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INTRODUCTION TO E-INSURANCE

E-insurance can be broadly defined as the application of Internet and related information
technologies (IT) to the production and distribution of insurance services. In a narrower
sense, it can be defined as the provision of an insurance cover whereby an insurance
policy is solicited, offered, negotiated and contracted online. While payment, policy
delivery and claims processing may all be done online as well, technical and regulatory
constraints may not allow these elements to be subjected to full e-commerce application
in certain countries.
However, insurance legislation worldwide is being continuously modified to
accommodate online payment and policy delivery, and outside the discussion of e-
insurance metrics, these elements should be included in the narrow definition. The
anticipated efficiency effect of e-insurance is twofold:-
• E-insurance should reduce internal administration and management costs by
automating business processes, permitting real-time networking of company
departments, and improving management information.
• It should reduce the commissions paid to intermediaries since it can be sold
directly to clients. For insurance sold to individuals, agents typically receive a
commission of 10 to 15 percent for non-life policy sales and renewals and from
35 to 100 percent for life insurance policies in the first policy year, but much less
on renewal.
However, some of the income gained in commissions that are not paid to intermediaries
must be spent on online customer acquisition and marketing. Assuming cost savings do
materialize in a competitive market, they would be passed on to consumers thereby
allowing them to buy more insurance, or other products or services.
Since insurance penetration (Premiums as a percentage of GDP) in developing countries
is only of that in developed countries, the efficiency gains created by e-insurance may
contribute substantially to growth in insurance spending and thus intensify its
indisputable role in promoting trade and development.
Of the $2.5 trillion worth of global insurance premiums, about 1 percent could
qualify as e-insurance, according to the broad definition. Little, if any of the premiums
earned in developing countries, could be described as e-insurance according to the

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narrow definition. In stark contrast, the majority of the $100 billion global reinsurance
business is traded using some form of electronic medium. Considered along with initial
reports indicating that online premium rates are more competitive, this could point to
acceleration in online distribution of insurance covers measured by the overall value of
insured assets. Considered along with initial reports indicating that online premium rates
are more competitive, this could point to acceleration in online distribution of insurance
covers measured by the overall value of insured assets.
During the height of the dot.com euphoria, expectations for e-insurance growth were very
strong, and many insurance and reinsurance companies and intermediaries have
continued to invest in their e-commerce capabilities. Swiss Re’s research arm
SIGMA estimates that by 2007 e-insurance will have 5 to 10 percent market share in
standardized personal lines insurance
Figure 1 indicates forecasts that 7 percent of global premiums will qualify as e-insurance
by 2007.

Figure 1.

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NEED OF E-INSURANCE:-

Recent developments in information technology (IT) and web-enabled systems have


made it easier for insurers to run global operations in a way that would not have been
possible even two years ago. Insurers are already reaping advantages from IT
improvements in internal efficiencies in areas as diverse as underwriting, claims, policy
administration, financial reporting and human resources. But efficiencies go beyond these
internal ones. In the coming years, the internet will have at least two major effects on the
insurance industry: cost efficiencies and broader distribution. These efficiencies will
come as insurers experience a greater availability of data from the internet and the
transfer of business processes from manual-related or computer-related systems to newer
communication related systems.
Such internet-style technology will reduce cost, reduce the level of effort and improve
accessibility to large-scale data. Data accumulation becomes much easier under the
internet approach and thus affects costs and value of insurance. The internet will bring
insurers to a whole new audience, and will allow them to sample new markets that would
have been too expensive to enter. Making information available to potential customers
and the ability to market products to the new audience will have a tremendous impact.

THE WEBSITE:-COMPARISON OF INSURANCE INDUSTRIES OFFERING


V/S CUSTOMER EXPECTATION

Today’s customers have certain basic expectations about their insurer’s website without
which they will turn to other more interactive sites. As the website is a touch point for
consumers and insurers; it should have the following basic features:
• Functionality:
Many insurers have made plans to add capabilities to their sites such as problem
resolution. But such functions as claims handling, self-administration of policies, online
billing and bill payment may have not yet been executed to the satisfaction of the site
visitor.

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• Timely response:
Today’s sophisticated web surfers do not complain when they get a lack of response from
an insurer’s website – they just take their business someplace else.
The Customer Respect Group discovered this gaffe in its “Summer 2004 Online
Customer Respect Study”. 27% of carriers surveyed do not reply at all to online inquiries
and another 25% answer only about half of their inquiries. As a result online users will
abandon a visit to a site and go to a competitor’s site to make a purchase if they have a
less than satisfying experience. Response time should therefore be addressed more
seriously.

• Financial products and services features:


Customers will visit an insurance site more often if it has a wider breadth of financial
products and service features. For example, Nationwide, Usaa and Prudential insurance
companies (all of which offer an extensive array of products that can be bought online)
average three visits per customer each month, as opposed to one monthly visit per user to
sites with narrower offerings.
Moreover, in another survey supporting this point of view, it appeared that 45% of
consumers are less likely to use their insurance sites if products and services such as
financial aggregation are provided elsewhere.

