After more than a decade, the life insurance industry has shown comparatively better penetration and growth in India, which is evident from the increased numbers of private (foreign and domestic) players, increased reach and awareness of the end customers, growth in insurance premiums, innovation in product offerings, and enhanced role of regulatory framework.
For the life insurance industry, the period after liberalization can be termed as the phase I, which witnessed an introduction of insurance products and rapid growth of 24.2% of CAGR in annualized premium equivalent during FY2000-05. During this first phase of development, insurance industry had been dependent on regular capital investments from its promoters, focused entirely on profitability, and basic automation was done. In the next four to five years, ie, phase II, witnessed players focusing on expansion of product range, introduction of innovative products, and development of a strong distribution channel. So, during this second phase, ie, FY05-09, the industry grew at a CAGR of 25.9% with focus of the insurers shifted to profitable growth, which led to more rational product pricing based on more conservative assumptions and the use of better technology (CRM and ERP) ensured efficiency. Now, the Indian life insurance industry has entered its phase III, where it is witnessing high-market and regulatory compliance pressure. This calls for an improved risk management, use of analytics, enhanced customer servicing, and maximizing customer value in synchronization with the governance.
A life insurance company, being an information-centric organization, primarily has to manage information and risk associated with it. It either works on an agency model (Aviva Life Insurance) or on a bankers model (HDFC, ICICI Prudential), but few companies have also adopted a hybrid model (Max New York Life Insurance), which deploys agents as well as banks.
According to Gartner, the Indian insurance companies are expected to spend $1.8 bn on IT products and services in 2012, which is an increase of 11.7% over 2011 revenue of $1.6 bn. This forecast includes investments by insurers on their internal IT (including personnel), hardware, software, external IT services, and telecommunications.
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Gradual Upgradation: Need of the Hour
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Most of the life insurance companies till now had deployed technology separately in piecemeal in its 4 major functions: new business, policy administration, claims and issuance, annuities servicing as per the need, and cost-benefit analysis and management priority. But with the increasing market pressure and maturity of the customer in terms of awareness and expectations, all the solutions or applications of the different functions in the organization either needs to be integrated seamlessly or an end-to-end technology solution should be deployed.
We have received BS 259999 certification for our business continuity and management system, which shows our intent for ultimate customer satisfaction, says Pramod Krishnamurthy, chief technology officer, Birla SunLife Insurance Co. He further added that the organization has integrated its website, call center, IVRS, mobile technology, Taslima CRM, and information security software.
Integration of solutions and applications based on different platforms is posing a real-time challenge to the IT management due to difficulty in data migration from one platform to the other. If the organization does so, then the maintenance cost and manual effort for data migration becomes a costly affair. So, in such a situation, insurers are finding it tough to manage the triangle of being robust, flexible, and cost-efficient.
For example, Max New York Life Insurance Company operates on partnership (hybrid) model and uses advanced technology according to operational, functional, and technology perspective. Complete automation has been done in the organization with a clear technological map based on a clear thought and architecture to derive sustained growth, says Hitesh Arora, chief information officer, Max New York Life Insurance Company.Â
But few other life insurers like HDFC Standard Life Insurance, ICICI Prudential Life Insurance, ING Vysya Life Insurance, Kotak Mahindra Old Mutual Life Insurance, IDBI Federal Life Insurance, Canara HSBC Oriental Bank of Commerce Life Insurance, and SBI Life Insurance, who have strong back-up of the technological architecture of the bank or can invest to create one as per the need, are positive about the technological upgradation. We have deployed software/solutions like: an AS400 engine for core policy admin, workflow and imaging system, SAP for financial accounting, Peoplesoft HRMIS for HR, and ULS for unit accounting, says Samrat Das, CIO, TATA AIG Life Insurance.
It has been observed that after integration of IT architecture, another challenge, which is of paramount importance is risk management. Risk management earlier was handled by the insurance company itself, but now they are on a lookout for better solutions from the vendors. Peter Haslebacher, COO, iWorks Asia-Pacific, SunGards insurance told that SunGard is providing Prophet, an enterprise risk-management solution to 22 insurance players in India. Strengthening of the distribution channel (stakeholders satisfaction) is as important as customers satisfaction.
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One of the life insurance players in India has deployed Oracle Golden Gate, transaction management solution, which provides a real-time bi-directional data synchronization solution for heterogeneous dual-active or multi-master databases.
One of the ex-CIOs who handled the implementation of this project advocated the feature of daily analysis of data unlike rest of solutions/applications used in the insurance industry, which does data assessment at the month-end or year-end.
IT solutions providers like CMC, Cognizant, EDS, Wipro, IBM, and many more are using business intelligence and data analytics to gather meaningful information ultimately to face the challenges and exploit the opportunities opening up with the changing trends of the industry. Whole industry is looking forward to the strategic use of BI and analytics for their organization to foresee the future demands.
In addition, increased regulation has now demanded more strategic role for the CIO/CTO/head, IT in the insurance organization unlike before when the person in-charge IT was only concerned with the deployment of applications and troubleshooting. Now, IT management has to devise an upgradable technical architecture to contribute to the productivity of all the functions of the organization.
Integrated Grievance Management System
SK Sharma, secretary, department of financial services, Ministry of Finance has launched the online grievance portal, ie, Integrated Grievance Management System (IGMS) of Insurance Regulatory & Development Authority (IRDA)) in a seminar on Policyholder Protection and Welfare in September 2011. Through the channel of IGMS, IRDA has asked all the Indian insurance companies to focus on increasing insurance literacy. This solution has been developed and implemented by Wipro. This solution emphasizes on putting a proper regulatory mechanism in place to protect the interest of policy holders. It will not only facilitate the policyholder to register/track their complaint online with insurance companies but also facilitates IRDA to monitor the grievance redressal procedure established in the insurance industry. The system will involve mirroring of the grievance database of insurers in a central repository.
Therefore the compliance to this regulation requires a close coordination with the technical team and operational teams of the insurer for resolving the integration issues with the insurers grievances system, the Authority desires to have Single Points of Contact (SPoC) from the IT team and grievance cell of the respective insurers. The SPoCs may be at a senior level who would assist the implementing agency during the design and implementation process.
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IT vendors are also gearing up with cloud based customized applications and solutions to cater to the new breed of needs of the insurance industry. As the technology demands of the industry are growing to ensure quality service for their customer, in the similar fashion these insurance companies are demanding high-quality technology solutions from us (IT vendors), says Vineet Arora, managing director, Aditi Technologies. Therefore innovation is the only key to suffice the new demands and stay ahead of the competition. Arora further adds.
IT vendors are also becoming technology partners with the insurance companies to provide consultancy and customized IT solutions for better risk management and ensure maximum customer value with quality customer servicing. A sequential or synchronized conversion of huge volumes of data coming from many platforms internally (from employees) and externally through website, call center, IVRS, mobile technology, and social media platforms, into meaningful information is only possible with a clean IT architecture to ensure a new and repeat business by shortening yet strengthening the process.
IRDA has played a crucial role of a watchdog from time to time through its regulations to raise bar of the industry in terms of performance and eventually benefit the end customer as much as possible. Recently, IRDA in September 2011 has asked the life insurance companies to submit reports quarterly on asset liability policies and look at their asset liability portfolio and report against it. Everything is driving towards more efficiency, regulatory, distribution, and business process management.