Technology in Insurance

Technology in Insurance
 Introduction
 Components of Total Underwriting System
 Application of IT
 IT & Life Insurance
 Technology & Cyber Insurance in India
 Impact of Technology on Insurers
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INTRODUCTION
The developments in IT are the working wonders in all the fields of activity.
It has become possible to send & receive information almost
instantaneously. If circulars do not reach the agent on time or doubts are not
cleared quickly, or the agent does not have detail of new plan announced in
the press, the agent may face awkward situation with the prospects. These
problems ca be totally avoided with use of IT. Insures traditionally have
been quick to adopt latest advanced in technology. This is happening in the
areas of IT as well. The extent of IT application will vary between insures.
The information technology has always played a very important role in the
operation of every life insurance company. In fact, of all the business
organization in the service sector, the life insurance companies were the
organization in the service sector, the life insurance companies were the first
to adopt ‘Mechanization’ as an inalienable part of their operations all over
the world. This becomes necessary because of the two important reasons
namely-
1. The nature of services to be rendered to the policyholders.

2. The need to evaluate the liability under the policies in vogue the time
of valuation.
EVALUTION OF POLICY BOND
The first service rendered by a life insurance company to the

policyholder is the issue of policy bond. In the olden days, every policy
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was ‘Narrative type’. All the policy documents & conditions applicable
had to be typed out separately. But the number of policy sold was
limited; it was possible to continue that method of preparation of policy
bond. Hence, the life insurance companies switched over to ‘Scheduled
type’ of the policy documents. Here, the form of the policy bond was
standardized & as most of the conditions & privileges were similar, pre-
printed stationary was prepared. The only work left was to fill up the
details of each individual policy, viz., policy number , plan & period of
assurance , sum assured , mode of payment of premiums, instalment
premiums , date of last payment of premium, date of maturity of the
policy , age & whether admitted or not, name & address of the
policyholder , name of nominee, etc. IN order to complete the schedule
of the policy bond with these particulars, addressograph machines were
introduced. Policy particulars were embossed on zinc or aluminium
plates & these plates were used to print the particulars in the schedule
part of the pre-printed policy bonds. These plates were then used to print
advanced premium & default notices, premium receipts with counterfoils
intimation sent to the policyholder. The companies also had ‘Unit
Record Machines’, otherwise called ‘Power Samas Machines’ which
were operated using punch cards. These were parallel records in which
the policy particulars were punched in the prescribed fields. There were
two types of cards namely-
1. Premium master cards
Premiums master cards were utilized to account for the premiums

received & then for generating lists of lapsed policies.
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2. Valuation Cards
Valuation Cards were prepared to be utilized for the valuation of
liabilities under the policies. There was one-on-one correspondence
between the adrema plates & premium master cards.
With the advent of the micro processors, the addressograph

machines along with the adrema plates & the ‘unit record machines’
along with the premium master cards became redundant & went out of
use. Both were replaced by a new kind of record called ‘Policy Master’
for each policy, integrating both adrema plate & premium master card.
Apart from the ease with which servicing of the policies could be
rendered through micro processor operations, the speed with which the
same can be undertaken. The speed was necessary because of the
tremendous increase in the volume of the new business & much larger
increase in the number of service operations.
For Example
LIC of India has about 13crore of policies. Assuming that about 20% of
these are under salary savings scheme, i.e. about 2.4crore, & another 20%
in paid-up condition, there remain approximately 8crore policies under
which premiums are received by yearly, half-yearly or quarterly. Usually,
50% are under quarterly, about 20% under yearly & 30% under half-
yearly mode of payment, i.e. Rs.1.6crore under yearly, Rs.2.4crore under
half-yearly & Rs.4crore under quarterly modes. The number of premiums
accounting transactions during a year will therefore be as under-
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Duration Amount
Yearly 1.6crore
Half-yearly(2.4*2) 4.8crore
Quarterly(4.0*4) 16.0crore
Total 22.4crore
Thus, in one year, the number of transactions in respect of the premium

payments alone for the organization is Rs.22.4crore- a huge &
stupendous task indeed without the fast operating computers; it will be an
impossible task to manage transactions of such a magnitude. In addition,
there are many other transactions to be handled. Underwriting of
proposals for the life insurance became standardized because of the
universal adoption of ‘Numerical Rating Method’. Thus, “The use of IT
& specifically knowledge-based systems in underwriting has
developed through generations of systems, which have progressively
increased in complexity.”
First Generation: Screening Systems
These were developed by larger companies in the 1970’s to

decrease general expenses. They allowed for the entry of the information
from the application, & screened out or accepted clean non-medical cases
which were previously handled by the manual jet screening units. The
remaining cases were referred to the underwriters.
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Second Generation: Information Display Systems
These appeared in the mid 1980’s. They were designed to save

the underwriter’s time & thereby improve the productivity. Information
display systems allows the underwriter automated access to the various
sources of information, such as underwriting manuals, medical
terminology, lists of medications & other underwriting guidelines. These
systems replace the need for multiple volumes of handbooks. They allow
rapid success to the information that an underwriter needs.
Third Generation: Initial Underwriting Systems
These systems were developed to improve the service to the

field by approving some cases automatically & eliminating cases not
needing review by an underwriter. Because they require complex
knowledge-based systems for their processing, they have only been
available for the past few years. Initial underwriting systems extend the
capability of the first generation systems & go beyond screening to
identify underwriting problems, automatically underwrite some cases, &
pre-process other cases for underwriters by ordering information ‘for
cause’ such as attending physician statements. The advanced third
generation systems can also do the initial underwriting with the
requirements such as medical examinations, inspection reports &
laboratory test results. Some can even do discrepancy processing (i.e.
comparison of the decision based on the information on the application &
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information from other sources, noting & dealing with the discrepancies
such as unadmitted histories).
Fourth Generation: Knowledge based Decision Assistance Tools
This is relatively a new system which provides underwriters

with the knowledge-based systems to underwrite complex impairments &
to help them to manage their administrative workload. They have been
designed to enhance the risk selection process. Their use by the
underwriters can help them to manage the mortality expenses by applying
consistency to the underwriting process.
Fifth Generation: Total Underwriting Systems
The fifth generation of underwriting systems encompasses &

surpasses the previous systems. They integrate all the components
discussed above into a single system; they also include a management
information system for the entire process. This is the essence of the
underwriter work, which, as discussed above, would be integrated into
the entire administrative flow for its greatest impact.
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Components of a Total 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 & 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 & 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 agents
report, requirements ordered in the field & MIB (Medical Information
Bureau) information could also be entered for processing.
Screening
The second component is screening. This involves taking