• Connectivity and easy site navigation:


Insurers need to ensure that the consumer’s online experience is as convenient as
possible. In “Policyholder Self Service” report by Gomez Inc. it was established that
currently the average visit to insurance sites lasts about 10 minutes, which means that
insurers have a very short time in which to impress the consumer with the value of their
site before they move on. In that same report it was also found that more than half of
those who were unsuccessful at performing self service say that they are unlikely to try
again, while successful self service will likely draw people back (74.7%)
It can be concluded from the above that the basics of an attractive website is still not
perfected by established insurers, which sheds some light on why the number of online
customers are not yet up to expectation.

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ADOPTION OF E-COMMERCE TO INSURANCE:-
Certain industries, such as travel, banking, and retail, have embraced the emerging
technologies that make electronic commerce possible. Some firms have gone as far as
completely revamping their business processes. The insurance industry has made real
progress in implementing some of the technologies of e-commerce, but the industry has
been slow to adopt others. This is because insurers must carefully select which
applications to implement, weighing the costs and benefits. Some applications of e-
commerce used in other industries do not easily fit the business of insurance. Many
others, however, present insurers with interesting possibilities .
A typical e-commerce transaction can be divided into the following five phases
1. Search
2. Valuation
3. Logistics
4. Transaction
5. After-sales services
The first four stages of e-commerce described above directly lend themselves to
analogous steps for purchasing an insurance product online. Consumers search from
different insurance companies for products that they are willing to purchase. They
evaluate the products from different companies to determine the one which best suits
their needs. The insurance company then conveys the terms of the insurance policy to the
customer and the customer responds with details including a description of the entity
being insured, the terms and the duration of the insurance policy. When both the
customer and insurance company agree to go ahead with the transaction, the buyer pays
the initial premium to the insurance company and the policy certificate is sent to the
buyer.
The after sales phase of e-insurance is however considerably different from e-commerce.
In e-commerce, human intervention is required for activities in the post-sales phase such
as repair or replacement of parts. However, a major interaction between an insurer and
the insurance company occurs in the post-sales phase if the insurer submits a claim for
the amount insured. Online claim settlement involves complex interactions between the

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insurer, the insurance company and possibly legal and judicial authorities and, in an
automated environment, requires close interactions between humans and automated
agents. This phase is therefore the most difficult to implement over the Internet and
online insurance sites mostly rely on human intervention for this phase.
Insurance companies offering proper services through Internet can be classified into the
following categories:
• Web Sites: Almost every insurance company has homepage providing
information about the company and products. However, these homepages are little
more than passive online versions of the company’s brochures.
• Product Portals: Portals are sites that provide a collection of links to sites of
interest.
• Point-of-Sale Portals: Unlike most other commodities, the sale of insurance
products is initiated by the sellers. Certain sits exploit this approach by offering
insurance products while selling insurable goods such as cars or while providing
information on health or college education.
• Intermediate Brokers: Brokers are intermediate sites that do not sell insurance
products directly but assist clients in matching their requirements with the policies
offered by insurance companies.
• Reverse Auction: In this case, the client is usually an organization interested in
group insurance. The client announces its requirements and selects the best offer
made by an insurance company.
• Aggregators: Aggregators are sites that compare quotes from different insurance
companies. The service is often supplemented with general information on
products as well.

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THE INTERNET AND INSURANCE: IMPACT AND IMPLICATIONS :-

The Internet and life insurance: impact and implications

Current position of Internet usage by life insurance companies


Stages of incorporation of Internet into existing businesses can be broadly categorized
into four main stages.
• Web Presence Stage
To obtain on-line quotes on a contract that they may be interested in and the activities
of the company are largely targeted activities. However there is no processing of the
information past this stage and a customer must obtain an application form to process the
transaction any further.
• Interaction Stage
This is where a company uses web pages to provide information about their products and
services i.e. corporate information, to include financial statements and balance sheets.
This stage is very basic and apart from raising brand awareness, there is no real
significant impact and incorporation into existing businesses.
• Transaction stage
This is where the company has enhanced information technology and may even have
facilities for customers to place orders and transactions
• Enaction stage
Here the company has used the net and IT, to redefine their business and are known as
e-enabled businesses. The emphasis is on interactive customer relationship management
and full integration of Internet facilities into the company. An example of such a
company might be Cisco systems.
Currently most companies are in the interaction stage and thus need to upgrade their
business value by making the Internet an integral part of their business value and despite
the insurance industry’s hesitancy to embrace the Internet as a channel for distribution,
the outlook over the next five years is very positive.
“While the online insurance marketplace represented only about $1.9 billion in premiums
($1.6 billion net-influenced sales and $0.3 billion online sales) in 1999, this market is

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expected to grow to $11.1 billion in premiums ($7 billion net-influenced sales and $4.1
billion online sales) by 2003.”

