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Issue of January 2006 

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Insurance in the 21st century

D K Mehrotra, MD, LIC talks to Kumar Dawada about how insurance companies can retain business despite global competition. The strategy is to invest in customer-centric IT initiatives and to focus on customers by providing better products, services and returns.

We live in the information age. People are becoming more aware of the importance of insurance in their life. However, there is a paradox in the form of a growing need to educate people to buy insurance.

Today, natural disasters on a large scale occur regularly and even terrorism is increasing day by day. Specialised software is used in actuarial science to accurately predict life expectancy and mortality. But natural disasters are difficult to predict.

This has highlighted to the world that insurance is a basic and fundamental need for the safety and security of the family. Only a larger insurance cover can guarantee a better future.

However insurance claims for natural disasters are very low. This is because insurance coverage was too low, and those who really needed insurance had not taken it. There is the need to push insurance as a social responsibility for those who really need it.

Business And Social Objectives

When LIC was formed in 1956 through the amalgamation of 225 private companies, its business objectives complemented its social objectives. The main objective is to spread life insurance to every nook and corner of the country especially rural areas, to socially and economically backward classes and provide them reasonably-priced financial cover against death.

Other objectives include encouraging people to save for the future by making insurance-linked savings more attractive and secure. The funds created are then utilised and invested for nation building. The insurance business is conducted with the full realisation that LIC is only a trustee of the insured public and priority is given to meet the needs that arise due to change in the social and economic environments.

Even today after 50 years, the core value of social commitment has not changed. What have changed in recent times are customers’ expectations and the environment in which the life insurance sector operates. This is due to globalisation which has opened up the insurance sector to private players.

IT For Insurance

IT policy flows from the business and social objectives. IT usage covers all business activities of the organisation. This includes finance, investment, product development, actuarial, underwriting, customer relationship management, marketing, policy servicing, human resource development, office servicing, and estate management.

IT’s role is not to automate processes. Rather, it is a strategic tool to simplify procedures and revamp processes. This helps create a very efficient customer service management system. It not only provides anywhere, any time service, it also provides greater accountability, transparency and responsiveness in all business processes.

In today’s world, IT is a must for any industry to keep pace with the customer’s changing expectations. This is especially relevant in the service industry. The insurance sector has to ensure that the technology it chooses does not lag behind where customer expectations are concerned.

In our case, LIC has more than 16 crore policy holders. So it has to induct the best IT products available and use them to cater to the needs of the customers and deliver anywhere any time service on demand and to add value to its new products. The trust and the goodwill of the customer gained in the last 50 years have to be consolidated by making all activities more customer-focused.

For instance, LIC has a corporate Web site to provide information on products, services, policy status, grievances and premium calculator. Other facilities include touch-screen information kiosks at central locations to provide 24 x 7 inquiry services to customers.

Info centres are set up at major cities to provide call centre type services. Alternate premium payment channels like ECS, Internet payment gateways as well as ATMs of major banks are also available. Push services like premium alerts and product information have been also been started through SMS.

A Customer-Centric Focus

As all the activities of insurance sector are customer-centric, any new technology implemented or process developed needs to be customer-focused. It is necessary to look at any IT implementation from the customer’s perspective.

This approach ensures that the technology’s benefits and convenience are passed on to the customers. The implementations should help customers minimise their effort in dealing with LIC and allow interactions and transactions from the comfort of their home or office any where and any time.

Future IT

Facilities exist to pay premiums and get information on policies online; however, there is a need to enhance the online service to include settlement of claims, policy surrender, distribution channel management and policy dockets.

Facilities exist to pay premiums and get information on policies online; however, there is a need to enhance the online service to include settlement of claims, policy surrender, distribution channel management and policy dockets.

There is a need to acquire CRM tools for better understanding of customers and their buying patterns. There is also a need to redesign business processes and centralise non-core functions, provide real-time processing, to have sound security policies and conform to international standards.

Initiatives to be implemented in the near future include Web portals dedicated to customers, sales intermediaries and employees. The process is afoot to set up a premium payment gateway for collecting insurance premia over the Internet as well as an online data store at a central level to make data available to requesting applications for online real-time transactions.This will provide MIS reports and help us deploy analytical and operational CRM.

Putting a document management system in place will eliminate the need to reference physical records and create the capability of extending anywhere, any time service to settle claims and other similar activities by using a repository of document images. Another aim is to conduct network audit, information security audits and achieve BS 7799 standards.

The feasibility of a BI solution from business objective and customer perspective is also being considered. Already the proper providers, technology and models are being considered as a precursor to a BI initiative. Work is also going on for a payment gateway which works both ways—payments and receipts, so that the customers can get their payments wherever they require.

For The CIOs

The insurance sector has to work with huge amounts of data on a daily basis through nationwide networks. There is a growing need to provide real-time services and transactions to customers. Hence the dependence of the business on IT will keep growing.

IT implementations will also have to be upgraded to align them with growing customer expectations and market needs which will, in turn, drive business objectives. Only those IT implementations that suit business needs and add value for customers will be adapted.

The customer should be the principal beneficiary of any technological or business process initiative. It is necessary to see things from a customer’s perspective and only those technologies will be adapted which bring the organisation closer to the customer, which make the customer trust the organisation, which are user-friendly and convenient for the customer.

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