applications & sorting them into two groups: clean ones & those in need
of further processing. This is fairly simple. Screening checks that
applications need no further requirements, have all medical & non-
medical questions answered properly, are within certain age & amount
limits, & have acceptable finances & an appropriate beneficiary.
Approved cases are sent directly to the administration system.
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Initial Underwriting
Applications that are not approved by screening flow into the

next component are called ‘initial underwriting’. This series of
knowledge-based systems defines underwriting problems & determines
why the case required further processing. It checks for age & amount
requirements & examines the financial, non-medical & medical aspects
of the case, as well as the interaction among the. It decides if there is
sufficient information to deal with the problems, it has defined.
For Example
If a proposed insured to a minor illness two years ago, the system will
allow the case to pass through for most ages & 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,
identifies the appropriate underwriting guidelines. In this way the initial
underwriting deals with cases not needing an underwriter’s attention &
pre-processors 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
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examination, blood pressure, etc.) to be entered into system directly from

the provider or by home 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 &
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 & status functions. The front-end
workflow tools keep track of cases, their requirements & 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 are detailed
underwriting problems & their actions. Other tools allow the underwriter
to manipulate, track & change the underwriting problems & requirements
of a case. There is also an electronic notepad for the underwriter which
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 requirements preparation, reporting
of MIB codes & the process of requesting reinsurance.
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The status lets non-underwriters to review the selected case

information. An agent’s status reveals the data from the application, as
well as the requirements & whether they have been received.
Information Display
The information display component gives online 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 & 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 &
coronary heart disease. Their logic is patterned after the knowledge &
thought processes of expert MDs & underwriters. Information is
requested from the record & a rating is suggested. If underwriters choose,
these will guide them through the detailed decisions needed to underwrite
impaired cases.
Management Reporting
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This component generates administrative & other reports on the

decisions made within the system. Reports can be created by the
management from the database of information.
Benefits
Underwriting systems have many benefits. For underwriters

they limit the number of cases that need to be received, 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 & have been very pleased with
results. As an underwriting officer stated “This gives the underwriter to
deal with more complex & 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 &
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 some applications in less than 15 minutes. Also,
the sales process can be helped by determining all requirements (both
those required for age & amount & 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.
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Knowledge-based 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 & keeping track of requirements. Such
tools decrease the clerical work of underwriters & improve the workflow
in underwriting departments by eliminating unnecessary paperwork.
Apart from reducing underwriters work, knowledge-based
systems can provide decision-assistance tools in the risk classification
process. Impairment underwriting knowledge-based system is
sophisticated decision-support tools. They assist in the determination of
ratings by promoting the user for information & correlating that
information with underwriting guidelines & the programmed thought
processes of expert underwriters. They serve as an excellent training tool
for the junior underwriting & assist experienced underwriters in very
complex cases.
In addition to helping in the actual underwriting decision
making, knowledge-based systems can assist the underwriting manager
with the overall underwriting process. Once information has been entered
into the knowledge-based system, it becomes available for management
reporting & decision making. This allows underwriting managers to
follow the screening of cases by the system, as well as the ordering of
requirements & the rating of impairments. These decisions can be tracked
according to agent, agency or underwriter so that underwriters can
interact better with the producers with whom they work; underwriting
managers can also more effectively manage the underwriters who report
to them. Previously unavailable management information tools are made
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readily available, as is information on specific underwriting decision

making.
Application of IT
As awareness of quality began growing among policyholders in

India also, LIC of India had to think of many applications of information
technology was undertaken on a huge scale. All the 2050 branch offices,
which are servicing centres, were equipped with computer systems.
Training of employees also was organised 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 & issue official receipts on the spot to the
policy holders when they tender money towards premiums, the entire
operation takes 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 policy documents. Similarly, loans & surrender value
module, policy revival module, claims module were also introduced.
Now a revival quotation, a policy quotation, or a maturity claim
intimation letters are generated on the computer. All these gave
tremendous boost to the efficiency in rendering service to the policy
holders.
Up gradation of technology also helped in another direction.

Several reports, which could be used as MIS, get generated for use by
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managers at all levels. This helps management to review performance

against prescribed indices & to take appropriate corrective actions where
necessary.
To bring out revolutionary changes in communication to

policyholders, several steps were taken. Inter-Voice Response Systems
have been introduced which help policyholders ascertain several types of
information about their policies like policy status, premium position, loan
amount, maturity/next survival benefit due, accumulation of bonus, etc.
over telephone lines in the language of his choice. The policyholder can
also get the information on fax. MAN is installed in several cities, which
enables policyholders to pay their premiums or get their status reports,
revival/loan/surrender quotations in any of the branch offices convenient
to them in the cities. Now, many of the cities with MAN are connected
by WAN which enables policyholders to pay premiums any where in the
country. E-mail connections have been established in many of the offices
& internet connections have been given to all divisional offices, all
departments in all zonal offices & central office. A website
(www.licindia.com) was setup to give information on internet about the
organization, products & services. The web-page has been made
interactive with features like ‘On-line Premium Calculation’, ‘On-line
Bonus Calculation’, ‘On-line Forms, etc. The site also includes a feature
on ‘Frequently Asked Questions by Non-Residents Indians’. The page
‘Contact Us’ provides all e-mail addresses of the office to aid
communication. Information is available on the website in Hindi also.
The corporation has also setup interactive touch screen based multimedia
kiosks in prime locations in the metros & major cities for dissemination
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of information on the products & services. The corporation has plans to

redesign these kiosks to provide policy details & accept premium
payments. All these applications have definitely brought a great amount
of satisfaction of 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 websites like ‘Bima
online’ also have been established.
Technology is the most important tool in another very

important area of a life insurers functions. It is valuation. The process by
which the values of various policies of insurance existing at a point of
time are obtained is called ‘valuation’ of liabilities of an insurer was
small, policy values used to be calculated for individual policies. But
when the number of policies runs into several lakh or crore, as at present,
it is extremely inconvenient to calculate the value of each contract
separately. Methods have, therefore, been advised to collect data for each
plan insurance in a form suitable for valuation in groups having some
common characteristic like age, duration or term to run to maturity & the
like. Grouping is done only if there is sufficient number of policies to
make of a reasonable size. For a sufficient large life insurance
organization, this work is possible only through application of
technology. It is a legal requirement today in our country for a life
insurance company to conduct an actuarial valuation every year. This
adds to the importance of IT applications.
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With the increasing complexity of products both life insurance