Implications for life companies


Survival of the fittest
One possible impact of the Internet in the future will be the position whereby only a small
number of companies shall exist owing to economies of scale in commoditization.
Having established a strong brand, their support services for their products will be diverse
and be innovative and technological. Inclusion a mutichannel distribution strategy along
with bundling a variety of secondary related products will help them to provide insurance
products for both the long and the short term.
These companies will be the result of the merger and acquisition of several existing
financial companies and may be a global venture. Profit margins although deliberately
kept low will exist and the emphasis shall be on high volume, minimum unit cost sales,
with heavy investment of capital in advanced technology. The target sector will be the
average person who has relatively simple insurance needs.
Customers may find that loyalty discounts exists and they shall be quite happy to
purchase other products from these big market players.
Specialisation
Here each company will choose to concentrate on their core business competencies
outsourcing non-critical components and leaving the distribution of their products to
independent firms, such as supermarkets, who have a wider consumer base. There shall
be a trend towards a virtual office environment.
Communication between manufacturers and distributors (B2B) would be by using
extranet facilities and allow one to one marketing. It will be imperative, from a
competitive point of view, for insurers, to offer online transactive services and to
participate in B2B online exchanges. On the positive side, the expansion of this B2B e-
commerce should result in cost-savings for policy administration.
The industry would see a deregulation with branding and diversity of the distributor’s
customer base becoming key sources of competitive advantage. ‘White label’ products
would become increasingly common as competition increases and new players emerge.

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The resulting effects will be the demise of many small and medium sized companies and
a reduction in the number of Independent Financial Advisors.
Team as well as self-education support in the form of information available to the
customer on the Internet. As innovative products and quality of service become
overriding issues, administration becomes complex and expensive and indeed customers
may choose to forms C2C alliances to sell second hand endowments, for example.
A Niche scenario
As the number of people surfing on-line increases every day and wealthier and more
educated customers display sophistication about them a niche market might develop in
the future to meet the complex financial requirements of such customers, who have
complex financial needs. These needs will include continual personal expert advice
through channels such as Independent Financial Advisors or a Direct Sales Force
Team as well as self-education support in the form of information available to the
customer on the Internet. As innovative products and quality of service become
overriding issues, administration becomes complex and expensive and indeed customers
may choose to forms C2C alliances to sell second hand endowments, for example.

The Internet and other markets: impact and implications


Impact on insurance brokers
The market in which insurance brokers operate is very diverse. Consequently, the
potential of e-commerce is also diverse. An investment broker will advise on which type
of investment product or investment fund matches a customer’s risk tolerances and
personal circumstances, including tax issues. These factors are variable and hence the
broker is, from a business point of view, in a good position.
Moreover, customers are aware that insurance is a necessity and not a luxury and hence
are prepared to take time to seek advice in relation to a lower-cost best value approach.
Within the corporate market, brokers are aware of the importance of a best value
approach in terms of cost and creditworthiness. Brokers also advise on corporate pension
issues in terms of selection of investment managers and assessment of solvency risk.
Direct dealing insurers however, who promote cutting out the middleman, are replacing
the role of the non-life broker.

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Moreover, the position of the smaller retail insurance broker is very different to their
larger competitors.
By a combination of web-based marketing sites and the facility of transmission of data
between systems using a standard interchange facility may facilitate low cost electronic
trading for brokers which may be paramount to the survival of the smaller broker. Web-
enabled TVs would increase the potential market and thus provide even greater savings.
Also Internet usage allows an alternative to the traditional manned claims desk by
allowing free exchange of information on claims procedures. All, however, face the
threat of disintermediation and broker commission rates are under threat. This has been
partially due to the Internet, as customers “go direct” with the underwriters.
Brokers have responded to this by increasing the range of risk management services that
they offer. However, this still does not deal with the issue of the Internet being
responsible for edging them out of the market altogether, as the development of a
Universal Electronic Data Interchange allows communication between customers and
insurers that is more direct.
Not all is bad news. Indeed the Internet can be advantageous for the broker in terms
of providing them with a faster more cost efficient method of transferring information
globally and hence enabling them to pass on the savings to their customers and hence
attract more business.
The Internet is also changing the role of the broker from an intermediary to an
“infomediary” who conveys information to the customer. As markets become
increasingly dependent on standardised information such as the FTSE indices, the
broker becomes the supplier of information that affects these indices.
In essence, the Internet could speed up trends that are already present in the market.
If this is the case then only those brokers, who are continually re-evaluating their role
and its changes due to the Internet, will be able to reap the full benefits. Indeed
ignorance of this technology may result in significant consequences.
Implications for reinsurers
This topic is somewhat difficult to address, as reinsurers have minimal Internet based
activity. The problems they face are different to brokers as they are not involved so much
in the transfer of information and they are more the risk bearers. The ease of information

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sharing allows customers accounts to be continually monitored by reinsurers. It will also
mean that they are up to date, thus making renewal simpler. Moreover, this data is easily
manipulated and stored thus decreasing administrative costs.
Within the London market this advantage is readily apparent with organisations such as
Lloyd’s enjoying the increased efficiency gain. However, the Internet facilitates
competitors in the reinsurance industry such as the Bermuda reinsurance centre.
These centers have benefited greatly from the impact of the Internet as distance and
location has been a traditional barrier to entry. Furthermore, such centres are in anideal
situation to postulate legislation for newer forms of e-commerce that would
complement their existing tax position and hence generate even further business.
These competitors have undoubtedly affected the traditional market share that Lloyd’s
enjoys and thus it is imperative that such points should be considered.

