been very
successful in providing requirements documentation, process flow automation, rules-based engines and a
single view of customers, even when data has been captured in multiple application silos. For self-service
Web sites, we’ve even been able to create environments through which customers can receive
individualized and validated cross-sell and up-sell information as part of their standard site interaction.

16 INSURANCE INSIGHTS www.cognizant.com

 Industry Trends
Business Drivers
n Become responsive and
Business
customer-centric. Processes
Implementation n Increase new business by Current Focus Areas
reducing policy issuance time. of STP Include:
Risks n Reduce transaction cost. n New business.
n Non-integrated n Increase productivity n Underwriting.
heterogeneous applications. through automation.
n Poor documentation of business Other Process Areas with Potential
rules and processes. for STP Implementation:
n Involvement of partners (e.g., n Licensing and n Accounting.
distributors). appointment. n Commissions.
n Change management. n Claims.
n Post-issue services.

Industry n Disbursements.

Trends on STP Implementation Model

Enabling Solutions
n Electronic documents and forms. Exception Interception Model
n e-Signatures. n Optimal combination of process
n Process orchestration. automation and human
n Case management and workflow. intervention.
n Electronic content management. n Provision for human
intervention in case of exception.
n Electronic contract generation
and distribution. OTS Products n Easier to implement and
n Planet soft: cost-effective.
n Automated underwriting.
The Policy Processor.
n Electronic payment
& settlement. n FirstBest UMS.
n Xenos: Guaranteed Issue.
n Blaze.
n iLog.

Figure 1: Industry trend in Straight through processing

Conventional transaction processing encompasses multiple manual steps, including application review and
the ordering of credit and medical reports. Automation is now seen as the only way to improve the process,
which is where STP comes in. STP is a method of adopting automation as a processing goal. STP brings
automation to all steps in the transaction process, from the initial request to its completion, and the concept
is readily applicable across all lines of business and activities.

Carriers have been moving toward STP, as evidenced by the utilization of BPM to automate the business
process; CRM to automate the customer relationship process; and SOA to enable the development of links
necessary for BPM integration. The insurance industry has a need to adopt the STP concept even if the
realities of specific policies and risks require some human intervention. Our view of STP for insurance
carriers is to ensure that all necessary data is captured only once and is available throughout the enterprise
for all applications. Even with each step in every application automated, we still recognize and build
business rules that require human intervention. A significant advantage of the STP process of integrating
external rules engines with legacy applications is its significant impact on competitiveness, removing many
of the advantages of start-up operations.

Straight-through processing provides the insurance industry with a framework for meeting the goals of
rapid response to change; improved time to market; real-time transaction processing; improved productivity;
decreased operating costs; improved audit trails; maximized legacy systems efficiencies; and greater
satisfaction in the distribution channel and among customers.

INSURANCE INSIGHTS 17
 Data access processes must perform independently of any specific database. STP applications incorporating
BPM, SOA, DMA and CRM processes offer simpler systems that integrate well with existing platforms and
can be easily modified. Various application programming interface (API) design models can be utilized, but
the core technology is Web services. Succeeding with STP requires a close partnership with an expert who
understands how to effectively create an optimized business services organization.

To discuss how to implement STP or obtain our white paper on which this article was based, please contact
your account manager. The white paper addresses the core issues for any organization wishing to adopt
straight-through processing techniques to modernize its operations. Learn how STP, integrating and
processing real- or best-time data through all channels of information across your enterprise can optimize
your legacy systems running on multiple platforms and enable more timely and effective strategic and
operational shifts to meet today’s and tomorrow’s business requirements.

Lawrence T. Gillick, Sr., CPCU, is a member of Cognizant Business Consulting group and has extensive
experience in P&C insurance. A graduate of the City College of NY, he taught insurance at Hofstra University
and is certified in New York to teach and monitor exams for Property and Casualty, Life and Accident and
Health State Licensing. He has been a consultant in insurance processes for 12+ years.

Bhavesh Mandlas is a member of the Cognizant Business Consulting group and has extensive experience
in consulting assignments in both Life Insurance and Annuities domain for North American and APAC
insurers. He has wide knowledge on insurance business processes and his areas of interest are Process
Rationalization, Requirements Engineering and IT Portfolio Assessment. He holds a Masters degree in
Management and also insurance specific certifications like LOMA, AAPA & IRDA certifications

18 INSURANCE INSIGHTS www.cognizant.com

About Cognizant

Cognizant’s single-minded mission is to dedicate our global technology and innovation know-how,
our industry expertise and worldwide resources to working together with clients to make their
businesses stronger.

To learn more about Cognizant, please visit: www.cognizant.com.

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