& pension entering the market, the field force, especially the agents need
a large support from the company represent. While discussing life
insurance program with potential customers, agents need sophisticated
information including benefits, comparisons, need’s & matching
products, rates & impact on the customer’s budget, return, etc. like in
Japan, life insurance companies in India may also supply ‘Palm-Tops’ to
their sales force. This will be possible only through extension of the
concepts of information technology.
Market research is another area where information technology

has a great role to play. Today, the customer has become the centre
around the entire market revolves. The world is fast moving towards
market driven economy. Organizations, which were merely based on
‘sales concept’, are eagerly aiming to convert themselves into ‘marketing
organizations’. Life insurance companies which primarily deal with the
financial needs of the people cannot ignore these realities. The life
insurance market has become very dynamic. The needs, aspirations,
attitudes, buying behaviour, standards & quality of life are changing. The
perception of what constitutes standard of life is also undergoing a
metamorphosis. Different types of products are the need of the hour. The
demand is more for ‘flexible’ rather than ‘packaged’ products especially
in the services market. To certain its share & to improve it, there is no
alternative for any life insurance company than to have a continuous
market research. The company should know the demographic changes
taking place in the society. They should know what is selling & where.
T.Y.B.B.I. 17
They should know the pace of sales on day to day basis. They should not
only know the emerging customer profile but also the size of the market.
All these need a scientific market survey & research either done in-house
or outsourced. A typical market survey report is appended which shows
the enormity of the job. Without the support of technology, this will be
an impossible task for the company.
IT & Life Insurance
Technology is remaking the insurance industry as companies of

all sizes discover new ways to use web-based services to expand their
reach & profitability. Adaptations range from online requests for a phone
call from an agent to quote on car insurance, online agency franchises,
and risk management for $100-million plus in the Netherlands. Even that
list only scratches the surface.
Forrester research estimates that at least $11 billion of the

annual auto insurance market is expected to be researched or purchased
online by 2007. That amount is 9% of the market, & that’s just for
personal auto insurance. The insurance industry is the perfect example of
a good fit for technology, but insurers should avoid simply using
technology.
For technology’s sake technology has enabled the companies to

save customers time & has made doing business more convenient &
T.Y.B.B.I. 18
efficient. The agent is a key part of the operation, particularly in handling

large estates, pension plans, & key-person insurance. The companies are
trying to make the agent’s job easier & more efficient by taking the
administrative duties to the internet, so the agent’s can devote more of
their time & energy to selling. The companies aspire to embody the best
skills of the (physical) agent through an internet resource to research &
purchase insurance online. The companies also enable the customers to
take their own decisions. If an agent doesn’t add value, the internet will
eliminate that role. So, traditional insurance agents will have to
concentrate on the value they add. Web-based format reduces the amount
of redundant data entry, automates the generating of reports & allows
electronic exchange of the information. But with projects of a large size,
the information can get quite complex. In the latest scenario, many
people will research insurance online but not buy it, he predicted. Most of
the people want a person to deal with, but we’re finding that a growing
number of customers are more open to buying online than we might have
expected.
Technology & Cyber Insurance in India
The opening of the insurance industry in India would boost

competition, facilitate technology transfer & lead to new products, better
customer service, deeper & wider insurance coverage & many more
opportunities for employment. As new private sector entrants enter into
India, opportunities in the insurance industry, which is gaining
prominence the world over, is the development of technology & cyber-
insurance strategies. Cyberspace is a risky place. Companies conducting
T.Y.B.B.I. 19
business over the internet are exposed to a variety of new, unpredictable

& serious exposures such as servers crashing, computer viruses,
destruction of data, e-mails disappearing & attack from hackers for which
there are few precedents in terms of risk management & even less actual
insurance coverage.
Cyberspace presents unique challenges to risk managers for

several reasons, the foremost being that there is no standard risk profile.
The wide variety of internet-related businesses, such as ISPs, content
aggregators, certification authorities, online merchants & software
developers, all contribute to the difficulty of developing a single risk
profile. Enacting appropriate insurance policies for ensuring cover for
security issues & intellectual property rights issues is vital.
For safe business transaction, what is needed is a secure legal

environment & while legislation in India is providing this environment
with the enacting of laws dealing with the internet, insurance companies
in India should provide comprehensive protection policies for a business
against web-related risks, such as hackers &viruses, credits card &
employee fraud, business interruption losses action. Essentially, the
policy can fill the gaps in coverage that have opened up between standard
insurance policies due to the fact that the way business is done has
changed. Intellectual property infringements: content providers who
use content of others without permission can trigger these risks. Errors
& omission liability: these risks are typically triggered by the
programmers, web hosts & web-designer’s who, through negligible in
their work cause injury/ damage to a third party. Personal injury &
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advertising liability: As e-commerce grows, these risks can be triggered

by worldwide web sites, & trade publishers who publish illegal content
which may be constructed as libel. Director’s liability: Directors &
officers often face the risk of litigation due to number of factors, such as
consumer protection laws, securities related laws & certain provisions in
corporate laws that place additional responsibilities on directors.
Employee liability: These risks would arise from the breach of
confidentiality & rights of privacy arising out of confidential client
information stored on a particular system or website. In addition,
employees can initiate sexual harassment charges from an employee due
to disturbing e-mail content. Legal fees: Fees incurred for litigation
arising out of various claims, such as intellectual property. Many
businesses on the internet mistakenly think their internet-related
exposures are covered by their existing policies.
Impact of Technology on Insures
Any new adoption needs time to get acquainted with the users
until they gain enough confidence & knowledge in that system. Recent
studies reveal that consumers lack passion for insurance because of its
complexity, but despite these push backs, a growing number of insurers
are intrigued by the significant cost savings & customer-retention
benefits to be gained through online self-service. Although carriers think
that by encouraging insurers to do transactions by online services which
would reduce operational costs vastly, they are very cynical of investing
in web technology with the dot-com collapse. The trick lies in educating
insurers about the concept & benefits of e-services in this sector. Driving
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client to initial online self-services experience into something more

interactive by call services that would involve human interaction will
certainly have a greater impact. This balanced approach is how most
insurers are enabling online self-service that not only make sense for
policyholders, but also provides support for intermediaries & agents. The
main challenge for any health company’s website would be bringing all
sections of people to view their site.
They should show some positive incentives to bring customers

to their websites. Online services have own advantages like accessibility
of information 24/7, visualization of information, providing interactive
plan finder tools, adding useful links to the website, live chat
technologies etc. An online activity helps to give necessary knowledge to
consumers, which is very positive, because it implies that when people
learn more they establish a deeper relationship & a broader dialogue with
the carrier. Agents & brokers also enjoy the efficiencies that come with
writing new business & servicing their customers on websites. About
55% to 60% of customers take booklets electronically. In order to enable
efficient online self-service functions, companies typically have to update
their legacy systems.
Despite the current limits to online self-services, as the internet

continues to gain acceptance, customers probably will become more open
for using it as a conduit for insurance services.
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 Introduction
 Detection V/s Review
 Approaches to Detection
 Neural network technology
 Technical Challenges
 Internet & Intranet & its benefits to Agents & Policyholders
 KIOSK
 Macromedia Technology for the Insurance industry
 New wave of technology offers the insurance industry healthier
future
Introduction
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Losses due to insurance fraud and abuse affect every business