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POTENTIAL EFFECT OF E-INSURANCE ON INSURANCE INSDUSTRY
Insurance and the broader area of financial services are industries where electronic
commerce will play a significant role. These information-intensive industries are fertile
ground for the play of forces that have spawned e-commerce. The evolution of the use of
ecommerce by insurance companies and intermediaries raises a number of issues with
respect to the impact of this technology on the industry and its regulation. Any discussion
of the impact of e-commerce on insurance must address some of the issues affecting the
major players in the insurance electronic marketplace1: Insurance company (Insurers),
Consumers, Insurance agents, Other service providers, and Government /Society (through
the supervisory authority).

Each group has a direct interest in the evolution of the electronic market. Each is affected
to some extent by the technological change that is revamping electronic commerce. The
interests and roles of these different stakeholders must be addressed so that change is
promoted and managed effectively, rather than impeded by those that feel threatened by
it.
Effect of E-commerce On Insurance Companies
Insurance companies have regarded the Internet mainly as another channel of distribution
for their products. Compared to online stock brokerage and online banking, development
of the Internet in the insurance industry has been somewhat cautious.
Websites mainly serve to provide information about the company and its products. Many
insurers especially in developing economies have not seized the opportunities created by
ecommerce for making all business processes more efficient, beginning with the online

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sale of policies. But the growing number of those who have embraced the technology is
most encouraging .
There are some factors, which make the online selling of insurance products difficult:-
1. The complexity of some products, e.g., tax-efficient life insurance policies, increases
the consumer’s need for specific advice. It has not yet been possible to automate the
provision of information; although it can be assumed that continuing advances in
technology will create new opportunities for automated solutions. The complexity of
many insurance products can often be reduced by design modifications.
2. In many cases, it is difficult to standardize claims settlement for example, as this
involves a large amount of investigation and decision-making. This process often
involves people and companies who are not in a contractual relation with the insurer.
3. The Internet is particularly suitable for products where contact with the company is
more frequent. Insurance is usually taken out infrequently, every couple of years or even
once in a lifetime. Once a policy has been concluded, with some types of insurance the
insurer and the policyholder have barely any contact, unless an insured event occurs.
Also, existing insurance policies can often only be cancelled with a certain amount of
effort. This makes the switch to an Internet insurer more difficult.
4. Many consumers still view the Internet as an insecure medium. This prevents large
transactions being concluded via the Internet, and it deters the transmission of
confidential information, both of which are essential aspects of insurance policies.
5. In personal line especially, regulatory hurdles make Internet distribution difficult. For
example, as e-commerce increases the number of cross border transactions, licensing
requirements in all jurisdictions where such transactions occur also apply.

Competition and Market Penetration


The Internet enables new entrants to the market to avoid the expensive and lengthy
process of setting up traditional distribution networks. E-commerce lowers market entry
barriers and increasing competitive pressure in the insurance industry.
In the past, many insurance products have been distributed mainly through captive agents
or independent brokers. Since enormous investments are needed to build up such a
distribution network, established insurers were generally well protected against new

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competitors. Now the Internet provides new companies with instant access to the
insurance market at an affordable cost. Market transparency is improving, since product
and price information is more readily available through the Internet. Lower market entry
barriers and higher market transparency are combining to intensify competition and force
prices down. This also makes it increasingly difficult for insurers to pass the
comparatively high costs of traditional distribution onto the prices it charges for its
products.
In life insurance especially, online distribution may change the nature of the
competition. Acquisition costs traditionally play a key role here. They often come to
more than 100% of the new premiums, and are only amortized over the course of a long
policy term. For new entrants to the market, such a big cost burden at the start of the
insurance contract is a major barrier to entry, as they are unable to draw on a constant
premium flow to finance new clients’ acquisition costs. If Internet insurers manage to
reduce these acquisition costs significantly, it would become far easier for them to break
into the market. On the other hand, Internet insurers need to attract clients through
advertising, and this entails substantial costs as well. Furthermore, a certain amount of
advice is normally required for many life insurance products, because of their transaction
volume and complexity.
Even if e-commerce lowers market entry barriers, start-up companies in particular need
to become sufficiently well known if they want to win significant market share. Another
important factor, particularly in the insurance industry, is that the client must have
confidence in the insurance company. Online sales still carry an element of uncertainty
for many clients. This is mainly because of unresolved legal aspects of online policy
conclusion and premium payment, as well as concerns about data protection. Therefore,
insurers with an established brand name have a competitive advantage, as they naturally
command a greater degree of confidence. New companies need to build up this goodwill
from scratch, and this usually involves high advertising and marketing expenses.
The current disadvantage experienced by new Internet insurers should gradually become
less important over time. First, confidence in the Internet as a distribution channel will
improve as its penetration increases. Second, newcomers will be able to build up their
weak reputations through secure ratings or alliances with well-known Internet brand

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names. Successful alliances for Internet insurers are feasible with online banks or online
brokers, as well as with quality portals such as AOL, Yahoo or Microsoft.
E-commerce enables established companies in other sectors to cross over into insurance.
Lateral entrants from other sectors can break into the insurance business with the help of
the Internet. The most likely candidates are companies who already have a well-known
brand name and strong customer loyalty. These companies, such as banks or internet
providers, could set up new, efficient e-commerce systems, without the burden of legacy
systems or conflicts with other distribution channels. They could also transfer their brand
name to the insurance industry and utilize existing sources of finance.

