Insurance : Waking Up to a New Life

Life insurance in India is gradually becoming a booming
business despite having a late start compared to the banking or financial
services industries. Though the twenty odd insurance players in the country have
collectively invested Rs 58,000 crore in the equity market, the adoption of
technology in this segment has still been relatively low when compared to the
entire BFSI pie. Today, the life insurance penetration in India is around 4.75%,
and the sector is looking for a higher penetration in the urban and rural
markets.

Till the time the industry was de-nationalized and opened
up in India, both in the life insurance and other insurance space, the
government owned players held monopoly. Therefore, the adoption of IT was quite
slow. However, LIC has been one exception, and has played the lead role in
adopting technology on a very progressive basis, despite the size of the
organization and the number of policy holders it is among the largest in the
world. LIC of India is investing nearly Rs 600 crore on electronic document
management system (EDMS). The corporation is expected to transform more than 175
mn policies into electronic format by 2010.

In India, non-life insurance companies in the public
sector were very slow in adopting technology till about a couple of years ago,
but now are catching up fast. Now, they are gradually identifying vendors for
web based solutions, and are gradually moving onto advanced platforms. In the
private sector, both in the life insurance space and other spaces as insurance
companies do not have legacy issues, they have been adopting technology right
since the word go. They have been substantially adopting IT as a backbone.
"Considering the insurance sector opened up only a decade ago it benefited the
private players, as they did not have to contend with any legacy. Most private
insurance players have been investing in the latest IT applications,
infrastructure, hardware, etc," says Anita Pai, executive VP, ICICI Prudential
Life Insurance. Coming from the ICICI Group which has always believed in using
technology to the fullest, IT adoption was never an option, and has always been
an essential part of ICICI Prudentials DNA.

Private players have been able to score in areas such as
infrastructure management, connectivity, etc, which is obviously lacking to some
extent in the public sector insurance companies. Change management is also a
built-in process in the private sector which unfortunately is not possible that
easily in the government sector for reasons of size and the geographical spread
they have. Hence, they do face infrastructure hiccups such as connectivity,
power availability, etc. Also, the number of stakeholders involved in the public
sector company is much higher. The average age of the human resource profile
also impacts the IT adoption curve within the organization.

Adoption and Use of IT

IT has always been used for functions such as financial accounting by
insurance companies. But the real main areas where IT can be leveraged are in
terms of customer service particularly in areas such as policy administration,
claims management, re-insurance management, and internal services such HR, etc.
Many other companies use technology for straight through processing (STP) for
underwriting and claims as the industry is beginning to grow more mature. While
the insurance sector is seeking to maintain a balance between acquiring
customers and developing existing ones, they are heavily focusing on CRM to help
acquire customers through various touch points, and translate operational data
into actionable insights for proactively serving customers. According to Dhiresh
Rastogi, CTO, Kotak Life Insurance, today insurance sector is a very big adopter
of IT. "In the first phase, IT was mostly used by operations and actuarial. In
the second phase, other departments such as HR, finance, channel management,
etc, began adopting IT. In the next phase, IT adoption was taken up by the sales
and distribution teams, customer service, marketing. Now the adoption of
business intelligence, customer analytics, and other advanced tools are on the
horizon," says Rastogi. He also says that apart from CRM, the current focus is
on a lot of self service tools like portalsservice and sales, IVR, request SMS,
and creating multiple touch points for customers, agents, sales managers, and
other front line activities.

Anthony Jacob, CEO, Apollo DKV also shares similar views.
"We believe that historically the investment in technology by the insurance
sector has been low. However in the last two to three years, this has changed
with public and private players making investments in automation, connectivity,
and business intelligence solutions," says Jacob.

While the Internet is becoming an important medium for
marketing as well as for claims management, insurance companies are exploring
similar innovative ways to ramp up customer services. "Apart from CRM tools,
which are widely used, imaging and workflow automation are also being widely
adopted by many insurance companies to ensure better customer service, and
facilitate better policy and claims processing," says Ajay Bimbhet, MD, Royal
Sundaram Alliance Insurance. According to him, mobile computing with the help of
hand-held devices is another initiative that the insurance industry is fast
adopting to improve their customer services, and to improve connectivity of the
sales force even in the remote locations. He also adds that while the need for
business intelligence is well understood by the players, given the current
environment, there is a need for real-time and anytime business intelligence
solutions.