and every risk manager. The stakes are high: according to the Insurance
Information Institute, 10% of claims payments are fraudulent, resulting in
$24 billion dollars in losses each year. Workers’ compensation claims
alone are responsible for about $5 billion in losses each year.
Unfortunately, most of this fraud is never detected, or it is discovered
after claims are paid when recovery of these lost dollars is both expensive
to do and unlikely to happen. Insurance fraud detection has taken a giant
step forward with the introduction of the same sophisticated technology
already used by most banks and credit card companies to stop fraud,
saving companies in these sectors billion of dollars each year and
reducing fraud by as much as 50%. However, as with any new
technology, considerable confusion exists as to which types of systems
are effective for which purposes. Focusing on claimant fraud in
insurance, this paper will identify types of technology utilized in fraud
detection, their scope and limitations, to help risk managers choose
appropriate technology for their needs. Fraud Detection and Technology
In reality, no one technology delivers a complete solution for fraud
detection. A complete solution is the result of the intelligent combination
of several technologies, most of which are not particularly effective if
used alone.
The challenge of addressing the fraud and abuse problem – and

the different technologies that can be used for this purpose – can perhaps
best be understood through a framework of detection and review.
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While detection is the process of identifying and prioritizing suspects

from the available data. Review entails confirmation of
fraudulent/abusive activity and the process of taking corrective actions
such as blocking of payments, recoupment of paid dollars and
prosecution. The variety of technologies that can be employed can
perhaps be best understood by assessing their contribution in improving
either or both of these two processes. To date, the primary emphasis has
been on the review side, with a focus on technique for surveillance,
investigation, and prosecution. Many technological tools, such as those
for ad-hoc querying or viewing of activity, have been designed to aid in
the review of potentially fraudulent claims. However, the challenging
task of detection-effectively identifying suspects in the first place-has
received less attention and currently offers the greatest opportunity for
benefit if addressed in a comprehensive fashion.
Detection versus Review
The mission is to find insurance fraud and abuse; once we do

that, we can take a variety of actions to recover payments already made
and prevent future inappropriate payments. Our starting point is the
mountain of historical transaction data (i.e., claim master-file
information, payment transaction, medical/payment detail, policy
information, etc.). Detection – identifying suspects – is the first step, and
is complicated by a host of technical challenges. Review is the second
step, and requires giving human experts the information they need to
confirm fraud and abuse. Detection is a statistical game with the global of
improving the odds of finding the target. The process is analogous to
T.Y.B.B.I. 25
fishing for a rare fish in the ocean. Without the right tools, we are left to
fish the endless sea of legitimate claims for our rare fraudulent catch. Not
surprisingly, a tremendous amount of time and effort can be spent to
identify a single case of fraud.
The job of a detection system is to filter the entire ocean and

scoop out a small pond containing a significant fraction of the total fraud
so that the ratio of fraud to non-fraud is much more in favour than it was
in the “ocean”. Fishing in a well-stocked pond translates into substantial
savings because we can use the system to focus expensive human
expertise on reviewing those claims that are most likely to pay off (in
settlements, averted future fraud and abuse or successful prosecution).
We stop wasting effort reviewing false leads, and we prioritize effort to
inspect the most important cases first.
The effectiveness of a detection system can be quantified using

the following two metrics:
Detection-rate (the percentage of total fraud isolated in the pool of
suspects) and false-positive-rate (the ratio of legitimate to fraudulent
entities in pool of suspects).
Review
The review process gathers the evidence that human experts

need to confirm fraud and abuse. Because of the complexity of detecting
provider fraud and abuse, no system can be 100% accurate in selecting
fraudulent claims. Once the detection system has generated a pool of
T.Y.B.B.I. 26
suspects, expert claims adjusters or fraud investigators are needed to

review suspects, conducts the appropriate investigation and bring the case
to closure. The experts may use technology to help them navigate
through, visualize or analyze the detailed data behind a case. Detection
can be likened to the “front end” of the fraud-fighting process, while
review is analogous to the “back end”. Many tools offered to assist in the
fight against fraud and abuse, such as those allowing for the reviewing of
and ad-hoc querying of claims databases are useful for the review
process. Other technologies, such as those involving link-analysis
(looking at the activity of individuals coming in contact with a particular
individual), are also most useful after a suspect has been identified.
While these techniques can be important, for example, investigating rings
to which given suspect may belong, the question remains: Where does
the suspect initially come from? Furthermore, the reality is that most
fraud and abuse is opportunistic and does not involve elaborate rings. A
detection system is necessary to uncover suspicious activity in the first
place.
Most approaches to detection employ a manual process

dependent on human intervention – a claims adjuster spotting unusual
activity in a claim or a whistle-blower (eg., a co-worker or disgruntled
ex-spouse) calling a 1-800 fraud line. In some cases, simple red-flag rules
are used to assist in the identification of potentially abusive activity or
simple statistical tools that profile peer groups and use standard
deviations to identify outliers. These are good first steps, but there is
much room for improvement. There is great potential for insurance
organizations to identify more fraud and abusive and identify it closer to
T.Y.B.B.I. 27
its onset. Because detection has received far less attention than review,
this paper will focus on the application of technology to the detection
problem.
Detection Review
Finds suspicious behaviour Finds out what is suspicious
Identifies the suspects Identifies suspicious information
Pools the suspects Compiles the evidence
Rank orders suspects by level of Provides an action plan based on the
suspicion evidence
Provides reasons for the suspicion Confirms the suspects
Approaches to Detection
Two fundamental approaches to detection are rule-based and

model-based. The nature of fraud and a comparison of these two
approaches can be better understood by using the analogy of the amoeba.
Using Rules to Detect Fraud and Abuse
Rules (or red-flags) are often developed to identify “suspect”

claims. For example, neck injuries are more likely to be fraudulent than
head injuries. Hence, a “rule” may identify neck injury claims as suspect.
However, even though neck claims have a higher risk of fraud than head
claims, it is still the case that far more neck claims are valid than are
fraudulent, so the rule may be refined to further restrict the claims
identified as suspect (e.g., an employee on the job for less than one year).
In terms of the amoeba analogy, the boundaries of the regions defined by
rules (shown as squares in the diagram below) are very simple compared
T.Y.B.B.I. 28
to the boundaries of the amoeba. Usually, a rule has some overlap with
the amoeba but also has some area outside the amoeba. A tremendous
number of rules are required to cover the amoeba and fill its multi-
dimensional space.
In actually, rules-based systems are most beneficial to find

