UNIVERSITY OF MUMBAI PROJECT ON MODEN TECHNOLOGY THAT IMPACT THE INSURANCE INDUSTRY
SUBMITTED BY Mr. DIPAK K CHAUHAN
PROJECT GUIDE Prof. MINAL GANDHI
BACHELOR OF BANKING & INSURANCE SEMESTER V (2016-17)
K.E.S. SHROFF COLLEGE OF ARTS & COMMERCE, KNDIVALI, MUMBAI – 400067 UNIVERSITY OF MUMBAI Page 1 of 74
PROJECT ON INFORMATION TECHNOLOGY IN INSURANCE Submitted In Partial Fulfillment of the requirements For the Award of the Degree of Bachelor of Management By Mr. DIPAK K CHAUHAN
PROJECT GUIDE Prof. MINAL GANDHI BACHELOR OF BANKING & INSURANCE SEMESTER V (2016-17) K.E.S. SHROFF COLLEGE OF ARTS & COMMERCE, KANDIVLI, MUMBAI – 400067
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Declaration I
student of BMS – Semester V (2009-
10) hereby declare
that I have completed this project
on__________________________________________
___ The information submitted is true & original to the best of my knowledge.
Student’s Signature
( )
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C E R T I F I C A T E This is to certify that Mr________________________ Of TYBMS has successfully completed the project on __________________________ _____________________ under the guidance of_________________ ___________
Project Guide Prof. MINAL GANDHI
Course Co-ordinator Mrs. A. MARTINA
External Examiner Page 4 of 74
Principal Dr. (Mrs) J.K. PHADNIS
ACKNOWLEDGEMENT Before we get into thick of things, I would like to add a few words of appreciation for the people who have been a part of this project right from its inception. The writing of this project has been one of the significant academic challenges I have faced and without the support, patience, and guidance of the people involved, this task would not have been completed. It is to them I owe my deepest gratitude. It gives me Immense pleasure in presenting this project report on "INFORAMTION TECHNOLOGY IN INSURANCE SECTOR". It has been my privilege to have a team of project guide who have assisted me from the commencement of this project. The success of this project is a result of sheer hard work, and determination put in by me with the help of my project guide. I hereby take this opportunity to add a special note of thanks for Mrs. MINAL GANDHI, who undertook to act as my mentor despite her many other academic and professional commitments. Her wisdom, knowledge, and commitment to the highest standards inspired and motivated me. Without her insight, support, and energy, this project wouldn't have kick-started and neither would have reached fruitfulness. I also feel heartiest sense of obligation to my library staff members & seniors, who helped me in collection of data & resource material & also in its processing as well as in drafting manuscript. The project is dedicated to all those people, who helped me while doing this project.
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RESEARCH DESIGN PURPOSE OF STUDY The main reason to select "MODERN TECHNOLOGY THAT IMPACT INSURANCE INDUSTRY" is to understand the need of IT in insurance business which makes the business more safe and sound and to study the development of IT in the insurance industry.
OBJECTIVE OF STUDY Understanding & studying the various uses of information technology in different fields of insurance sector. To make in depth study regarding current status of IT in insurance. To study the various changes brought in by IT in the insurance sector through its advent. Understanding the importance & purpose of IT Learning the various benefits provided by IT to its employees, organization as well as the individual.
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RESEARCH METHODOLOGY DATA COLLECTION The input for the project has been collected keeping in mind the objectives of the project and accordingly relevant information has been found. The methodology used is a descriptive method of the research.
PRIMARY DATA The data regarding " MODERN TECHNOLOGY THAT IMPACT INSURANCE INDUSTRY " was collected through primary data. Semi-structured interviews were conducted with ‘Rajesh Bedichandani’ the development manager of the "LIFE INSURANCE CORPORATION OF INDIA" This was done to understand the current practices and the style of functioning Information Technology in Insurance Company.
SECONDARY DATA The data had been collected by reading various books of IT. The data regarding Information Technology Introduction, recent trends was collected from their official website on the recommendation of the personal interview.
LIMITATION There are no specific books for IT in insurance; it is covered as a small topic in the books of insurance. IT is very vast topic to cover. Less information was available on the internet especially in IT use in private insurance industry.
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EXECUTIVE SUMMERY The computing technology, networking technology and advanced electronics together make today's Information Technology. The convergence of electronics & telecommunication created by devices like fax, telex which the business world wide has been using extensively over last three decades. It includes hardware, software, computer interface & storage device and data distribution& networking. The use of application of the information technology in wide variety of insurers operations has now become strategies in the sense that it has direct impact on the productivity of resources and impact on reducing the cost of various activities. Insurance organization has three-tier set-up. Operating office (BO / DO), controlling office (RO / DO), and central office (HO). This department includes the technological manager, system manager, network manager and operation manager. It is applicable in all the functional areas of the organization such as marketing, finance, HRM, and R&D. E-Business is the integration of system, process; organization, value-chain and entire market using internet based and related technologies and concept. E-Commerce is merely a part of E-business and is limited essentially to marketing and sales processes. E-insurance derive multiple benefits to the insurer such as speed of Response Issuance of Policy and settlement of claim faster, flexible pricing and customized service, 24*7 availability and so on. But it is not possible to quantify and define the risk under the new atmosphere are secrecy of information, authentication of information and papers, and keeping the data safe. The form of service being provided by help lines in the field of insurance are customer information, EPS, issue of payment of premium facility, call centers etc. IT in stages of policy includes the IT in payment of premium, Claim Settlement and Underwriting etc. Selection of Information technology depends on its scalability, quick to market, easy to maintain & price affordability. Extensive use of technology is ultimately expected to bring about considerable amount of standardization of products and process. The emerging technologies are influencing the delivery channels of financial services. The insurance workforce when provided with wireless connectivity can access critical information and application anywhere, anytime, resulting in greater efficiency and superior customer service. Page 8 of 74
INDEX
SRNO.
TOPICS
PAGE NO
1.
INFORMATION TECHNOLOGY
1
2.
INFORMATION TECHNOLOGY IN INSURANCE
6
3.
INSURNACE & ELECTRONIC COMMERCE
18
4.
IT IN STAGES OF POLICY
29
5. 6. 7
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SELECTION OF RIGHT TYPE OF IT FOR AN ORGANISATION MOBILE & WIRELESS APPLICATION IN INSURANCE INDUSTRY
39 45
LIFE INSURANCE CORPORATION OF INDIA
53
CONCLUSION
63
RECOMMENDATION
64
BIBLOGRAPHY
65
Chapter: 1 INFORMATION TECHNOLOGY
INTRODUCTION
DEFINITION
RECENT TRENDS
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INTRODUCTION Computing technology, networking technology and advanced electronics together make today's IT. The convergence of electronics and telecommunications created by devices like fax, telex which the business world-wide has been using extensively over last three decades. The convergence of computers and telecommunication has generated various computer networks making the business data transfer feasible. The computers with advanced electronics has provided the multimedia facilities i.e. apart from the data in electronic format the voice (audio) and image (video) also can be a controlling input to and output from a computing device.
Hardware: Development in information technology have been characterized by miniaturization and reducing cost with improved performance and better reliability combined with shortened product development cycles, due to advances in clip technology. The early use of huge computers during the world war two was for military purpose. The computer technology went hand in hand with the advance in electronics. The computers for commercial use in 1960s, made use of transistors instead of vacuum tubes in the earlier computers. The integrated circuit (IC) technology of 1970s from the backbone of latest computers. With the feasibility of circuits having large scale integration (LSI) and very large scale integration (VLSI) powerful computers came to the table tops (Micro computers) and then to laptops and now to palmtops.
Software: Like the hardware the computer language (software) have also undergone change. The software transaction from very hard to use machine level language (MLL) through Symbolic Assembly level Language (ALL). High Level Language (HLL like COBOL, Basic etc), fourth generation have today reached to expert systems. This has brought the computer closer to business managers who may not be necessarily computer professionals. With complicated operating system for mainframes and mini computers the personal computer came handy with operating system life DOS, UNIX. This changed the concept of huge data processing units. The Page 11 of 74
recent additions of user friendly interface like Windows brought menu driven, user friendly computing to the society. Word processing and spreadsheets made processes more efficient and one could edit documents or do calculation faster. But there was no sharing of information.
Computer Interface and Storage Device: 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 introduced the flexibility of translating maps and figures to computer memory. Scanners have added image capture facility to computers. The touch screen add-ons and touch panels would accept finger touches as if they were mouse clicks. The storage devices have changed from bulky and sequential access magnetic disks and tops to handy and flexible floppy disks, hard disks. Optical disks offer mass storage capabilities. Today's compact disks with high storage capacity of 600 MB onwards are replacing concepts of publication of books manuals and encyclopedia or any other business information with relatively less cost.
