IT in the Indian Insurance Sector

Runner-up : e-Gov Projects : Govt of India : Automation of Central Excise & Service Tax [ACES]

Managing e-Books with Calibre

Other Finalists : Punjab National Bank : BCP Automation Project

Most Innovative Project : National Thermal Power Corporation : RFID & Collaborative Framework

We all know that the BFSI sector overall is among the early adopters of IT, but there's enough action in the insurance sector (the "I" of BFSI) alone to merit analysis. All this was evident from various entries from insurance sector in Best IT Implementation Awards 2010. Before we drill any deeper, let's learn a few facts about the insurance sector in India. Starting from 18th century, the insurance sector in India has completed a full circle from liberalized setup to nationalization and then back to liberalization. India being the second most populated country in the world, with 70 percent population in rural parts, there is huge untapped marked for both life insurance and general insurance. With the Government's liberalization of this sector, there is huge opportunity for both private and public players. In fact it is predicted that life insurance sector in India would grow at 30 to 34% annually from 2008 to 2011. Currently India is the fifth largest insurance market in world.

There are two important aspects to keep in mind when talking about life and general insurance. While general insurance is done for a short period of time, life insurance is done for longer period. It's important to realize this because there's a greater need to focus on customer retention in general insurance. In general, every insurance company has a core application that is used for generating insurance policies (like CMC's Life/ASIA). Now, the processes revolving around this core system need to be automated to reduce time taken for policy processing, which in  turn directly affects the company's business. Normally insurance companies have a base of agents who pitch insurance products to customers. Once a customer agrees for a product, all the customer's documents are sent to the local office where a background check is done, and a policy is issued if the customer is found eligible. There are a lot of sub-processes in this process. Therefore, the more automation is done in this system, the better for the insurance company. Isurance companies use specialized workflow software like Savvion, and instead of moving physical documents, their digital scans are taken for quick processing and transfer, etc.

History of insurance sector in India

Life Insurance

1818: Establishment of Oriental Insurance Company in Calcutta

1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies taken over by the central government and nationalized. LIC formed by an Act of Parliament (LIC Act, 1956), with a capital contribution of Rs. 5 crore from the Government of India.

General Insurance

1850: Triton Insurance Company Ltd. was established in Calcutta4

1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business.

41957: General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices.

41968: The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up.

41972: The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance business in India with effect from 1st January 1973.

4107 insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company.


Graph showing implementation trends in insurance vertical, one can clearly see spike in BPM&A and Web based solutions

Implementation Trends
From all the project nominations we received from the insurance sector,  majority of them are either business process automation or web-based solutions. A lot of insurance companies are automating processes using their workflows that automatically assign work and generate alerts if required. This data not only helps companies do more work, it also gives greater visibility to the management about how much is being done and by whom. Now if a customer care representative receives a call from a customer complaining about delay in policy receipt, he can immediately check out in the workflow who was working on the concerned policy and its status. So, a complete process automation reduces turnaround time for customer queries and cuts down chances of error, especially the duplication of customers, which is one of the biggest concerns for any insurance company. The other clear trend is in selling policies quickly. Most insurance companies including those in public sector are selling their products online. This step clearly is to enhance penetration into the market and give customers easy to choose options if they're interested. So besides offering an interface to update customers about the latest policies, these sites also provide a channel for purchasing policies. Simple online tools built on these portals also give customers options to explore ideal insurance premiums, and also help them compare different products. So, we can say, insurance companies have achieved differnet levels of automation. Those who've already established online presence, are now proceeding further and plugging innovative components into the same. For instance, Kotak Life Insurance has created an online application for its agents, whereby different incentive schemes can be given based on an agent's performance. On the other hand, agents can also check their status to know how much they have achieved. All this brings transparency in incentivizing agents and also gives the management a clear view of the agent's performance. Insurance companies have a pretty heavy back-end infrastructure. So, a lot of consolidation of this IT infrastructure is also happening to reduce the complexity.

What according to you are some of the key challenges that your industry faces today, which haven't yet been resolved by using IT?

In the life insurance space, it is the retail segment that makes up a prominent chunk of the business; while in the non-life insurance space, it was corporate entities which made up the dominant class of the business. However, this is also going through a sea-change in the sense that even non-life players are migrating heavily into the retail or mass-market products. Customer relationship management has been a quintessential element of life insurance companies. However, in the non-life space, retail has got a certain amount of accentuation only recently. So, they still have a long way to go where CRM is concerned. As far as Business Analytics is concerned, I dont think we have reached that level of maturity in this market. If you look at the entire matrix based on which support systems can be built, BI is still a gap in this market. Foresee a lot potential in the adoption of Enterprise 2.0 applications and also social networking tools. I also feel that cloud computing concepts should be adopted by insurance players to reduce TCO. Given the expected pace of growth of general insurance industry, the ability of an insurance company to be able to reach and service customers at a relatively low cost will become a key differentiator going forward. This would call for technology support, and the focus will be on retail channels including direct sales force, Internet, or mobile solutions. Also, tools which will assist the insurance companies with product innovation and packaging, quick time-to-market and technical pricing would be the key drivers. Finally, insurance companies will also have to invest in educating customers on the evolving nature of service delivery to drive growth in the insurance business.

R Raghavan General Insurance


Among the many challenges are; managing product development and life cycle components effectively; increasing growth with decreasing levels of support resources; increasing work automation; process efficiency and continuous improvement opportunities; building consistent processes that can be extended across products or lines of business; optimizing legacy and mainframe system environments; maintaining compliance with changing statutory; federal and international regulations; creating a consistent customer experience that promotes customer acquisition and retention; promoting "ease of use" across varied lines of business and distribution channels.

Going ahead we first want to sustain it for long periods. We want to ensure that customer is getting maximum benefit out of technology that we are implementing. That's why, our eyes and ears are open to the latest developments in the world of technology, like cloud computing, open source, etc. For example, mobile computing is picking up pace and we are exploring the development of a technology that would enable users to explore their policies from their mobile devices.

Parvinder Singh, Corporate VP & Head - IT Service, Max New York Life Insurance

Tech Used
When we analyzed the various technologies that were used by the insurance sector this time, we found a balance between the usage of Microsoft's .NET platform and Oracles's Java. While on the database side, there was again a similar usage between Oracle and Microsoft's SQL server. Other than these platforms for business process automation many insurance companies were customizing Savvion BPM solution. Other major technologies used include Documentum for document management and Tivoli Workload Scheduler for batch processing. We already received couple of nominations in Best IT from this sector who used standard SAP and Microsoft's Dynamic packages.

Online tools that help customer choose ideal insurance amount are common these days

Future Outlook
Automation seems to be the key area in the insurance sector. In the future also, we would see more processes being automated. Customer engagement via online is also bound to increase as private companies are coming in this business and established brands need to keep an edge over these new comers. Other key future trends in this vertical include implementation of business intelligence for up selling and cross selling of different products. Besides these trends, insurance companies like other non IT companies are moving towards SOA and Cloud based setups to focus on their core business instead of spending time in managing IT.

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