Benefits for Insurance Companies

The new e-commerce capabilities bring significant efficiency improvements in


distribution, administration and claims settlement. The biggest cost block for a non-life
insurer is usually claims payments. Online distribution brings a direct reduction in
distribution costs. Additional savings potential comes from using e-commerce to
automate business processes. This in turn brings reductions in administration and claims
settlement costs. Modern information technologies also bring cost savings for claims

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payments. For example, better data analysis may improve risk selection, while the
detection of insurance fraud and tighter control by partner companies can help to reduce
claims costs.
In life insurance, claims costs are much less than in non-life insurance, because of the
high savings component. Distribution costs represent the biggest cost block, which means
that the bulk of the cost savings can be achieved in distribution. However, many life
insurance products require a lot of advice, and are therefore only partly suited to pure
Internet distribution.
For traditional insurers, the need to adapt to the new e-commerce opportunities not only
entails direct cost, in the form of substantial investments in the new information and
communication technologies, but also the indirect costs of having to change their existing
business models. Companies have to revamp their business processes and corporate
structures, which leads to many different internal conflicts. Internet marketing threatens
traditional distribution channels and therefore tends to meet with strong resistance within
the company. Many insurers avoid this problem in the short term by not passing on to the
customer the efficiency gains created by electronic distribution. In some cases, the
salesperson even receives a commission if a client in his or her area takes out a contract
online. Some insurers pursue a dual strategy and try to establish a foothold in countries
where they have no significant market share by offering e-commerce solutions while still
maintaining the traditional distribution channels in their home market. This is not a
strategy for long-term success; however, as the potential efficiency gains in the home
market are abandoned.
Insurers selling over the Internet will have a substantial cost advantage over the lifetime
of a customer, relative to non-internet based insurers these efficiencies are primarily
driven by reduced sales costs, lower customer service costs, and cheaper and better
information gathering about the customer. At the same time, the use of e-commerce will
demand the progression and integration of various components of insurers’ information
systems, many of which are still wedded to legacy mainframe platforms that are
becoming increasingly inefficient.
According to Ernst and Young (1999), the average traditional transaction costs is $90,
while the average transaction cost through a web enabled customer portal is $4.44.

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Figure shows the costs of traditional vs. online purchasing processes.

The structure of many insurance markets and the role of intermediaries (e.g., insurance
agents) will change dramatically. Currently, there are insurance malls that allow one to
obtain quotes from a number of companies almost instantaneously. If the major functions
of insurance agents have been information transmission and facilitating transactions,
ecommerce will make these functions much easier and less expensive for insurers and
consumers. Certain agent functions will be disinter-mediated1 or replaced by an
electronic market. The traditional agent role will likely be diminished for standardized,
commodity like products such as term-life, homeowners, renters, and auto insurance.
Electronic commerce will further the decreasing use of the independent agency system
relative to exclusive agent and direct-response distribution systems. At the same time, the
insurance agent’s role may be enhanced in advising consumers on how to optimize their
insurance purchases and in dealing with insurers in areas such as claims settlement,
potentially valuable services for consumers.
Another interesting aspect of the economics of the Internet is the existence of so-called
network externalities. That is, the network becomes more valuable the more people are
connected to it. With the increased value of connection comes the decreased cost of

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distribution. Products with relatively high fixed costs and low value (such as travel,
credit, or burial insurance) are relatively expensive to produce. Those customers pay a
high price per dollar of coverage for these products. The Internet allows the disinter-
mediation of this relatively high overhead for these low face-value products. This means
that prices can be lowered and more insurance sold by reducing the transaction costs of
the exchange. Increased access through e-commerce also may prompt some consumers to
purchase broader, high-value insurance products to manage their risk
Top Obstacles And Concerns For Insurance Companies
In view of trends concerning the growth of e-commerce in the general economy, it is
interesting to consider what the impact has been and is likely to be for the insurance
industry in particular. Although other online financial services have already taken off
quite vigorously, the insurance industry’s involvement with and commitment to
electronic commerce lags far behind competitors in the banking and brokerage industries.
Top obstacles for the insurance industry:
• Resistance to change
• Threat of agent/broker disintermediation
• Lack of technology/regulatory hindrances
• Threat of insurance company disintermediation
• Lack of industry vendor solutions

Top e–commerce concerns:


• Costs/impacts of moving off legacy systems
• Impact of legacy channel investments
• Lack of skilled information technology personnel
• Lack of e-business strategy
• Lack of enterprise technology architecture
It is widely recognized that e-commerce will enable insurers to significantly lower costs,
realize business process efficiencies, improve customer service and brand loyalty, and
enable insurers to better position themselves competitively.