Data Distribution and Networking: Advancements in IT have provided connectivity amongst computers for electronic data interchange. This enables the organizations and individuals to spread message within and outside the organizations at a very low price on electronic mail. Electronic data transmission enable information sharing within specific sites on Local Area Network (LAN) using coaxial or unshielded twisted pair (UTP) cables. Operating offices of a business house can be connected through leased telephone lines to from a network Metro Area Network (MAN) allowing data transfer within different offices of a city. Electronic data transmission over long distance using satellite communication links or fiber optic cables forms WANs. The new client-server technology has provided an open system environment with broad interoperability across diverse hardware platform and connectivity between offices.
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Definition of Information Technology (IT) on the Web: "Information technology architecture is an integrated framework for acquiring and evolving IT to achieve strategic goals. It has both logical and technical components. Logical components include mission, functional and information requirements, system configurations, and information flows. Technical components include IT standards and rules that will be used to implement the logical architecture. " "Information Technology (sometimes called IT) is a term that covers all forms of technology used to create, store, transmit, interpret, and manipulate information in its various format.”
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RECENT TRENDS IN IT Introduction of digital telephone exchange. Common business documents are being replaced by paperless Electronic data Interchange. Conventional data entry gIvmg a way to scanners, digitized Image processors. Hardware prices are declining and micros are becoming as powerful as minis resulting in an increases of mini/micro users, compare to mainframe. Although artificial intelligence is being experimented with, knowledge bases expert systems are slowly being made available. Decision support system is gaining importance. Increased capability of computer systems and the growth on use of internet. The need for data communication and networking is increasing. Even heterogeneous computers are getting linked. Greater acceptance of the use of IT. All these developments have led the insurance and reinsurance practitioners to record the use of IT as an essential and integral part of their work.
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Chapter: 2 INFORMATION TECHNOLOGY IN INSURANCE
INTRODUCTION
SETUP
IT DEPARTMENT IN INSURANCE COMPANIES.
ADVANTAGES
IT APPLICATION IN FUNCTIONAL AREAS.
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INTRODUCTION The rapid innovation in the field of information and communication technology has posed serious challenges for the insurance industry in India. The use and application of the information technology in wide variety of insurer's operations has now become strategic in the sense that it has direct impact on the productivity of resources and a sweepening impact on reducing the cost of various activities. With arrival of private insurance players, the competition has become more intense and an important role is being played by the insurance sector. Even though the use of information technology is not new to the insurance sector, yet it may find tight compartmentalization regarding the use of information technology in various departments of the insurance companies including the major players since last 50 years. The most visible of these departments are accounting, policy issue and servicing, claim processing, sales management etc. The innovation in information technology can be effectively utilized in the following areas: Speedy and correct issuance of documents Expeditious disposal of claims
Quality Assurance & Efficiency
Proper building of accounts and statistics Therefore the imperative for all the insurers, especially LIC and GIC is to build up efficient interface between the various departments and segments. This would reduce the paper work, improve efficiency of service and provide competitive advantage to the insurance companies.
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SETUP: Generally the insurance organizations have three tier set-up - operating office (BO/DO), controlling offices (RO/DO) & central office (HO). The organization & responsibilities of the IT department & its sub-departments is more or less in the hierarchical order of the various offices. The IT department at HO is responsible to the chairman/CEO of the organization for implementing of IT plan. The department is responsible for procuring new technologies, conducting training & preparing to the CO. the head of the IT department may have the following managers with their respective tasks:
Technology manager Evaluation and acquisition of new technologies in hardware, software, networking and packaged solution Recruitment and supervision of system and network engineers Conducting of various training programmes.
System Manager System analysis and design Functional specifications
Development of application and user manuals Assignment of work to project leaders, system analysts and programmers Evaluation of studies
Network Manager Network Administration (Including WAN) User administration, system security-mail etc. Controlling and supervision of network administrators.
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Operations Manager Maintenance of hardware Job scheduling, backup and file control Assigning work to operators and DEOs Training of users Controlling of data flow.
IT DEPARTMENT IN INSURANCE COMPANY FUNCTIONS The IT department in an insurance company performs the following functions: Provision for hardware & software resources Adoption of latest technology for competitive advantage. Training of employees- at operating, head & controlling offices on office automation. Advise the top management on Business Process Re-engineering (BPR). Develop, maintain & implement insurance related application. Maintenance of networks
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ADVANTAGES OF IT IN INSURANCE: The insurance industry is service-oriented industry and mainly based on the retail consumer. So the benefit of storing data is immense. They help study the customers test, preferences, habits etc. The Indian insurance market is still at the embryonic stage and the companies who enter first and are customer savvy will be at an advantage. A range of insurance products is available today to suit the customers with varying life style and needs. So product differentiation is no longer the key to attract customers. The key is consumer care- improved service, affordable covers, reduced premium and improved quality. The insurance company also has both front and back end jobs. The front end jobs include policy servicing, billing, co-insurance, re-insurance, claims management, financial accounts and audit. Back end jobs include statistics, data warehousing, risk management etc. Other back end jobs include managing investment, personnel system and policies, office service, etc. Today every system in an organization has software made to automate the process. Packaged software products are used extensively to make presentations, follow up proposals, policy and client services, commission tracking, task management, underwriting etc. IT has made the life for a manager so much simpler. The advantages of Information Technology with reference to the insurance business can be stated as below: Helps the companies to lower costs of administration, transaction and communication through their entire supply and demand chain and results in overall increase in efficiency. Improves customer relationship and quality and effectiveness of communication. Redefines business relationships. Speeds up nearly every stage of doing business and results m efficient business. Keeps all interested parties fully informed of market needs and opportunities. Will enable a wider range of customer designed products and services. Will enable greater depth and breadth of customer services.
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DISADVANTAGES These systems are less flexible, difficult to operate. IT is rapidly changing and the pace is so fast even expert in this field are finding it difficult to cope with. This results in hardware and software products becoming obsolete in ridiculously short periods of time. Difficulty may arise in finding the right type of personnel to handle the system and data. A powerful, flexible and adaptable computer system is valuable but it is not a substitute to experienced people. Change in technical and business environment will pressurize the need to upgrade the systems and processes which entails expenditure.
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TECHNOLOGY FOR INSURANCE 1. Database Management System: The principles of tracking and measuring responses can pay off the insurance industry. To find more clients, insurer needs to record many factors including: lapsation, cash value, premium and competition. But the need to record and study the characteristic of persistency- the length of time insurer retain policies, customers and agent is most important for insurance companies. In order to find out profitable combination of households or clients, products and agents, a database with five to ten years history of immense importance. Such historical retention was prohibitively expensive in the past. But clear advantages of new PC (personal computer) and RISC (Reduced Instruction Set Computing) technology gives companies power to keep tens of millions of policies on a device with thousands of bytes of data per policy / client/agent. Analyzing a 10- year database is cost effective. Reviewing the database provides information on how many clients have actually migrated not just how many policies have lapsed or surrendered. Using database technology companies can get a comprehensive, performance, loyalty, and lost opportunity.
2. Data warehouse: Data warehousing technology is based on integrating number information system into a 'one stop shopping' database to achieve vision of making company national in scope, but regional in focus. Traditionally, the sale of policies and the claim settlement are two separate areas for the insurance companies. Data warehousing allows managing by profit levels with an integrated approach rather than by limiting losses. Data mining can be used as a means to control cost & increase revenue resulting in enormous earning for effective users. The path of business applications of computers, computer based information systems (CBIS), encompasses many stages including the very early application like transactions processing systems (TPS) followed by the management information system (MIS). The computer applications like decision support systems (DSS), expert systems (ES) and executive information system (EIS) are still awaited in insurance business. Office automation (OAS) Page 21 of 74
happens to be a continuously ongoing, dynamic process for any business. Companies need to utilized decision support systems by implementing data warehouses that pull information from existing legacy systems into a customer information database. Such decision support systems will equip the insurance managers with ability to allow for customized products and services that are more in line with what customer want.
3. Group Linking Software: Group linking software enables sharing of information and particularly suits document heavy insurance business. Tracking of policy application shows how information that is input and accessed from a number of locations can increased efficiency. An application of coverage is entered into the groupware system from a forms generation packages. Key fields in the form are already linked to this software allowing a user to click on the field and view information regarding that area e.g. cost of coverage for similar risk. The user clicks again and taps into research information regarding such risk, underwriting guideline or other documentation. If underwriting guidelines have been updated to changes are highlighted in red and mark with a start. User from other locations can view any information as soon as it is added to the file. As each user completes work on the file it is moved to the next station. The basic promise behind the groupware is to allow an unlimited number of users to collaborate on a project at any time, in real time, and to track the location and progress of the project. The ability to replicate information and to synchronies database or applications no matter where you are in the world is what made group linking software are lotus, exchange, first class.