evidence, not detect suspicious claims. This means rule-based technology
is effective as a tool for review, but not effective enough for pure
detection to summarize rule-based technology.
Pros Cons
Used in decision support systems to Rigid “if…then” statements (if the
identify claims that depart from rule is lenient, it detects few
normal behaviour in predictable suspicious claims; if strict, it
ways identifies too many false-positives)
Increases adjuster efficiency by Time-consuming and expensive to
making some decisions automatically maintain and evolve
Improves consistency – applies the Detects fraud and abuse narrowly
same rules to all incoming claims
Good initial results when rules On an on-going basis, detection rates
applied to a pool of claims gathered typically diminish rapidly
over a period of time
Neural Network Technology
T.Y.B.B.I. 29
Within supervised or unsupervised models, a variety of

technologies are available. Amongst the most powerful are neural
networks. Humans cannot simultaneously consider more than a handful
large amount of data to identity those patterns- comprised of interactions
involving multiple variables- most indicative of fraud. In a supervised
model setting, a neural net model can consider hundred of variables in
developing a score through a learning process of looking at known
historical example of “good” and “bad” pattern of behaviour in an
unsupervised setting, a neural network can characterize complex
behaviour pattern to identify those claim that are most similar to each, as
well as claims that are most unusual.
Traditional statistical method (for example, regression) can, in
theory, produce models that are just as accurate as those produced using
neural network technology. However, because such methods rely upon
human experts (typically statisticians) to explicitly determine the
complex predictive power of a neural network model. Furthermore,
maintenance of traditional statistical models is costly.
Technical challenges
The task of insurance fraud and abuse detection is accompanied

by a host of technical challenges. An effective solution to the problem
requires a comprehensive approach, enabled by a variety of technologies
that addresses these technical challenges head-on. Some of these design
issues include:
 On-going reassessment of fraud risk
T.Y.B.B.I. 30
Because fraud may not exist at the time the claim is

submitted, or because evidence of abuse may not yet be
apparent, a system must reassess each claim over and over on
an on-going basis.
 Understanding raw data

The starting point the “raw mounting of data.” A through
understanding of this data requires careful analysis and
domain expertise. Furthermore, regardless of what
technologies are employed, careful engineering is requires
addressing issues of data being messy, missing or non-
standardized.
 Behaviour from ongoing transaction data

Characterizing claim activity involves the summarization of
all transactional data (e.g., payments or medical service
details). This summarization must not lose key aspects of
activity.
 Complex pattern in data

Identifying which claims are most suspicious requires a
comprehensive analysis of many different features
characterizing the claim and its activity. A detection system
must be able recognised those patterns of behaviour most
indicative of fraud.
T.Y.B.B.I. 31
 Limited examples of confirmed fraudulent claims

In many cases, only a small number of known examples of
fraud may exist in the historical data. One must be to handle
such situation when developing the detection system.
 Prioritization of suspects
In order to match work levels to staffing constraints, which
may be different customers and may vary over time, a
detection system must allow for prioritization of suspects.
Scoring models provide a rank-ordering of all suspects so that
attention can be focused on those deemed most suspicious.
 Effective use of detection results

In order to effectively use the detection system’s explanations
for what makes a claim look suspicious should be provided,
strategies for effective workflow assignment should be
determined ( e.g., match resources with suspects that are most
beneficial to review ) and tools to review the results should be
available (these may already exists).
 System maintenance
The system performance must not deteriorate due to changing
patterns of activity over time. Because neural network models
are built from data and automatically learn complex patterns
within the data, they can be efficiently redeveloped. Indeed, as
more examples of abuse become known, model performance
T.Y.B.B.I. 32
can be expected to improve over time. The complexity of

integrating these technologies into a single product is
immense, but so is the benefit. These features make such an
integrated product a truly powerful tool in the fraud detection
process and also help to integrate it with the review process.
Internet & Intranet
The internet is a worldwide system, accessible

through computers. Information travels through the internet at
incredible speeds. It cuts across national & international
boundaries. While the internet allows access for anybody
from anywhere, the internet is an in-house network, working
on the same principal. The difference is similar to the
difference between a national newspaper & in-house news
magazine, which is for private circulation. If an insurer has an
intranet system, the information in the intranet will be
available only to its offices & personnel. The policyholders
will not be able to access the data in the intranet. Circulars
meant for internal circulation can be posted on the intranet, &
everybody will have immediate access to it, however far away
he may be located. In the intranet also, it is possible to restrict
some information to certain categories of persons, who will be
identified through passwords.
Both internet & intranet enables users to do the

following at any time (24 hours, 365 days)
T.Y.B.B.I. 33
 Send & receive letters, which are called e-mail. Every person
will have an ‘e-mail id’, which is his address in the net.
 Search, read & receive data, files, and pictures.
 Buy & sell of policy.
Benefits to Agents
If the insurer has an intranet, the agent can, sitting at his

place of work, be attending the insurer’s office, making enquiries
about status of proposals or claims or discussing with any other
agent, for clarification or advice, whenever he wants to do it. The
physical distance between the agent & the office will not be of any
consequence at all. The benefits to agents will be –
 He can receive all circulars & instructions issued by any
office. All delays on account of postal transmission, being
forwarded from one level to another, dispatch department,
absence of peons, wrong addresses, misplaced through
oversight, lost in transit etc. are avoided.
 Any doubts with regard to proposal, benefits, premium, and
taxation, medical examination, insurability etc., can be
discussed & got clarified directly from the person concerned.
 Communications to & from the office will be immediate
through e-mail & at a low cost.
T.Y.B.B.I. 34
Benefits to Policyholder/Prospects
Prospects can get benefit through the internet in the following ways-
 They can get details of the various policies, the benefits there
under, the premiums payable etc.,
 Prospects can get advice on the suitable insurance plan for
themselves.
 Policyholders can get information with regards to the status of
the policy, the premiums due, the bonuses attached, the
surrender values or loans available, revival possibilities,
nearest office for any further transactions.
 Details can also be had about housing loans or other benefits
available to policyholder.
 Premiums can be paid without having to go the office of the
insurer, by direct debit to the policyholder credit cards or bank
accounts.
The LIC has included in its websites, for the benefit of the prospects
& the policyholder, information relating to health issues.
KIOSKS
Kiosks are unmanned information centres, placed

strategically at public places. They are called Interactive Touch
screen kiosks. A kiosk is a self-contained hardware & software to
T.Y.B.B.I. 35
blend all current media including graphics, video, text & quality
sound. It consists of a touch sensor & a monitor on which the sensor
can be fitted. The user is expected t touch the relevant sensors,
according to the choices offered by the kiosk visually on the
monitor. The kiosk then takes him the required information or to
transact the required business.
The LIC has installed kiosks in more than 100 locations