R Raghavan, GM, IT, GIC has a different take on the
adoption of CRM and the maturity of BI tools in the insurance sector. "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,"
says Raghavan. "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,"
he explains.

Over the last year, owing to the slowdown, insurance
companies were a little conscious about their IT investments. "Now business is
picking up with a lot of insurance companiesboth public sector players and
private playersbeginning to invest in IT over the last three to four months,"
says Atul Sareen, MD, India sales, SunGard, which is a leading provider of
solutions to the insurance vertical globally. He also adds that other factors
such as the SEBI regulations on mutual funds, caps on the commissions charged,
and the structure is influencing more and more players to offer insurance
products. Hence, over the last few months a lot of insurance players are showing
interest in newer solutions. "We are now seeing a lot of insurance companies
focusing on group business as well. A lot of life insurance companies have
invested in individual core products, but had not invested as much in the group
business. As the insurance companies are expanding, channel management is again
an area where they are investing to help partners to log into a centralized
network and carry out transactions. CTOs and CEOs of insurance companies are now
looking at investing in customer facing solutions, as well as workflow and
process enhancement in a big way," says Sareen.

Leading IT Adopters

While LIC has been in a completely different league when it comes to IT
adoption, there are many other prominent insurance players who have had some
very good IT success stories.

The largest re-insurance company, GIC, has also done some
pioneering work. It is the third reinsurance company in the world to have gone
live on SAP since 2006. Today the SAP system addresses all verticals of the
business. As everything is online, maneuverable and manageable, GIC is also
planning to create a large MIS database from within, and contemplating opting
for pure business analytics tools. It has already implemented a document
management system that converts all archival hard copy documentation into
electronic storage, set up a Disaster Recovery System in Bangalore to address
business continuity issues. GIC is now looking forward to pioneering the
electronic data interchange system in India. As a national re-insurer, it
already has almost all the non-life insurance companies on a mutually dependent
system. With the help of electronic data exchange mechanism, transactions can
happen in a paperless format between GIC and all our constituent parties. This
will be done by bringing in the standardization element which is called as ACORD,
which is in various stages of implementation in the mature markets. "GIC would
like to be the first to implement the system in the Afro-Asian region. We expect
electronic data exchange to be the next big evolution in the insurance market,
as it will bring in the much required standardization. This will also help GIC
evolve into a trading platform," says Raghavan.

ICICI Prudential is also among the most mature IT
adopters. While it has a robust CRM in place for a few years, it has also
recently implemented lots of BI tools, and has invested in a HRMS which has
automated almost 99% of its people systems and processes. According to Anita Pai,
the next big wave in the insurance space is going to be a scramble to provide
services on the mobile, while continuing to invest in the online services area.
Today 70% of the customer services functions are done via self service. Hence,
the use of technology for self service through IVR at the call center, online,
and SMS make up a large chunk. And this is an area where ICICI Prudential will
continue to invest in.

Kotak Mahindra too has implemented a number of projects
covering all the areas of business. Some of them are workflow and STP for
improving the efficiency of operations and underwriting department. Kotak Life
Insurance won EDGE award 2009 for this project. It has also implemented i-Rec
for enabling efficient recruitment, and has put in place a customer portal for
enabling self service tools for customers. Kotak Life Insurance recently won the
Nasscom CNBC IT User Award 2009 for many of its IT initiatives.

Ensuring a robust IT roadmap, Royal Sundaram too has
invested a lot for being in business agility. "The need for BPM (business
process management) and BAM (business activity monitoring) has been identified,
and we have already implemented these for some of the key platforms used
internally and externally. Another area which has been identified as a key focus
is the Internet, and we are constantly upgrading our capability, and have
successfully launched online policy issuance and renewal business for our retail
products," says Ajay Bimbhet.

Challenges, and the Future

Experts feel future technologies such as SOA, cloud computing, web 2.0all
have a place in the insurance sector. "Now that insurance companies have their
CRM in place, and have consolidated their IT applications, the next step is to
integrate all the functions at the organizational level through the SOA
approach," says Sareen. Raghavan foresees a lot potential in the adoption of
Enterprise 2.0 applications and also social networking tools. He also feels that
cloud computing concepts should also be adopted by insurance players to reduce
TCO.

Given the expected pace of growth of the general insurance
industry, the ability of an insurance company to be able to reach and service
the customer 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 the growth in the insurance
business.

Priya Kekre

priyak@cybermedia.co.in