4. Imaging and workflow technologies: The proposal forms may be scanned into an imagine system, data may be extracted for update to computer and for automated underwriting workflow may 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 the imaging system, every document - be it correspondence, forms, photocopies of cheque, faxes etc. are all maintained in a shareable electronic folder-neatly indexed, updated and available simultaneously to all concerned. Page 22 of 74
The recent report of MetLife insurance indicated the performance improvement attributed to imagine and workflow technology to the extent of 50000 claims document - clearance in 8 hours in case of dental claim of health insurance service.
5. Mapping: Mapping technology can be used by insurers to meet different needs, such identifying loss prone areas or geographic claim analysis. It helps the insurer to analyze the extent of its network i.e. the insurer can determine whether it has too many or too few agency force in particular area. Mapping is very convenient way to layer disparate information from various databases to create pictures. Maps can illustrate how many buildings are located in flood plain, or whether to buildings covered by the same insurer's fire policies are close by each other and thus present potential double loss if fire break out in one of them.
6. Call Centre Technology: Good consumer service is a crucial element in gaining, maintaining and retaining profitable customer. Call Centre concept based on interactive voice response services (IVRS) is gaining importance in this aspect. Employees based the primitive concept of call centre on an enquiry system providing information services to customer through telephone line answers. The totally automated computerized exchange but lacks in flexibility i.e. only predefined queries are serviced.
7. Video Linking: A video linking facility between two remote units of an insurance company and between an insurer and broker allows underwriters at one place and brokers at other unit to discuss risk inherent in a proposal face to face.
8. Cat Models: Catastrophic models use data from recent spate of natural disasters that helps develop more predictions of insurer's property exposures in future disasters. Using this data curious Page 23 of 74
"what- if' scenarios of probable maximum loss (PML) using the best estimate available at an insurer's exposures are tested. Finally an underwriting policy that limits the company's exposure to catastrophic losses is implemented.
9. Intranet, Extranet and Internet: Intranet is the network connecting different offices of the same business to permit the internal data within the business. 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 networks. Any user, who would like to exchange some information with other user at a remote location, can log into the computer of Internet, provider via modem or an Internet access CPU (IAC). The Internet and online service providers are providing opportunities to create new forums that can be utilized by everyone worldwide. Insurers can browse through many useful sites an Internet.
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IT APPLICATION IN FUNCTIONAL AREAS: Even though the information technology has wide application in all the spheres of the insurance business, yet following are the most important ones in respective functional Ares.
MARKETING The scope for use of information technology in marketing function is tremendous. It may start from the consumer acquaintance to an insurance product to claim settlement or further selling of new product or developing consumer for the product. Information technology can be integrated with almost all the p’s of marketing. It may help in formation and implementation of various marketing strategies including pricing, promotion and customization strategies. Some of these areas are discussed below.
Consumer awareness: The use of information technology may be path breaking for the insurance companies since conventionally the awareness of insurance products in India is low. With the use of Internet the information about the products and pricing policies can be made available to the public in few seconds and much transparency in operation can be established. There are numerous web sites available which can help the prospective customer to compare the insurance products of various issuers and decide the product suited to his needs. Also, the information about the new products changes in the existing ones and of course, the information about various discounts and incentives can be provided at a much faster rate and lower cost.
Customer Services: In insurance being a service needs high concerns in terms of services. Customer service requires maximum attention and should span the entire gamut of activities in the purchase of the products i.e. right from the dissemination of information, documentation to policy administration and claim settlement. The service quality standards on the new private insurance players have a threat to the then giants viz.LIC and GIC. The investment in the personnel and knowledge systems has helped private players companies build significant demine expertise. The emerging areas if IT applications are: Page 25 of 74
1. Market Research 2. Consumer targeting and segmentation 3. Customization of products 4. Easy procedure like premium payments, claims settlements, tracking of brokers and agents. 5. Complaints managements/ grievance handling. 6. Intermediary analysis.
FINANCE: Information technology can be effectively used for internal management viz. Accounting treasury management, financial performance reporting etc. and as well as in resource mobilization, portfolio management, investment planning etc.
HUMAN RESOURCE MANAGEMENT: Application of IT in Human Resource Management is obvious. It can be effectively utilized in (1) recruitment and selection, (2) training, (3) performance appraisal, (4) promotions, transfers and dismissals, (5) valuations etc.
RESEARCH AND DEVELOPMENT: R&D has been made an easy task with increasing use of IT. Surveys and research on market potential, analysis of markets, tracking with international norms and developments are the profound areas of IT applications. The various applications of information technology in life and non- life insurance companies broke into identifiable area.
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Chapter: 3 INSURANCE AND ELECTRONIC COMMERCE, E-INSURANCE
INTRODUCTION
BENEFITS
FACTOR AFFECTING E-INSURANCE
E-INSURANCE BUSINESS CHALLENGES
ROLE OF E-COMMERCE IN DISTRIBUTION OF INSURANCE
PRODUCTS
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INTRODUCTION: Insurers face a complex array of business issues. They now realize that failure to tackle these issues may lead to losing the market share which ultimately has its impact on the profitability. To tackle these issues, the insurance companies should take initiatives that have the ability to provide a higher level of customer service and there by customer higher retention. Insurers also need to take initiatives that can reduce cost and therefore increase profitability. In response to growing need to confront these complex issues, innovative insurance websites are springing up and new technology development is taking place. The insurance industry is speedily moving its service online. Insurance providers globally recognize that web enabling their business will make it possible for them to deliver a faster, simpler, more transparent customer service at a significantly lower cost. The insurance providers are enhancing their investment in technology, infrastructure and skill to utilize the new opportunities to the core. According to one survey in London and New York, the insurance industries presently provided few online restricted services. The survey also indicates that additional areas of growth likely and are expected to shift to core areas such as claims management. Presently a large number of insurance companies are using the internet for marketing purpose which involves customer contact for various purposes like: 1. To educate and inform the people about the product available. 2. To ascertain the customer needs 3. To suggest suitable products. 4. To finalize the transaction. Unlike the commercial goods, which any buyer would like to see, feel or test before deciding to purchase, insurance is an intangible product. It is a promise based on the terms and conditions of the contract. This distinguished feature makes insurance product very convenient to buy over the internet. Exhaustive, up to date information on all the strength of insurance company can be provided on the website which can be browsed by the internet user. This will help him to do business with insurance company at his leisure.
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BENEFITS OF ELECTRONIC INSURANCE o
E-insurance provides multiple benefits to the insurer and the existing and prospective insured's:
Information collected is better and cheaper o
Speed of response- Issuance of policy and settlement of claims is faster Provides new ways of doing business in competitive market
Flexible pricing and customized services o
Global accessibility i.e. lapse of physical boundaries
Increased
sales
without
additional sales force o
Immediate premium collection and funds transfer Reduced cost per transaction
o
24*7 availability i.e. round the clock availability of information Real time knowledge base building
MAJOR FACTORS AFFECTING E- INSURANCE:
Growth of net: It is estimated that India would have about 150 million net users by 2010. These figures represent a huge buying potential.
Competition Pressures: Insurance companies because of competitive pressures would be driven into Internet rather than a clear ROI justification.
Customer: The availability of net-based service will be a huge factor for customer retention.
Cross sells: When linked with other financial products, a portfolio approach to investment, savings and risk coverage will increase cross sells and customer loyalty and retention.
Costs: In the beginning e- insurance will be a cost factor rather than a profit driver, but in the long run it will be a cost reducing factor.
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E-INSURANCE BUSINESS CHALLENGES: Electronic insurance will not only provide many benefits but also pose business and technical challenges.
Business Challenges Disintermediation increases business: Study has shown that the cost of distribution decreases with the increase value of connection. Products with relatively high fixed costs and low value such as travel, credit or burial insurance are relatively expensive to produce. Customers pay a high price per dollar of coverage for these products. The internet allows the disintermediation of this relatively high overhead for these low face value products. This mean that prices can be lowered and more insurance can be sold by reducing the transaction costs of the exchange.
Reorganization of companies- Virtual Companies: Many insurers will be prompted by the opportunities presented by E-commerce to restructure the packaging of insurance service. Insurance companies using E-commerce may reengineer, outsource, and/or streamline their management function, or marketing and distribution arms. To move efficiently deliver these service, some insurers will be able to reduce their significant investment in physical facilities and certain personnel. E-commerce will enable independent agency insurers to more easily adapt their distribution mechanism to market competition and expedite their transactions with intermediaries.
Insurance customers what do they want: Customers could get better and different service through the internet. It is possible to obtain quotes from a number of companies. In some cases, the internet provides rating agencies evaluation of insurers. The internet and outsourcing can be provided additional cost saving to customer. Technology can bring the customer closer to the insurance contract, by removing layers of inefficiencies. Consumers will also obtain price comparisons for relatively generic contracts, such as life insurance and rates for a standard set of auto insurance coverage for given vehicle and driver characteristics. Consumer also could have access to internal records to see Page 30 of 74
where their claims are in term of payments, when their next annuity payment is due, and low their mutual fund is performing. This can be done without calling a burdensome voicemail system, being put on hold, or finding a person who can give them the desired information efficiently.