covering its divisional headquarters. The kiosks provide information
on policy status, product information about all products including
group insurance products. These can be used by persons, who do not
have their own computers & cannot access the internet. They can be
operated 24 hours a day & do not require any supervision like the
ATMs of banks.
Macromedia technology for the insurance industry
The insurance industry faces tough challenges; increasing

complexity, the push for profitability, a growing demand for
business intelligence, and evermore governance, all of which
requires providers to think differently in order to grow. Macromedia
can help. Our technology enables leading firms to deliver powerful
online experience that simplify business processes and automate
workflows, improves analysis, and make it easy for agents and
customers to collaborate with providers. We understand that to
thrive in today’s competitive marketplace, businesses must
T.Y.B.B.I. 36
differentiate themselves through better experiences and operational

efficiencies.
Macromedia has a history of enabling rich productive digital

experiences that drive satisfaction and growth while improving the
bottom line. An effective user experience can enable straight-
through processing; allow for more thorough, real-time analysis;
make systems easier for agents to use; and improves employee
productivity . We believe great experiences build great businesses.
The most widely deployed client software in the world macromedia
is the industry leader in empowering businesses to create and deliver
effective and compelling user experiences. We’re providing
technology to deliver great digital experiences across browsers,
operating systems, and devices, online and offline, to turn often
frustrating experiences into useful and engaging ones.
Indeed, leaders in insurance and financial services have embraced

our technology. The Macromedia flash platform is an enterprise-
class solution that provides a robust, end-to-end architecture for
deploying rich and engaging content, application and
expressiveness. The ubiquitous flash player software-deployed on
more than 98% of the world’s computers and on the majority of
mobile and electronics devices-enables rapid and efficient reach. It’s
also supported by the flash ecosystem, which includes more than
one million developers worldwide.
T.Y.B.B.I. 37
Macromedia provides the tools you need to:

 Differentiate your company with effective online interaction
tailored to your customer, ‘agents’, and employees’ needs.
 Increase efficiency by reducing manual, complex processes,

multiple hand-offs, and the cost to provide services.
 Improve decisions and speed transactions with advanced

reporting and monitoring features that enable users to
visualize real-time information from multiple data sources.
 Sell more and improve agent satisfaction with easy-to-use

interfaces, rich web collaboration, and e-learning that takes
training and service to a new level.
New wave of Technology Offers the Insurance Industry a

Healthier Future
For the last 30 years, the insurance industry has invested

heavily in technologies to improve the efficiency and effectiveness
of claims processing. In many cases, insurers feel that there is little
room for step change improvements in their performance. They are
mistaken. The next wave of computing promises to secure benefits
outside individual enterprises, and connect whole markets, allowing
new levels of service and cost effectiveness to be achieved. This
T.Y.B.B.I. 38
article examines the drivers behind this new opportunity and shows
how some insurers are already reaping the benefits on offer.
Driven by Claims
The insurance industry is driven by claims. For example,

in the property and casualty market in Europe, the average
underwriting ratio (total cost of claims divided by total premiums)
has been running above 90% for last decade. Many insurers have
been scraping by solely on their investment income. This cannot
continue when interest rates are at 40 year lows, and stock markets
are still 50% down from their peak in March 2001.
Technology has historically been used to improve

internal efficiency. Every insurer has installed automated claims
processing systems to speed up claims handling and reduce costs.
Typical claims expense ratios have been coming down by a few
percentage points each year, as the cost of hardware and software
drops. But for the most insurers there is not much more to squeeze.
More recently, technology has also been used for customer
interaction. With the mass market adoption of Internet access, many
insurers now allow their customers to send in claims details online,
thereby cutting call centre costs, and reducing expensive errors in
capturing the policy and claim data.
At first glance this sounds great, but 90% of claims will

still end up needing manual intervention, because the claim data
T.Y.B.B.I. 39
needs to be shared across an unpredictable array of partners. For

auto claims this includes vehicle repair shops, claims adjusters,
lawyers, the police, natural auto databases, rental car companies,
and more.
Nothing keeps insurance leaders up at night like the high

cost of claims processing. Numerous attempts to reduce costs have
failed to provide significant results. The industry is still looking for
ways to fight fraud, increase predictability, improve reserves
management, streamline workflow related to claims adjustment and
settlement, and manage litigation. Insurance leaders agree that the
industry needs a comprehensive cost-cutting strategy – one
featuring both technical platform modernization and business
process improvement.
By offering powerful personal and organizational

productivity solutions, Microsoft and its partner offer insurance
companies tools to cut costs and improve productivity.
The following partners offer claims processing solution built on the

Microsoft platform:
 Process Claims
Process Claims, a leading software provider for the insurance
industry, delivers solutions that automate communication and
information flow, and yield rapid return on investment. By
harnessing the power of the Microsoft. NET Framework and
T.Y.B.B.I. 40
their own data transformation technology and industry

expertise, Process Claims offers solutions that provide data
translation and mining, business intelligence, workflow
management, assignment automation, appraisal management,
and trading partner integration.
 Insurity
Insurity offers end-to-end software solutions and services for
property and casualty policy administration, claims, business
analytics, and reporting. More than 125 insurance and
financial services companies, including more than half of the
nation’s top 20 carriers, use these solutions. The Insurity suite
of integrated solutions uses Microsoft technologies, such as
Microsoft Visual Basic, Active Server Page (ASP)
technology, Microsoft Message Queuing (MSMQ), and
Microsoft SQL Server.
 Visibility
Visibility, Inc. is a leading provider of collaborative litigation
management solutions for the insurance industry. These
solutions focus on simplifying the processes that add
complexity to everyday routines. The products and services
have evolved from the feedback of customers and needs of
the industry, resulting in targeted and intuitive solutions.
Visibility is more than a software company – it is a
networked community dedicated to improving the business of
insurance.
T.Y.B.B.I. 41
 Decision Research
Decision Research created VISTA Decision Maker, a Web-
based insurance management system that does business the
way companies do business. Built on Microsoft .NET
technology, VISTA offers insurance carriers a solution for
easily managing the entire policy life cycle – from quoting
and insurance to claims and billing. Using Microsoft products
and technologies such as Microsoft SQL Server, Internet
Information Service (IIS), and Microsoft Excel, VISTA
product modules provide a user-friendly environment and are
fully scaleable to support businesses from start ups to Fortune
500 companies.
T.Y.B.B.I. 42
 Microsoft’s contribution to the insurance industry
 Challenges for Technology in insurance
 Neural network technology
 Insurance & E-Commerce
 Benefits of E-Insurance
T.Y.B.B.I. 43
Microsoft’s Contribution to Insurance Industry
For many drivers, the seemingly endless round of phone