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However, insurers cite as top obstacles factors such as resistance to change, threat of
agent/broker/company disintermediation, lack of technology infrastructure, regulatory
hindrances, and lack of industry vendor solutions.
Insurance Products Suitable For E-Commerce
Not all insurance products are equally suited to Internet distribution. Their suitability
depends chiefly on how much advice is required. The more complex the product and the
bigger its financial scale or transaction volume, the greater the client’s willingness to pay
for advice. Products that are particularly suitable for marketing on the Internet are those
that can be described and rated using a small number of parameters, such as motor,
private liability, homeowners, household contents and term life insurance. These types of
cover are also suitable for online price comparisons, which make the Internet even more
attractive for potential clients.
E-commerce also will have implications for the sale of more unique and complex
insurance and reinsurance products particularly those purchased by commercial
enterprises. These transactions rely heavily on information and communication and e-
commerce can make this process more efficient. At the same time, the sale and servicing
of complex insurance products will require different kinds of networks appropriate for
individualized transactions. Security will be an important consideration here given the
large amounts of insurance and proprietary information at stake.
Products that are not necessarily suitable for online marketing include most life and
pension products, health insurance and many commercial lines. But even these products
can benefit from the huge opportunities for quality and service improvements presented
by ecommerce:
• If clients already have extensive product and risk expertise, the Internet can still
be used as a marketing tool, despite the high complexity and transaction volume.
“Internet team room”, for example, could support the consulting and negotiation
process.
• Even if the conclusion of the policy and the associated advisory services occur
with little or no online support, policy administration or claims settlement can still
benefit from such support. For example, a client may seek independent advice

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when choosing a private health insurer, but is prepared to use online facilities to
process and settle doctors’ bills.
• Brokers can use e-commerce solutions to bundle together the needs of a large
number of clients, handle the administration themselves, and then forward the
data to the insurer.
• Modern communication technologies allow more personalized products, faster
response times, greater flexibility in covers and better support for risk
management.
However, there are ongoing debates about the suitability of individual insurance product
for e-commerce. The conventional wisdom is that obligatory, very simple or low-price
products do not require a seller’s push and thus can be distributed through e-commerce.
The greatest demand is for motor vehicle insurance, followed by health, homeowner’s
and term life insurance. The very desired product to be sold on the net is shown in the
Figure, whereas insurers selling online directly to clients are offering a very restricted
portfolio of products.

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New Value Creation for Insurers
The use of Internet technologies in the insurance industry is not just limited to
distribution, but also has a fundamental impact on almost all other production areas. The
integration of all business processes in a unified information flow significantly reduces
the cost of gathering and analyzing information. Since the efficient processing of
information is a key factor for insurers in the creation of value, the use of new
information and communication technologies enables them to revamp and rationalize key
links in the value chain.
Newly established insurers are not burdened by legacy business systems and are able to
exploit modern information and communication technologies in order to set “best
practice” benchmarks for the entire industry. This will exert significant pressure on
established insurers to adapt their business model to the changing requirements for
greater efficiency, speed and quality of service.
In the past, the value creation of insurers has centered on the aspects of distribution,
administration and claims settlement. In these areas there are many routine tasks that
could be automated through the efficient use of information and communication
technologies. The task would therefore embody less value creation. In the future, insurers
will have to create a greater proportion of their added value through a higher standard of
service.
Pre-Internet and Internet-enabled Insurance
Internet and e-commerce technologies are already changing the structure of the insurance
industry. The magnitude of the change can be best appreciated by comparing Figure 2.10
and Figure 2.11. As shown in Figure 2.10, the pre-Internet insurance world is largely
linear, with individuals (personal lines) or businesses (commercial lines) moving risk to
insurers, sometimes directly, but more often through the intermediation of brokers and
agents. Intermediaries are responsible for processing more than 90 per cent of all
premiums collected. The application of information technology increases diagonally
down the chart and is most prevalent in the reinsurance sector.

21
Figure 2.11 visualizes an Internet-enabled insurance industry and market. Its main
characteristics are that technology can be evenly distributed and information
intermediation is no longer a necessity but a preference. Gone is the linear travel of
payments and risk information from client to (re)insurer. Buyers of personal and
commercial insurance and reinsurance can choose to pursue multiple paths to acquire
price and policy information. Insurers and reinsures have extended their reach through
their online incarnations. Brokers and agents may do so as well. Using data standards can
positively facilitate the resulting increase in communication and data exchange.

22
Agents and brokers were an irreplaceable link in the pre-Internet insurance industry.
Agents intermediated sales of policies to non-businesses, such as personal life insurance,
motor vehicle insurance, and homeowners insurance and various savings and investment
schemes. They also intermediated insurance for small and dismissed business. Brokers
intermediated insurance between large organizations, or businesses, and insurers, as well
as between insurers and reinsures. Their economic role was to enhance market efficiency
by diminishing information asymmetries between buyers and sellers caused by any of the
following situations :
• The insurer is not fully informed of the scope of the demand, or the insured is not
knowledgeable about the selection of insurance policies and prices available; or
• The insurer has not fully mastered the technical and economic details of the
proposed risk, or the insured does not clearly understand the insurance policy’s
proposed terms and conditions.
In practice, agents are generally authorized to sell policies from only one or a few
insurers. Further, the terms and policy wordings of different insurers, even if distributed

23
by the same agent, often do not match. To clarify these differences and enable cross-
comparisons is perhaps the most important role of the agent.
Outsourcing of Insurance Functions
New information and communication technologies are making it easier for insurers to
break up the value chain. Individual functions, such as underwriting, policy
administration, claims management, investment or risk management can be optimized
within the business divisions or outsourced to a rapidly growing number of specialized
external providers. Claims management, underwriting and some parts of risk
management are particularly suitable for outsourcing to specialized providers. Rising cost
pressure will force traditional providers to review their fully integrated business model.
Traditional insurers perform almost all stages of the value creation process themselves.
However, a number of functions in the value creation process may be outsourced or
assigned to specialized service providers at greater efficiency and lower costs. Examples
are listed in Figure 2.12.
It, also, shows the value chain of a typical insurer. Traditional insurers perform almost all
stages of the value creation process themselves. The bottom half of the figure provides a
list of specialized providers that handle individual functions in the disintegrated business
model.
This would allow insurers to concentrate on those links in the value chain they enjoy a
competitive advantage(s) .