The Death of Insurance Agent: One of the reasons why insurers have been slow to use electronic commerce could be the fear of swallowing up the agents business. The internet does not necessarily imply the death of the agent. Many insurers are examining their agent's role in the process and are also developing direct contacts with the insured through their web presence. Agents could enhance their advisory role to consumers as their paper and money processing functions diminish.
Technological Challenges: One of the most prominent challenges of e-commerce is security. It is very evident that many users are reluctant to do business on the Internet due to security reasons.
SECURITY: Database security: The business database security is utmost important. This has to be monitored by security of the web server and web access.
Web Server Security: Security policies should be defined like who is allowed access, nature of the access and who authorizes such access? Etc.
Password sniffing: Protection against password sniffing is to avoid using plain text user names and reusable passwords.
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Network Scanning Programmes: Automated tools should be used to scan your network. These tools check for well-known security related bugs in network programs such as send mail and FTPD.
Physical Security: One can ensure physical security by having an alarm system that calls the police, having a keylock on the computer power supply.
Web Access Security: Host based restrictions can be implemented using a firewall to block incoming HTTP connection to a particular web server.
Transmission Security: Encryption is a key technology to ensure transaction security.
Privacy: Privacy is likely to be a growing concern as internet-based communications and commerce increase. Designers and operators of web site who disregard the privacy of users do so at their own peril.
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ROLE OF E-COMMERCE IN DISTRIBUTION OF INSURANCE PRODUCTS IN INDIA Indian insurance industry is now entering into this area. Indian firms are planning to use the Web to sell their products. The traditional method of selling insurance policies through agents may soon be rendered obsolete. Private insurance companies would then be reaching out to their customers through internet. With ecommerce likely to be allowed soon, customer can choose and buy a policy over the net. Private companies believe that setting up a website is much cheaper than developing an entire marketing network. These website, can be used in the future for setting claims. Indian companies have already begun negotiations with IT companies like Computer Science Corporation, Apex System Pvt Ltd. and IBM for system integration.
INSURANCE MALLS Insurance malls are growing resource for online insurance shoppers. They offer one stop shopping facilities. These are certain sites which are provided to compare quotes and products and facilitate a buying process with participating insurance companies. The malls provide valuable information regarding various participants, and provide the customer with research tools and explanations about the various products. The insurer who like to participate, enter into partnership with these malls. A fee is charged according to the number of products sold by insurer through these malls. While there are numerous insurance malls on the internet, the leaders presently in the field are insure market and insweb. If the customer decides to purchase the product online then the insure market charges the insurance company fees whose product is being purchased at percentages on the premium amount. Currently, the sale from insurance malls is restricted to only a few states.
HELPLINE SERVICE The development of Helpline is well established and advanced abroad especially in the UK. A Helpline is defined as ‘the provision of an advisory and/or assistance service via the telephone.’ The modus operandi is that the person who provide achieve have an online access to information relating to the problem in hand, such as a list of trade people, for household claims. Page 33 of 74
The respondents are normally well trained and able to make immediate decision so that appropriate action can be taken swiftly. Helpline are seen as a product of the Information Technology revaluation. The emphasis in the Helpline is n immediacy, which is the Hallmark of Help line.
The requirements for the success of helpline are: Modem telecommunications. Immediate Access to the source of information. Affordable computer processing power
Enhance computer processing speed enabling data to be captured, processed and distributed at unrivalled speed.
Continuous efforts to develop innovative products and services
Benefits of Helplines Every policyholder will have immediate access to the service at all times anc. whenever he or she is physically located. The Helpline staffs are trained to soothe customer and provides quali:~ advice. the assistance level provided is much more timely than tt:=traditional system Expeditious settlement of claims. The insurers are benefited, as customers loyalty increase as a result of efficiency and quality in claims service. The firms providing Helpline service have marketing advantages.
CUSTOMER INFORMATION The Helpline provide improve management of calls from customer for access to information. They also help to improve the customer knowledge, exponentially increase the choice of providers, and allow for individualized product offerings. Clients have different needs, so it is important to identify the information they require, because this is what they will expect when contacting a Helpline. It is necessary to continually monitor clients changing information requirements, to ensure that their needs continue to be met satisfactorily. The necessary Page 34 of 74
information must be collected and maintained on a regular basis to ensure that it is a latest as possible. A system must be developed so that the information can be stored in such way that it can be retrieved easily and quickly whenever required. Modem telephone switching system can provide sophisticated options which may enhance Helpline operation such as Auto Attendant and Automatic call distribution, voice mail and touch tone routing, Telephone options, trunk to trunk calling and other telephone services. Helpline also play a vital role in claims management. The insured who incurs a loss due to the happening of the event is in dire need for the rights advice. Helpline undertake to give them immediate relief, in some cases they give the right information and advice which can be followed by the insured. Sometimes arrangement to medical facilities, etc. is also undertaken.
ELECTRONIC PAYMENT SYSTEM: Electronic Payment Systems have been designed to help the increased cash flow, reduced costs and improved customer service objectives which are important to the insurers. Such system provides for improved cash flow through automated payment and reconciliation processing. It results in decreased expenses due to a reduction in paper work, file retention and retrieval. Thus Helpline service provides the customers with an option to make payments using Helplines. Some of the methods used to allow the customers to make payment of premium regularly and for the insurers to settle the claim of the insured are:
Debit card: A card that resembles a credit card but which debits a transaction account (checking account) with the transfer’s occurring contemporaneously with the customer purchases. A debit card is a machine readable, allowing for the activation of an Automated Teller Machine or other Automated Payment Equipment.
Electronic Fund Transfer Systems: A variety of system and technology for transferring funds (money) electronically rather than by cheque. Includes Fed wire, Bank wire, Automated Clearing House (ACHs) and other automated systems. Page 35 of 74
The electronic payment system shall include requirements for storage of data by and communications between the parties. This includes not only the data flows for payments themselves but also for refunds, account enquiries and settlements. It is also to be noted that it requires a mechanism by which the necessary security requirements for messages and stored data are achieved.
CALL CENTERS A typical call center is a service center that has adequate telecom facilities, trained consultants, and access to wide database, Internet and other online information support infrastructure to provide round the clock and year round service. Call centers are normally operated by large airlines, banks to provide service to the customers/callers, investment banks, mutual funds, telecom services, companies providing customized and high value services, IT products companies, among others. In the field of insurance, call centers are helpful in answering complex questions from policyholders and independent insurance agents, and often use a personal computer to access insurance information. They are used to handle calls from customers, claimants, and other parties who have a claim report. They handle correspondence from policyholders and independent agents to rate Insurance policies correctly. The call center secures basic information from customer, including where, when and how the loss occurred, who was involved and if any one was injured. They enter this information into their computer system and then forward the information and caller to a claim representative in an office near to the caller. They solve problem and help people, and treat customer with respect, courtesy and positive attitude WEBSITES AND PLACING GUIDELINES Helpline are being established to place new guidelines useful to the customers, the agents, the intermediaries with regard to changes in law, practice of insurance, other related laws and practices which have a bearing on the insurance activities and impact on the customers. Data warehousing is a prime example of the industries move towards strategic thinking. The concept relates to the electronic storage and dissemination of data. The conjunction of data warehousing applications with Web technology is a key trend, providing insurers with wide data distribution capabilities at relatively low cost and using this infrastructure to provide database Page 36 of 74
incorporating image, text, picture presentation, etc. to a defined user group. Such sites are also designed to provide guidelines to the agents and other intermediaries.
AVAILABILITY OF RECORDS AND FORMS Help lines provides access to application forms and other material on the request of the customer. The application are made available mostly free of cost or for a small amount. Help lines are attempting to use computer contact centers integrated with existing ERP and document management systems, to achieve a higher level of customer loyalty.
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Chapter: 4 INFORMATION TECHNOLOGY IN STAGES OF INSURANCE POLICY
IT IN PAYMENT OF PREMIUM
IT IN CLAIM SETTLEMENT
IT IN UNDERWRITING
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INFORMATION TECHNOLOGY USE IN PAYMENT
OF
PREMIUM: Insurance contract is a contract and premium paid is the consideration of the contract. The insurer promises to pay the compensation to the insured on the event of suffering of loss by the insured. In return to this promise to pay compensation, the insured pays the premium. There are payments which flow in both directions, from the customer to the insurance company and vice versa Automated payments are electronic payments which are authorized by the customer in case of recurring bills. In the case of insurance industry also automated payments can be made by the both the parties. Direct payments require the consumers to sign an authorization form for each company whose bill is to be paid electronically. This form authorizes the designated company to collect the funds for amount of the bill from the consumer's check or savings account on the date specified. PC banking allows the insurance consumer to initiate electronic payments from their personal Computer. Many PC banking programs also allow the consumer to access account information, such as personal account balances, account activity or to initiate transfers between accounts. Current savings or lending rates or other general financial information may also be available. Point-of -Sale and Debit Cards aloe the customers to pay an insurer electronically when making a purchase using an ATM or debit card. Point -of - Sale is a common method of payments at gas stations and grocery stores. Point - of - sale and debit cards provides consumers with an alternative to writing cheque or payment cash for purchases. These transactions are generally completed faster than purchase made by a cheque. Foe many consumers Point- of Sale and debit Cards provide an attractive to carrying large sums of cash to make purchases.