messages and paperwork that follow a traffic accident can make the
job of resolving an insurance claim feel as damaging as the accident
itself. For insurance carriers, auto claims processing – which
involves handling estimates, adjustments, repairs, building, and
more – is no less time-consuming, expensive, and frustrating.
Today, innovative technologies from Microsoft are

transforming the way auto insurance claims are processed. Based on
the power of the Microsoft .NET Framework, these technologies
open door to integrated IT systems that link programs and
applications built on any platform and written in any language,
streamlining the flow of data and bringing new levels of efficiency
to the business of claims processing.
Process Claims is a leading software provider to the

insurance industry, offering a broad range of property and casualty
solutions that span heavy equipment, commercial, personal, and
speciality lines. A Microsoft Certified Partner, Process Claims
delivers solutions that automate communication and information
flow, and yield rapid return on investment. By harnessing the power
of the Microsoft .NET Framework and its own data transformation
technology and industry expertise, Process Claims solutions provide
data translation and mining, business intelligence, workflow
T.Y.B.B.I. 44
management, assignment automation, appraisal management, and

trading partner integration.
Last year, Process Claims facilitated settlement of $4

billion in claims. The issue of data integration is critical for all
parties involved in resolving auto insurance claims. In addition to
insurance companies, there are companies that depend on data to
provide rental car services, supply parts, facilitate salvage
processing, determine vehicle valuation, and more.
Process Claims’ end-to-end material damage

management systems provide the vital link between all of these
parties. Utilizing Microsoft Visual Studio® .NET, XML, and Web
services – programmable application components that can be
accessed over the Internet with standard Web protocols – Process
Claims enables its clients to conduct business with greater speed
and efficiency. Typically, when a driver reports an accident, the
carrier assigns an adjuster or refers the driver to an authorized body
shop. Because Process Claims uses XML, it can take information
from any claims systems and instantly route the assignment to the
most appropriate appraiser. After receiving the claim, the appraiser
downloads it to an estimating application, writes the estimate, adds
digital photos, and sends the package back to the carrier through the
Process Claims browser-based application suite.
This ability to utilize XML and Web services has

established Process Claims as a marketplace leader. Not only does
T.Y.B.B.I. 45
the solution streamline claims processes, it also extends and

enhances the value of existing legacy systems functionality through
seamless integration with outside services. And because legacy
systems can access this new functionality transparently, training and
support costs are minimal. Process Claims’ Claims Port systems
focus on areas of material damage to reduce loss-adjustment
expenses, increase efficiencies, and improve customer satisfaction,
and they are configured to meet the specific business requirements
of individual insurers. Today, innovators are taking advantage of
technologies like this to automate business processes and transform
insurance claims processing.
Challenges for Technology in Insurance
The Insurance industry is facing a challenging situation.

In the midst of a global economic slowdown and severe earning
pressures, the industry is going through a phase of consolidation
and integration. Increased Merger and Acquisition activity has
brought about the need for IT departments to unify systems built on
diverse platforms. Systems need to be more customer-centric. IT
will need to drive and support revenue-producing initiatives,
harness knowledge for speedy decision-making and help enhance
the effectiveness of channel for IT in Insurance, with the twin focus
of providing greater ROI on IT investments while cutting budgets.
There is need to outsource many traditional activities and integrate
new technologies.
T.Y.B.B.I. 46
Solutions and Services
Management Consulting
Utilizing an industry-tested methodology, we leverage

our knowledge of the insurance industry in combination with our
wide-ranging technology expertise to provide strategic business
planning services. Our management consultants have a proven track
record in developing practical plans that are focused on optimizing
resources, managing cost and achieving long-range goals. Some of
the areas where our consultants can help you include:
 Insurance Research
 Business Planning
 Technology Planning
 Business and Technology Alignment
 Process Assessment
 RFI/RFP Vendor Analysis
 Offshore Application Maintenance Readiness
 Offshore BPO Readiness
 Unit Cost/Best Practice Analysis
Systems Consulting
The insurance industry is facing increased trading

volumes and regulatory pressures to decrease settlement cycles and
T.Y.B.B.I. 47
the need to reduce clearing and settlement costs. Straight through

Processing (STP) is seen as a solution to face this challenge. We
will help you re-engineer technical and business processes and
operational architectures to realize the ultimate goal of STP. We
offer our systems consulting services in the areas of
 STP framework
 Legacy Consulting
 Client-Server Consulting
Legacy Maintenance and Modernization
In the Insurance industry, legacy systems play a key role

in supporting large-scale business operations. With our help, you
can maintain and modernize your legacy systems efficiently. We
have proven experience in managing legacy systems in insurance
process areas such as:
 Life Insurance Administrative Systems

 Annuity Systems
 Investment Systems
Custom Application Development
Custom-built applications are developed to address the

unique business requirements of your organization in e-Business,
T.Y.B.B.I. 48
web-based and client-server applications. We will help you

implement solutions across diverse platforms and technologies. Our
insurance specialists have development expertise in a wide range of
insurance process areas.
We provide services that help integrate information technology with
business processes using Web Services, IBM MQ Series, MS
BizTalk Server 2000 and BEA Integration Suite among others.
As part of our service offerings we also provide
Application Testing Services that cater to the customers’ needs
centred on failsafe application deployment.
Information Technology
The computing technology, networking technology and

advanced electronics together make today’s I.T. The convergence of
electronics and telecommunications created by devices like telex,
fax which the business world-wide has been using extensively over
last three decades. The convergence of computers and
telecommunications 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 data in electronic format voice (audio) and image (video)
also can be a controlling input to and output from a computer
device.
T.Y.B.B.I. 49
Hardware
Development in Information Technology have been

characterized by miniaturization and reducing cost with improved
performance and better reliability combined with shortened product
developments cycles, due to advances in chip technology.
The early use of huge computers during World War II

was for military purpose. The computer technology went hand in
hand with advances 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
forms the backbone of latest computers. With the feasibility of
circuits having large scale integration (LSI) and very large scale
laptops (Micro computers) and then to laptops and now to palmtops.
Software
Like the hardware, the computer languages (software)

have also undergone change. The software transitions 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 (4GLs like relational
databases) 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
T.Y.B.B.I. 50
systems for mainframes and mini computers then personal

computers came handy with operating systems like DOS, UNIX.
Mapping
Mapping technology can be used by insurers to meet

different needs, such as 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
few agency force in a particular area. Mapping is a very convenient
way to layer disparate information from databases to create pictures.
Maps can illustrate how many buildings are located in flood plain,
or whether two buildings are covered bye the same insurer’s fire
policies are close by each other and thus present a potential double
loss if fire breaks out in one of them.
Call Centre Technology
Good customer service is a crucial element in gaining,