24
Effects of E-commerce On Customers
E-commerce opens up new ways of reducing costs. Simultaneously hardening
competition will ensure that these benefits are passed on to the consumer. The Internet
offers a number of possibilities for increasing the value creation for consumers by means
of increased transparency and improved services, not just in the area of sales.
Consumers might believe that they can get different and better service though the
Internet. This can be seen today in a number of limited examples. The Internet user,
usually an above-average earner, well informed and price conscious, likes to have several
quotes to compare. Consumers can obtain quotes for a number of companies. This is the
idea behind the strategy of aggregators, also known as navigators, supermarket sites or
malls. In some cases, consumers can see rating agencies’ evaluations of insurers. The
Internet and outsourcing can provide additional cost savings to the consumer. By
removing layers of inefficiencies, technology can bring the customer closer to the
insurance contract.
Consumers will also obtain price comparisons for relatively generic contracts. For
example, for many online insurers, they can compare prices for annual renewable-term
life insurance. Or, they can compare insurers’ rates for a standard set of auto insurance
coverage for a given vehicle and driver characteristics.

25
Consumers also could have access to internal records to see where their claims are in
terms of payment, when their next annuity payment is due, and how their mutual fund is
performing. This can be done without calling a burdensome voice-mail system, being put
on hold, or finding a person who can give them the desired information efficiently.
In addition to personal lines, commercial lines are also likely to benefit from innovations
over the Internet. Large consumers of insurance could build or participate in outsourcing
market auctions. Certain relatively standardized blocks of business (fleet auto or workers’
compensation) could be put up for bid. This would disinter-mediate the broker or agent
from a number of transactions unless they were the real market makers. At the same time,
intermediaries (i.e., brokers and agents) could provide additional risk management advice
to commercial buyers and qualitative information about different insurers.
E-commerce can bring a substantial improvement to service quality.).Advantage are:-
• Continuous service (24 hours/7 days)
• Depth of available information, such as price comparisons, product information
• No restrictions imposed by national borders
• Faster response times
• Anonymity
• More transparency and speed of claims management
. These advantages virtually constitute a catalog of requirements for insurers’ successful
Internet presence. At present many websites are cluttered and difficult to navigate. Many
insurance websites do not allow price comparisons. If a client wants to compare quotes
from several companies, the client still has to fill in a questionnaire with each insurer.
Insurance clients may use the Internet to place a large risk themselves. These “reverse
auctions” are particularly suited to big corporate clients who put their insurance
requirements out to tender and then select the most competitive offer. A purchasing group
could also use this facility; an automobile association, for example, looking for the
cheapest insurance cover for its members. Although individual policies could be put out
to tender in personal lines, this would however require very efficient search engines or
aggregators on the part of the insurer, in order to keep the search costs for such small
risks within reasonable limits.

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INTERNET AND CURRENT ISSUEE IN THE INSURANCE INDUSTRY
The Internet is acting as a catalyst to accelerate change in many of the areas is identified
in the section before. In the following, role and effect of Internet on these issues are given
Globalization
The Internet is a global medium and increases the transparency of all products including
financial services products. The key and most difficult aspect, of entering a foreign
market is securing distribution channels. The Internet provides global distribution
potential, though there are still a number of barriers including tax regimes, regulatory
requirements, brand and cultural issues.
New Entrants
Low barriers to entry on the Internet facilitate new entrants. In the financial services
industry the major entry barrier is distribution, which the Internet can overcome. The
internet emphasizes the importance of competency in direct marketing techniques and
branding which encourages retailers to enter the market.
Regulation and Deregulation
The Internet acts as a ‘push’ mechanism for the government to pressurize the industry
into providing alternative cheaper solutions such as stakeholder pensions. At the same
time the Net ‘pulls’ regulatory change, as consumers become more demanding due to its
transparency. The Internet may lead to products becoming more customer-centric, with
few boundaries between say banking and insurance, which will influence the regulatory
environment.
Socio-cultural Changes
The Internet itself may have profound changes on working and living patterns, making
working lives even more flexible. This will influence the financial products people want
to buy, and when they want to buy it. For example long-term regular premium products
may no longer meet customer needs.