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LEGALITIES OF E-CONTRACTS AND PAYMENTS: Insurance companies which sell their insurance products over the internet are confronted with two sets of problems. First, they need to tackle all the legal and practical complexities associated with doing business on the Internet. Second, they must come to terms with the extensive Web of insurance regulation and other legal peculiarities which govern the insurance industry of that country in which they operate. Hence, from a legal point of view, selling insurance over the internet is a much more complex endeavor than selling a book, or even a share of stock in a publicly- traded company. The nature of insurance requires that the seller of the product is informed of various characteristic of the buyer (or more accurately, of the risk being insured). The regulatory landscape which governs insurance sales is extensive and complex. The law which governs insurance sales is extensive and complex. The laws which govern insurance industry in various states being different, the insurance company performing selling of its products in different states needs to comply with the regulations of the different states. This makes the sale of insurance products globally difficult due to lack of uniformity in laws and regulations governing the industry. The insurance laws in general have not kept up with the pace of technology and are presently inadequate to regulate the sale and delivery of insurance products over the internet the insurance industry has been slow in embracing the information technology. Presently the technology needed to initiate, process and complete the contract is not sufficient. Imposing signature and formal paper delivery requirements on various aspects of insurance transaction makes it impossible to transact online. The insurance laws contain a variety of requirements for a "signature" to accompany documents in connection with insurance transaction, including policy applications, warrants, release forms for medical records, beneficiary chance, life insurance policy illustrations, claims forms, proof of loss forms, consumer protection disclosures etc. the purpose of the signature is , for assenting to the contract by the contracting parties.
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INFORMATION TECHNOLOGY IN CLAIM SETTLEMENT: Although till recently the internet was used to a limited extents as a way to sell certain classes of insurance policies, mow claims are being transacted through the internet. One of the most significant developments in the past couple of years has been the growing emergence of Java based technologies. These can be improved to provide well developed insurance software components with distinct insurance functionalities such as underwriting, reinsurance, claims management and payments processing. For many of the consumers, the greatest amount of interaction is during the process of making claim. The way in which this is handled is likely to dictate the process of making claim. The way in which this is handled is likely to dictate the attitude of making a claim. The way in which this is handled is likely to dictate the attitude of the consumers towards the insurer during renewal the following year. From the point of view of the insurer it is this are where cost are incurred in physical settlement of the claim and associated administration of the claim. It is this area which provides the largest potential for cost reduction and improved service provision. The following are the issues to be tackle in the area of claim management The insurer aims at selling the claims as quickly and efficiently as possible and reduces cost by minimal interaction with the consumer and the outside third parties. The insured desired that the claim be settle as quickly and as painlessly as possible. Failure to meet these requirements at the claim stage will significantly reduce the chance of his renewal with the same insurer. Hence time is of essence in such case. Often insurers offer to replace goods and services rather than make settlements is cash. This may result introduction in cost. Through the e-enabled insurance the insurers can prenegotiate discounts with suppliers and cut down on frauds and inflated claims.
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MODUS OPERANDI IN CASE OF CLAIMS: Claims notice by e-mail: Through the e-mail, online communication can be maintained with the consumers to know about his insurance needs and to suggest solutions and process the transactions. Once the cover finalized premium can be collected and policy documents can be issued. Similarly, when the loss arise and the insured can communicate with the insurance company through an e-mail submitting claim documents either through fax or e-mail and give consent if required, the insurance company can settle the claim on the basis of the document received, if there is no complication or issues on which negotiations are required. On the occurrence of the events, the claimants who may be the insured or the beneficiary or the third party is advice to intimate to the insurance company or its near by the branch. Such as intimation can be send by e-mail. The intimation shall be considered as claim notice required to be given by the claimant to the insurance company formally. The claims notice shall be quote the policy number and the date when the events occurred, etc. the claims application required can be downloaded from the website of the insurer. Facilities may include online filling of claims form. It ensures speedy communication of loss or event which ultimately speeds up the process of claims settlements.
Submission of information by e-mail The person interested in the claim, shall submit the required information and also the insurance policy along with the submission form. The claimant shall also submit other documents of proof of the death of person, and also proof of right of the claimant to the insurance claim. The claimant may also be required to submit beyond doubt in relation to the age of the claimant, and his relation with the insured, and the little to claim and his identity. All such submission can be made by e-mail. On receipt of e-mail, the insurance company sends a letter authorizing the said branch to process the claim and send the papers for setting the claim. On scrutiny and satisfaction, a cheque is issued to the claimant for settlement of the claim.
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Relevant information and reports Often in the case of accident claims, reports and information are required from the police and other investigating authorities' as a proof to settle the claim. In such cases also the report and information requires to process the claim submission can be sent by e-mail. E-mail is inexpensive and it covers a wide geographical area. Settlement of claims dispute is another aspect of the claim settlement. The settlement of dispute using the regular machinery of arbitration, tribunals or courts is not an easy affair. The settlement if often considered a laborious, frustrating task. As an alternative, going to the web to simplify the negotiating process is preferred. Internet enable dispute resolution service such as click n settle, cyber settle, and settle-online provide a place for opposing parties to make their demand securely and confidentially. They accept cases submitted online by either the claimant or the defendant. They notify the opposing side that case is online. They act as mediators, calculate and compare offers and demand in real-time, and notify both negotiable parties about the results. Cyber settle is a new website, which are claims oriented. Since its developments have had 12000 cases submitted more than half of them ended up negotiating online.
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IT IN UNDERWRITING SYSTEM: A total underwriting system needs to address the entire decision making process of underwriting, which starts at the time an application is completed and does not end until a policy is issued. The system needs multiple components for each of the essential functions.
Initial Data Entry: This is where information from the application is entered into the system. Depending upon the specifications of the company and its field force, data may be entered from an agent's laptop computer, at a regional marketing office or at the home office. Information from the agent's report, requirements ordered in the field and MIB (Medical Information Bureau) information could also be entered for processing.
Screening: The second component is screening. This involves taking applications and sorting them into two groups: clean ones' and those in need of further processing. This is fairly simple processing. Screening checks that applications need no further requirements, have all medical and non-medical questions and have acceptable finances and an appropriate beneficiary. Approved cases are sent directly to the administration system.
Initial Underwriting: Applications that are not approved by screening flow into the next component, initial underwriting. This series of knowledge-based systems defines underwriting problems and determines why the case required further processing. It checks for age and amount requirements and examines the financial, non-medical and medical aspects of the case, as well as the interaction among them. It decides if there is sufficient information to deal with the problems, it has defined. For instance, if a proposed insured admits to a minor illness two years ago, the system will allow the case to pass through for most ages and amounts, unless the provider of the service was unusual. However, if there is a history of angina, the system will not try to approve the case but will refer it to an underwriter. Prior to its referral, the system determines requirements, such as an APS or ECG, and identifies the appropriate underwriting guidelines. In Page 44 of 74
this way the initial underwriting deals with cases not needing an underwriter's attention and preprocesses those it cannot approve.
Requirement Processing: Since underwriting is an iterative process with information from many sources being reviewed at different times, a total underwriting system permits information (from requirements such as the medical examination, blood pressure, etc.) to be entered into the system directly from the provider or by home office personnel. Processing requirements are similar to initial underwriting, except that discrepancy processing is done by comparing the details of the information from the application with those received later. In this way, data from different sources is compared to uncover new problems. If there is significant history or physical finding on the examination that was not admitted on the application, it is noted and the appropriate work-up is ordered. If no problems are discovered, cases can be automatically approved without consulting an underwriter.
Workflow Tools: Underwriters need certain tools to process their cases administratively. A total underwriting system provides these. They include front-end tools, back-end tools and status functions. The front-end workflow tools keep track of cases, their requirements and underwriting problems. The in-tray function accesses cases electronically assigned to the underwriter. Rather than getting a stack of files, the underwriter now deals with an electronic stack of case. For each case there is a detailed underwriting status with identifying data, as well as underwriting problems and their actions. Other tools allow the underwriter to manipulate, track and change the underwriting problems and requirements of a case.There are also an electronic notepad for the underwriter; this can be integrated with an electronic mail system for field communication. The back-end workflow tools assist in the final administrative details of a case: forms to be signed, post-issue requirement preparation, reporting of MIB codes and the process of requesting reinsurance.