maintaining and retaining profitable customer. Call centre concept
based on Interactive Voice Response Service (IVRS) is gaining
importance in this aspect. The primitive concept of Call Centre was
based on an enquiry system providing information services to
customers through telephone line answered by employees. The
totally automated Call Centre concept provides better service
through automated computerized exchange but lacks in flexibility
i.e. only predefined queries are serviced.
T.Y.B.B.I. 51
The insurance companies worldwide are accepting the

auto manual Call Centres as one of the important strategies for
Customer Relationship Management.
Video linking
A video linking facility between two remote units of an

insurance company or between an insurer and a broker allows
underwriters at one place and brokers at other unit to discuss risk
face to face. The video link helps maintain the personal
relationships between brokers and underwriters which is very
valued for insurance business and in turn would help to draw
business it would not have seen if people use telephone or fax alone
for contacting.
Cat Models
Catastrophic models use data from the recent spate of

natural disasters which help develop more predictions of insurer’s
property exposures in future disasters. Using this data curious
“What-if” scenarios of probable maximum loss (PML) using the
best estimate available at an insurers exposures are tested. Finally
an underwriting policy that limits the company exposure to
catastrophic losses is implemented. Other information such as
where the faults are, construction specification, soil type, amount of
ground motion likely to occur at a given site is also used in the
models.
T.Y.B.B.I. 52
This new technology is helping insurance companies to

better understand their exposure to Mother Nature perils with more
accurate computer models providing precise information on
catastrophic exposures. This helps insurers and reinsures to better
access their catastrophic exposures and as a result, raise rates in
certain areas. This could mean that fewer insurance companies
would be seriously hurt or driven out of the market by a single
catastrophic event and the buyer will benefit from a stronger
insurance industry. The technology may show insurers that a given
type of property or a specific area is so susceptible to catastrophes
that they will refuse to underwrite such risks at all.
Insurance and Electronic Commerce
Enormous opportunities are being created by the

Internets new connectivity such as improving customer service,
reducing cycle time, becoming more cost effective, and selling
goods, services, or information to an expanded global customer
base. As entire industries are being reshaped and the rules for
competition are changing, enterprises need to re-think the strategic
fundamentals of their business in order to be successful. E-business
is first about business, rather than technology. Technology, while
important, is the less difficult part. The difficult part is managing
the changes in business strategies and institutional processes that
are needed for enterprises to take advantage of e-business, or to
avoid out to competitors who do so.
T.Y.B.B.I. 53
E-insurance Benefits
E-insurance will derive multiple benefits to the insurer like,
 Information collection will be better and cheaper

 Insurance of policy and settlement of claims will be faster
 New Ways of doing Business in a competitive market
 Flexible Pricing and Customized Service
 Global Accessibility i.e. Lapse of Physical Boundaries
 Increased Sales without additional sales force
 Immediate Premium Collection and Funds Transfer
 Reduced cost per transaction
 24*7 Availability
 Improved Service
 Real Time Knowledge Base Building
T.Y.B.B.I. 54
Conclusion
The Technology in Insurance has grown through their

performance, restructuring policy and their efficiency in providing
the large amount of insurance services with the help of technology
as their tool.
The supporting technology require will be a real time,

rather than batch, longitudinal rather than episode; will require
connectivity rather than be self-contained; will rely on large
relational databases.
Today’s consumers do not like to wait. Insurance

companies that are unable to react to their customers demands will
lose market share to their competitors that can. The question now
facing insurance companies is no longer if they should take
advantage of the internet, but how should they do it. Should you
adapt your existing products or create internet specific insurance
products and brands? Do you focus your efforts on distribution or
service?
List of Acronyms
T.Y.B.B.I. 55
MIS – Management Information System

MAN – Metropolitan Area Network
WAN – Wide Area Network
ISP’s – Internet Service Providers
LAN – Local Area Network
XML – Extensible Mark-up Language
Protocols – Used for communication purpose
COBOL – Common Business Oriented Language
UML – Unified Modelling Language
VB.NET – Visual Basic.Net
Bibliography
T.Y.B.B.I. 56
www.Technology & Insurance.org
www.ITinsurance.com
www.microsoft.org
www.ICFAIpress.org
www.macromedia.com
T.Y.B.B.I. 57

Technology in Insurance

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Technology in Insurance

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Technology in Insurance

 Components of Total Underwriting System

 IT & Life Insurance

 Technology & Cyber Insurance in India

 Impact of Technology on Insurers

1. The nature of services to be rendered to the policyholders.

EVALUTION OF POLICY BOND

The first service rendered by a life insurance company to the

1. Premium master cards

Premiums master cards were utilized to account for the premiums

With the advent of the micro processors, the addressograph

Thus, in one year, the number of transactions in respect of the premium

First Generation: Screening Systems

These were developed by larger companies in the 1970’s to

Second Generation: Information Display Systems

These appeared in the mid 1980’s. They were designed to save

Third Generation: Initial Underwriting Systems

These systems were developed to improve the service to the

Fourth Generation: Knowledge based Decision Assistance Tools

This is relatively a new system which provides underwriters

Fifth Generation: Total Underwriting Systems

The fifth generation of underwriting systems encompasses &

Components of a Total Underwriting System

A total underwriting system needs to address the entire decision

Initial Data Entry

This is where information from the application is entered into

The second component is screening. This involves taking

Applications that are not approved by screening flow into the

Since underwriting is an iterative process with information

examination, blood pressure, etc.) to be entered into system directly from

Underwriters need certain tools to process their cases

The status lets non-underwriters to review the selected case

The information display component gives online access to

Impairment Knowledge-based Systems

The next component is the impairment underwriting

This component generates administrative & other reports on the

Underwriting systems have many benefits. For underwriters

Knowledge-based systems can improve underwriter

readily available, as is information on specific underwriting decision

As awareness of quality began growing among policyholders in

Up gradation of technology also helped in another direction.

managers at all levels. This helps management to review performance

To bring out revolutionary changes in communication to

of information on the products & services. The corporation has plans to

Technology is the most important tool in another very

With the increasing complexity of products both life insurance

Market research is another area where information technology

IT & Life Insurance

Technology is remaking the insurance industry as companies of

Forrester research estimates that at least $11 billion of the

For technology’s sake technology has enabled the companies to

efficient. The agent is a key part of the operation, particularly in handling

Technology & Cyber Insurance in India

The opening of the insurance industry in India would boost

business over the internet are exposed to a variety of new, unpredictable

Cyberspace presents unique challenges to risk managers for

For safe business transaction, what is needed is a secure legal

advertising liability: As e-commerce grows, these risks can be triggered

Impact of Technology on Insures

client to initial online self-services experience into something more

They should show some positive incentives to bring customers

Despite the current limits to online self-services, as the internet

Losses due to insurance fraud and abuse affect every business