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The status function lets non-underwriters to review the selected case information. An agent’s status reveals the data from the application, as well as the requirements and whether they have been received.
Information Display: The information display component gives on-line access to underwriting guidelines with several types of automated searches to improve the access of information. It also makes available other underwriting references, such as medical dictionaries and drug references.
Impairment Knowledge-based Systems: The next component is the impairment underwriting knowledge-based systems. These programs deal with impairments such as high blood pressure, diabetes, cancer, respiratory disorders, aviation, ECG abnormalities and coronary heart disease. Their logic is patterned after the knowledge and thought processes of expert MDs and underwriters. Information is requested from the record and a rating is suggested. If underwriters choose, these will guide them through the detailed decisions needed to underwrite impaired cases.
Management Reporting: This component generates administrative and other reports on the decisions made within the system. Reports can be created by management from the database of information.
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BENEFITS Underwriting systems have many benefits. For underwriters they limit the number of cases that need to be reviewed, because the system is able to process them without intervention. In this way the technology improves the work of underwriting by eliminating unnecessary routine cases. Several companies have developed knowledge-based systems for this purpose and have been very pleased with the results. As an underwriting officer stated "This gives the underwriter to deal with more complex and time-consuming cases which was one of the reasons for installing the system. Furthermore, initial underwriting knowledge based systems decrease the number of times a case needs to be reviewed by an underwriter, because requirements are ordered and processed by the system prior to the underwriter seeing the case. For the producer, service is greatly improved. This is possible because some applications can be approved by the system almost immediately, without having to be seen by an underwriter. One company that has integrated this type of system with its field offices is able to electronically approve applications in less than 15 minutes. Also, the sales process can be helped by determining all requirements (both those required for 'age and amount' and those necessary for a specific cause) immediately so that producers do not have to contact an applicant a second or third time for additional information. Knowledge-base, systems can improve underwriter productivity in other ways with workflow management tools. Although these systems do not do any underwriting themselves, they do manage the paperwork in the ordering and keeping track of requirements. Such tools decrease the clerical work of underwriters and improve the workflow in underwriting departments by eliminating unnecessary paperwork. Apart from reducing underwriters work, knowledge-based systems can provide decisionassistance tools in the risk classification process. Impairment underwriting knowledge-based systems are sophisticated decision-support tools. They assist in the determination of ratings by prompting the user for information and correlating that information with underwriting guidelines and the programmed thought processes of expert underwriters. They serve as an excellent training tool for the junior underwriter and assist experienced underwriters in very complex cases.
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Chapter: 5 SELECTION OF THE RIGHT TYPE OF IT SYSTEMS FOR AN
ORGANIZATION
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INTRODUCTION Purchasing a new IT management system, be it for risk management or claim management system is not an easy task. Faced with thousands of different applications and choice, how does a buyer know what to buy? This process calls for two steps followed: First, the buyer must understand the types of system available in the marketplace and their price. Second, the buyer must know the organizations needs and select the application that will satisfy those needs
AVAILABILITY OF SYSTEM IN THE MARKET Information systems are generally grouped into four categories namely:
a) Risk Management Information System (RMIS): This system focuses on activities relating to the collection and analysis of exposure-related information and production of user defined reports. Sometimes, the term "RMIS is also used to refer to systems that can administer claims"
b) Claim Management Information System (CMIS): Usually, this system includes all the RMIS's functionality along with capabilities built in to judge claims, including monitoring litigation, tracking allocated expenses, making payments and a multitude of other types of activities related to the claims adjustment function.
c) Integrated Information System (IIS): This system contains all of the functionality of an RMIS and CMIS. In addition, is also a support the organization’s underwriting, loss control, legal, accounting, administrative and financial reporting functions.
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d) Enterprise resource Planning Solution (EPRS): It is organizational wide operational systems that includes financial, manufacturing, accounting, sales, and distribution and in some cases, risk management functions. Having gotten an idea about the different types of information system available in the market, now the moot question is now do insurers know which type of system will satisfy their needs now and into the future, should the organization's needs change? Understanding the functionality of each system and its implementation cost can help the insurer to solve the selection problem.
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APPLICATION SERVICE PROVIDERS An ASP hosts software application, making them available through Wide Area Network (the Internet) to clients (browsers) or other software on user's systems. All ASPs do not focus on the same activities.
ASPS AND INSURANCE: Now days, ASPs are providing comprehensive solutions to both insurers and insured to benefit from. Following are a number of insurance ASP categories:
(1) Risk Management Systems: Some RMIS vendors are now providing Web versions of their systems and may also provide hosting services. Risk Laboratories and Envision Technology Solutions are two best examples.
(2) Agency Management System ASPs: Adjacent (a type of ASP) hosts various brands of agency management systems. Applied System (with TAM Central) and AMS Services (with Afw Online) provide their traditional Windows software in hosted as well as locally installed versions. Three new alternates to traditional agency management system are also now available in the market.
(3) Carrier System ASPs: CSC and a few other carrier system software publishers offer hosted versions of their traditional software. Many other suppliers, like Ascendant One, are creating native-IP carrier software that they will provide in both local and hosted version.
(4) Information ASPs: Many Application Service Providers offer insurance-related information directly to the end users or as background services integrated with primary applications. To cite an example, iiX, ChoicePoint, and ADR provide access to underwriting reports through browsers and the Internet as well as integration with policy systems. Fair, Isaac offers Internet access to its Page 51 of 74
scoring systems.
(5) Education and Training ASPs: A growing number of licensing and continuing education offering are now being provided through insurance education ASPs, some evolving from classroom or paper -training environments.
(6) Certificate On-line: A few new companies provide the online evidence of insurance services (certificate of insurance, evidence of property insurance, and auto insurance ID cards). Service offered by these companies are interesting because they use the ASP concept for bettering the operational environment for all parties concerned with evidence of insurance activities.
(7) Claim On-line: Another group of system solution ASPs concentrates on claims problems, hosting a crossentity process that can include the insured, agent, broker, carrier, adjuster, state government, and even salvage buyer.
(8) Small Business Insurance ASPs: Many ASPs such as Agency Port and insure Trade are planning to offer mediation service between· agency and carrier system so that agencies can experience one work flow. Some of these mediating ASPs also offer access to market perhaps not readily available to agents/ brokers on their own.
(9) Document Access and Billing: Some ASPs such as Edos and Docucorp provide hosted solutions for document management and billing.
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How Asps Benefit Insurers? Different varieties of ASPs provide different benefits. But most would see following advantages over the local software: No need to install software or software upgrades. No need to do regular back-ups and store them off site. Internal disaster recovery program. No need to upgrade hardware regularly to run software upgrades. Predictable IT expenses based on subscription and fee-for -use arrangement. Access to application and solutions not available in a local version (with cross entity business systems solutions.) Easy provision of Web-based applications to customers. Faster time to market with lower capital investment.
Using an ASP creates some potentially new demand such as: Need for high- speed connection to the Internet. Access to software and data only when on-line, which potentially creates problem for travelers on airplanes or employees otherwise disconnection from the Internet. Potential difficulties with local operations like printing. Slow internet response times with sub-ten-second rather than sub-second response times being the norm.
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Chapter: 6 MOBILE AND WIRELESS APPLICATION IN THE INSURANCE INDUSTRY
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INTRODUCTION Wireless data communications, commonly referred to as wireless, is the latest wave of technology slated to push business in new directions. The securities and banking sectors of the financial service industry and are again leading in the initial use of wireless technology. However, insurance firm have an advantages in managing their remote workers utilizing advanced technology. The insurance firm can also take an advantage of opportunities to enhance claims handling and customer relationship management by using wireless communications. In the recent years, significant changes in the insurance industry have been forcing companies to find better ways of doing business. Like other financial services providers, insurers are identifying new methods of generating revenue, supporting existing business processes, and integrating emerging business processes. Insurance firms are seeking new technologies to facilitate the success of e-business. Increasingly, these organizations are looking towards mobile and wireless solution to help boost productivity, reduce cost and keep clients satisfied, all the while providing a substantial Return on Investment (ROI). Wireless devices, including Webenabled wireless telephones and Personal Digital Assistance (PDAs), are among the devices that forerunners in the industry are using to help meet these goals and achieve success in the efinancial world. Empowering insurance agents and claims representatives with anywhere and anytime access to critical information results in greater efficiency and superior customer service. Mobile and wireless solutions are also creating existing opportunities for competitive differentiation and growth in other key areas of insurance industry, such as client self-service, and e-commerce. In the ensuring discussion, the need and business advantage of wireless application will be broadly discussed focusing on the global as well as Indian insurance industry.
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IMPROVING INTERNAL BUSINESS PROCESSES Though many wireless initiatives focus on customer-facing applications, often the greatest returns come from improving the internal business process. Several large insurance companies are using mobile technology to significantly cut costs and have experienced significant ROI in the area of claims and sales.
SALES AGENT AUTOMATION AND CUSTOMER SERVICE Wireless initiatives should be geared towards agents since they are the point of customer contract, the ones in the field generating revenue, and have the most to gain through wireless applications. Wireless sales force Automation (SFA)/ Customer Relationship Management (CRM) tools will aid agents the most, since they have to manage large amounts of customer and policy data. Additionally, being able to access forms and documents wirelessly will greatly reduce submission errors. If all customer data is readily available, a wireless- enable sales force can see dramatic improvement in productivity and customer service. Instant access to customer accounts, pricing and billing information, along with history, can greatly Improve how sales managers handle client engagements. Field sales representatives can obtain instant access to critical information stored in back-office systems, significantly reducing cycle time of answering customer question. Maintaining close customer relationship is a top priority for the insurance companies. To deliver efficient, personalize service, insurance agents need regular access to customer profile and contact information, service contacts, and accounts tools. The mobile solution enables agents to connect to network applications from any location more conveniently and reliably, at a lower cost. As they always have the latest customer information at their fingertips, agents can manage existing client relationship and establish new ones, speed up the processing, and make informed decisions about client needs. This results in better customer service and builds stronger customer relationship. The synchronization technology enables the timely exchange of information with head office, expediting the application processing, and speeding the time to underwriting. Field agents equipped with a cell phone, pager, or handheld device can receive information at any time such as, notification of impending client policy expirations, alerts regarding premiums past due or Page 56 of 74
even changes to their daily book of business. This helps field agents to make informed decisions about clients needs. The emergence of new mobile computer or Pocket PC is a breakthrough, as it can be used in virtually any remote selling environment; it has the computing power to run real applications; and it is much easier to use. This implies large opportunities in mobile applications for the field force in farm, food and crop Insurance.
BETTER HANDLING OF CLAIMS PROCESSING: Wireless technology can also make the claims processing more efficient. Most consumers believe that claims process never happens quickly enough, and that carriers deliberately drag out the process to delay payment. On an average, the longer a carrier waits to settle a claim, the better the chance the insured will litigate. In addition, a shorter claims period results in a happier customer. The field claims representatives equipped with handheld devices can capture critical claims assessment data, ensures fast and accurate processing of claims, eliminating reentry and associated costs. One delay common to almost every claim is the time taken in the estimation process. This involves adjusters and body shops. Expediting this process can save everyone's time and money using wireless devices; adjuster can download claims notices and can even leave a copy of the claim with body shop or insured, saving valuable time. They can even better plan their schedules and routes, and thereby, can process more claims per day resulting in productivity enhancement and reduced costs. Insurance adjusters can use mobile device and applications to write the appraisal about claims instantly, instead of writing later in the office, which saves times and possibly reduces data loss. Wireless devices containing the multimedia applications and digital cameras may be used onsite in the property and casualty sector to documents the damaged physical property and casualty sector to document the damaged physical property. Digital photographs may be transmitted to the insurance provider along with claims documentation.
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CUSTOMER APPLICATION With the rapid diffusion of wireless technology and availability of mobile services at less cost, the use of mobile phones by the public is growing tremendously. This provides unprecedented opportunities for the insurance firms for better customer service. With mobile device, the clients could be empowered to make inquiries about their policies and payments, submitting and status tracking on claims, receiving quotes and locating nearby agents at any time, all that greatly increase client satisfaction and loyalty. It also facilitates clients to send email to agents or claims adjuster instantly, and even receives news; confirmations, changes alerts and offers on reduce products on a timely basis.
WIRELESS E-COMMERCE: As the technology that enables the wireless revolution matures, Insurance companies need to ensure that their e-commerce infrastructure are prepared for this new access channel and at the same time, they hone their tactical plans for wireless e-service delivery. From Web-enable wireless telephone to PDAs, these devices offer the mobile consumer the ability to interact, and transact, with Financial Service Providers. They are viewed as one of the means of implementing an enterprise customer relationship management strategy, designed to provide business to customer (B2C) functionality for personal lines insurance and Business to Business (B2B) functionality for commercial insurance. Mobile commerce functionality includes a wide variety of channel option like allowing clients to access their policy information, perform service activities and interact with the insurance provider or an agent.
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WIRELESS APPLICATION IN INDIAN CONTEXT: Despite this broad area of wireless application spelled in the above discussion with reference to global markets of insurance industry, the insurance business in the context of Indian markets may not completely take an advantage of it. The market environment in its current form may not completely support for implementing hi-reach processing, but with the refined processes and improved infrastructures the question of wireless feasibility could solely tend to disappear. The mindset of Indian markets towards insurance products majorly confines the need for wireless usage, at least for client side applications. Moreover the current penetration level of mobile phones is reasonably good only in the urban markets. As even the third parties get involved, many bureaucratic baseless areas in insurance processing particularly in claims processing, which may results in more delay. Through the technology could enable faster processing, the existing system may not provide conductive environment for reaping the complete benefits of it. However, the wireless application can be optimally utilized in most of the area of Indian Insurance Business. The emergence of e-choupal acts as an unprecedented means for reaching the remote rural markets, but requires waiting for its wide adoption. From the perspective of the sales agents, the advantage of wireless could be optimally exploited. As the rural markets encompass a major percent of the total Indian insurance market, its potential could be well tapped with the use of wireless application providing wireless device to the sales agents particularly in the rural areas enables them to access information or submit and process application remotely, reducing the need to travel between the office and work area. Even reporting to the office can be done from the field itself. In addition to the cost saving, the time saving opens opportunities for more sales calls and market coverage. This not only leads to better sales, but also improves the productivity of sales agents. Access to consumer data from remote areas helps agents make informed decisions and pursue the payment better. They can even effectively build better relation with the customer at remote market.
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In the claims processing area, though the wireless applications could not be completely exploited at least the initial processing of the claims (i.e. submitting the claim request) could be handled instantly with wireless, saving considerable time and reducing the processing delay to some extent. The insurance companies can effectively market their products by advertising or selling offers through Short Message Service (SMS) to the customer. The payments of premium could be streamlined well by sending regular alerts to the mobile customer, at least. In addition, the field force could be contacted instantly by the office administration wherever they are in the field at any time.
TECHNOLOGY OPTIONS: The success and widespread use of wireless technologies is due to the convenience and portability, improved quality and reliability, increased speed, decreasing cost for the user and the increased geographical range of the communication fields. There are a myriad of wireless technologies available today that can enable insurers to effectively manage their mobile activities. The key is to focus on areas of a business where true mobile needs exits, and where existing wireless applications can yield immediate benefits. Although there has been a lot of hype associated with wireless technologies, the focus should not be on the technology, but rather on what it enables the users to do. Wireless LAN and WAN technologies enable companies to set up fully functioning command centers onsite, enabling instant processing of claims reimbursements, and better, more -informed customer service. The mobile phones are best used as a way to push information to users via preselected criteria. Personal Digital Assistants (PDAs) and other handheld devices are useful in claims notification, processing, and capturing assessment data and related multimedia content.
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Prudential Insurance Improves Field Agent Effectiveness. With over 12000 field workforce and 300 offices, Prudential Insurance Company wanted to improve client service by providing its mobile sales agents with a powerful and feature-rich field automation system. Specifically, it wanted to enable its remote and mobile employees to access client information from anywhere in the country and to share that information with home office administrators and underwriters. After a careful selection process, it implemented Client Data system (CDS) that offers powerful sales and marketing capabilities, allowing field representatives to track client, insurance and investment information in order to provide superior customer service. CDS provided the database management and synchronization capabilities that are critical to enable sales representatives to access the most current clients and prospect information. Using this system, Prudential has seen sales representative's productivity increase by 150%, while simplifying maintenance and reducing costs.
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LIFE INSURANCE CORPORATION OF INDIA
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INTRODUCTION: The Life Insurance Corporation of India (LIC) is the largest Life insurance company in India and also the country's largest investor; it is fully owned by the Government of India. It also funds close to 24.6% of the Indian Government's expenses. It was founded in 1956. Headquartered in Mumbai, which is considered the financial capital of India, the Life Insurance Corporation of India currently has 8 zonal Offices and 101 divisional offices located in different parts of India, at least 2048 branches located in different cities and towns of India along with satellite Offices attached to about some 50 Branches, and has a network of around one million and 200 thousand agents for soliciting life insurance business from the public.
HISTORY: The Oriental Life Insurance Company, the first corporate entity in India offering life insurance coverage, was established in Calcutta in 1818 by Bipin Behari Dasgupta and others. Europeans in India were its primary target market, and it charged Indians heftier premiums. The Bombay Mutual Life Assurance Society, formed in 1870, was the first native insurance provider. Other insurance companies established in the pre-independence era included: Bharat
Insurance
Company
(1896) United India (1906) National Indian (1906) National Insurance (1906) Co-operative Assurance (1906) Hindustan
Co-operatives
(1907) Indian Mercantile General Assurance Swadeshi Life (later Bombay Life)
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The first 150 years were marked mostly by turbulent economic conditions. It witnessed, India’s First War of Independence, adverse effects of the World War I and World War II on the economy of India, and in between them the period of worldwide economic crises triggered by the Great depression. The first half of the 20th century also saw a heightened struggle for India’s independence. The aggregate effect of these events led to a high rate of bankruptcies and liquidation of life insurance companies in India. This had adversely affected the faith of the general public in the utility of obtaining life cover. The LIFE INSURANCE Act and the Provident Fund Act were passed in 1912, providing the first regulatory mechanisms in the Life Insurance industry. The Indian Insurance Companies Act of 1928 authorized the government to obtain statistical information from companies operating in both life and non-life insurance areas. The subsequent Insurance Act of 1938 brought stricter state control over an industry that had seen several financially unsound ventures fail. A bill was also introduced in the Legislative Assembly in 1944 to nationalize the insurance industry.
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OBJECTIVES: Spread Life Insurance widely and in particular to the rural areas and to the socially and economically backward classes with a view to reaching all insurable persons in the country and providing them adequate financial cover against death at a reasonable cost. Maximize mobilization of people's savings by making insurance-linked savings adequately attractive. Bear in mind, in the investment of funds, the primary obligation to its policyholders, whose money it holds in trust, without losing sight of the interest of the community as a whole; the funds to be deployed to the best advantage of the investors as well as the community as a whole, keeping in view national priorities and obligations of attractive return. Conduct business with utmost economy and with the full realization that the moneys belong to the policyholders. Act as trustees of the insured public in their individual and collective capacities. Meet the various life insurance needs of the community that would arise in the changing social and economic environment. Involve all people working in the Corporation to the best of their capability in furthering the interests of the insured public by providing efficient service with courtesy. Promote amongst all agents and employees of the Corporation a sense of participation, pride and job satisfaction through discharge of their duties with dedication towards achievement of Corporate Objective.
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MISSION "Explore and enhance the quality of life of people through financial security by providing products and services of aspired attributes with competitive returns, and by rendering resources for economic development."
VISION "A trans-nationally competitive financial conglomerate of significance to societies and Pride of India."
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INFORMATION TECHNOLOGY AND LIC LIC has been one of the pioneering organizations in India who introduced the leverage of INFORMATION TECHNOLOGY in servicing & in their business. Data pertaining to almost 10 crore policies is being held on computers in LIC. The computers were introduced in 1964 in LIC Unit record machines introduced in late 1950's were phased out in 1980's replaced by microprocessors based computers in Branch & Divisional offices for back office computerization. Standardization of hardware & software commenced in 1990's. Standard computer packages were developed & implemented for ordinary & salary savings scheme (SSS) policies. As awareness of quality service began growing among policyholders in India also, LIC of India had to think of many applications of information technology offices, which are servicing centers, were equipped with computer systems. Training of employees also was organized on a large scale. Several software packages for different servicing operations were introduced. A cash module was introduced, operating which, the cashier, while sitting at his desk, is enabled to print and issue official receipts on the spot to policyholders when they tender money towards premiums, the entire operation taking a few minutes. A new business module was introduced which enabled even underwriting operations to be computerized. It brought a complete integration of all activities connected with the processing of new business from proposal to adjustment of first premium to ultimately issue of policy documents. Similarly, loans and surrender value module, policy revival module, claims module were also introduced. Page 67 of 74
Now a revival quotation, a policy quotation, or maturity claim intimation letters are generated on the computer. All these gave tremendous boost to the efficiency in rendering service to policyholders. Up gradation of technology also helped in another direction. Several reports, which could be used as management information systems, get generated for use by managers at all levels. This helps management to review performance against prescribed indices and to take appropriate corrective actions where necessary. FRONT END OPERATIONS: With a view to enhance customer responsiveness & services, in 1995, LIC started a drive of On-line service to policyholders & agents through computers which enables policyholders to receive immediate policy status report, prompt acceptance of their premium & Revival Quotation, loan Quotation on demand. Incorporating change of address can be done online. Quicker completion of proposals & dispatch of policy documents have become a reality. All 2048 branches across the country have been covered under front end operations. So LIC claims that all its 100 divisional offices have achieved the distinction of 100% branch computerization. New payment related Modules pertaining to both ordinary & SSS policies have been added to the Front End Package catering to loan, claims & development officer's Appraisal to reduce time lag & ensure accuracy.
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METRO AREA NETWORK A Metropolitan Area Network, connecting 74 branches in Mumbai was commissioned in November, 1997, enabling policyholders in Mumbai to pay their premium or get their Status Report, Surrender value Quotation, loan quotation etc. from any branch in the carried out over this network on any given working day. Such networks have been implemented in other cities also. WIDE AREA NETWORK All 7 zonal offices & all the MAN centers are connected through a Wide Area Network (WAN). This enables the customer to view his policy data premium from any branch of MAN city. As at May 2002, there were 91 centers in India with more than 1200 branches networked under WAN. INTERACTIVE VOICE RESPONSE SYSTEMS (IVRS) IVRS functional in functional in 58 centers all over the country, enables customers to ring up LIC & receive information (e.g. next premium due , status, loan amount, maturity payment due, accumulated bonus etc.) about their policies on the telephone. This information could also be faxed on demand to the customer. WEBSITE LIC's website, www.licindia.com displays information about LIC & its subsidiaries LIC (international) E.C., LIC (Nepal) Ltd,. LIC Mutual Fund, LIC Housing Finance & their products. The addresses/e-mails Ids of its zonal offices, zonal training centers, management development center, overseas branches, divisional offices & also all branch offices are also provided. LIC has given its policyholders a unique facility to pay premiums payments. A website (www.licindia.com) was set up to give information on internet about the organization, products and services. The web page has been made interactive with features like 'On-line Premium Calculation', 'On-line Bonus Calculation', 'Online Forms', etc., The site also includes a feature on Page 69 of 74
'Frequently Asked Questions by Non-Resident Indians'. The page 'Contact Us' provides all email addresses of I the offices to aid communication. These web sites also serve as a virtual community for insurance professional with features such as the latest insurance news, career opportunities, insurance education, message board for discussions and events in insurance sector. Information is available on the website in Hindi also. INFORMATION KIOSKS LIC has set up interactive touch screen based multimedia KIOSKS in prime locations in metros & some major cities for dissemination information to general public on various products & services offered. These KIOSKS enable the users to provide policy details & accept premium payments.
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INFO CENTERS It has also set up all call centers to provide information about the products, policy services, branch addresses & other organizational information. All these applications have definitely brought a great amount of satisfaction to policyholders. The steps taken by LIC of India during the past 5 to 6 years are an indication of the important role that information technology can play in ensuring a very high quality in the servicing operations of a life insurance company. Several private life insurance companies also are utilizing the latest technology available including creating their own websites. A few private web sites like ‘Bima online’ also have been established.
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CONCLUSION From this study I would like to conclude that the insurance market is being revolutionized by technology at a high speed. There is a paradigm shift in the way insurance business is being carried out today. IT is being increasingly used as an enabling tool to carry out insurance business more effectively. IT includes computing technology, networking technology & advanced electronics. The convergence of computer and telecommunication has generated various computer networks making the business data transfer feasible. Because of IT insurance companies are able to provide various quality services to their customer such as EPS, issue of payment premium facility and so on and thus it make their customers satisfied. But, there are prominent challenges faced by insurance company i.e. Security. Many users are reluctant to do business on the internet due to security reason. It is also argued that internet related technology were not fully available to the nationalized insurance companies. So further I like to conclude that insurance related technology should developed in nationalized and international level so insurance business will grow more rapidly and more effectively.
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RECOMMENDATION Insurance companies should improve their technical efficiency by upgrading their information support and by developing R&D department in their respective organization. Management of insurance companies should accept meaningful computerization as a total managerial responsibility and should adopt appropriate strategies for its implementation. IT should be used as a tool to increase the companies' competitiveness and its prosperity. A good web site should develop so that consumer can actually transact its business.
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BIBLOGRAPHY BOOKS: INSURANCE AND RISK MANAGEMENT - P.K. GUPTA PRINCIPLES OF INSURANCE MANAGEMENT. -
GULATI, NEELAM
CLAM SATTLEMENT VOL-V (ICFAI) INSURANCE CUSTOMER SERVICE -KBS KUPA GROUP AND HEALTH INSURANCE(ICFAI) LIFE INSURANCE VOL-I WEBSITE: www.licindia.com SEARCH ENGINE: www.google.com www.altavista.com
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