27
CHALLENGES
Due to the complexities involved in insurance processes, many companies fear that the
upfront costs of implementing an e-business solution may be too significant to warrant
the return on investment. The highly complex, detailed and multi-faceted nature of the
insurance business may also make the execution of these services appear overwhelming:
• The insurance cycle consists of numerous, detailed steps requiring extensive personal
data to complete many processes. The work consists of the generation of printed policies,
priced by compiling and analyzing reams of data, and then serviced with monthly paper
invoices for the lifetime of the customer or until a claim must be processed – on paper.
• The multiple variances and unique requirements among states and jurisdictions require
additional workarounds.
• Operational challenges are compounded by the ongoing struggle for compliance with
numerous, ever-changing regulations.
• After attempting to apply hardware and software packages that were cumbersome to
integrate and delivered minimal cost savings upon execution, many companies have been
left with a negative perception of paperless solution providers.
Attempting to attain the cost savings of paperless processing, many companies
subscribed to new technological solutions for core processes such as underwriting, claims
payment, policy administration and correspondent support. However, now these
companies are realizing that these technologies are on disparate systems supporting
segmented business sectors. Without connectivity between the information, companies
still rely on paper trails, data re-entry and costly courier/mailing services to bridge the
gaps. Because each unique database must be updated when information changes, even the
most basic policy transaction can take weeks to be processed.
Many proponents of e-business services are touting expensive new technologies and
difficult alterations to time-honored processing workflows. This has led to the perception
that, to eliminate paper, businesses must first buy in to something even more expensive
and difficult to implement. Fortunately, this is not the case when companies consider
these requirements before moving to an e-business services solution.
1

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REGULATORY AND SUPERVISORY ISSUES AND INSURANCE ON THE
INTERNET
The development of e-commerce, particularly on the Internet, presents new challenges
and concerns for insurance regulators and supervisors from developed, as well as
developing countries.
1. Background
The establishment of Internet-based insurance businesses offers both individual insurance
consumers and insurers and intermediaries potential efficiency and cost benefits. E-
insurance improves information symmetry and market transparency conditions and may
enhance competition that can lead to reduced prices.
For insurance regulators from developing countries, Internet-based supervisory tools may
increase efficiency by streamlining and speeding up reporting from insurance enterprises.
The possibilities offered by Internet communication can also greatly improve the delivery
of information to the public, insurers and local and international investors regarding
market conditions, rights and obligations. Also, secure Internet communication could be a
major tool for fostering international cooperation among regulators to improve the
security of insurance markets.
From the perspective of a supervisory authority in a developing country, major concerns
pertaining to e-insurance relate to cross-border activities and how to safeguard the
interests of consumers if they contract policies in other jurisdictions. However, as most
countries continue to require local licensing for insurers offering products in the domestic
market and prohibit cross-border activity, cross-border trade in personal lines and mass
insurance products has not expanded. Also, the cost of establishing e-insurance platforms,
along with related marketing costs, has deterred financially unsound operators from
establishing a significant web presence. E-insurance provides a new channel for
distributing insurance products that accelerates transaction processes, creating more
opportunities for fraud. It imposes on supervisors the burden of developing supervision
methods that permit quick responses to threats to the interests of insurance consumers.
However, the emergence of e-insurance does not fundamentally alter the principles on
which today’s insurance supervision is based. For regulators, the essential question
relating to e-insurance, as well as to other distribution methods, is how to protect

29
insurance consumers. Supervisors have therefore approached e-insurance operations in
the same way they supervise business and market of traditional insurance operations,
including rate monitoring, surveying the marketing of insurance products, responding to
public complaints, conducting consumer education and fraud monitoring. To tackle the
particularities of e-insurance supervision, the International Association of Insurance
Supervisors (IAIS) established a working group on e-commerceand the Internet. This
working group has issued “The Principles on the Supervision of Insurance Activities on
the Internet” that were approved by the IAIS at its annual conference in Cape Town on 10
October 2000. More generally, insurance supervisory authorities have the same concerns
as those regulating other e-businesses, particularly e-finance businesses: business
continuity, personal data privacy, payment procedures and security, electronic signatures
and IT platforms.

2. Supervision_of_established E-insurance_operations
E-insurance was once perceived as a distribution channel that would erase national
boundaries, since a single e-insurance platform established in one jurisdiction could offer
insurance services globally. This has not occurred, since in most countries the
establishment of a locally licensed business is required before insurance services can be
offered to domestic consumers. E-insurance platforms thus fall under the laws and
regulations of the respective jurisdictions where services are offered. More precisely,
existing regulations relating to market conduct determine how insurance providers may
conduct their business online. Competition rules and transparency and information
requirements form the core of market conduct regulations. Monitoring of rates, marketing
of insurance products, handling of public complaints, consumer education and fraud are
areas included under this aspect of supervision.
3. Approval_of_rates,_terms,_conditions and_contractual_documentation
In many developing countries, insurers are required to file rates, terms; conditions and
contractual documentation for approval by supervisory authorities before the underlying
product is offered to the public .E-insurance offerings too, are governed by such
Requirements. Often minimum and maximum rates are established for compulsory
individual insurance products such as motor vehicle insurance, workmen’s compensation

30
and some fire exposures. This is making it difficult for e-insurance operators to undercut
prices offered by traditional competitors. Supervisory authorities should pay particular
attention to the terms, conditions and contractual documentation that are presented on
insurance providers’ websites. The supervisory authority should ensure that the
contractual relationships have a legal basis that is not prejudicial to the interests of the
insured, since the insured does not generally participate in the negotiations relating to
policy clauses.
In the case of life insurance, supervisors should require that certain clauses be contained
in the policies published on websites. This includes clauses such as incontestability,
under which the insurer, after a certain period, can no longer contest statements made by
applicants. Also, a clause on no forfeiture should be shown. Such a clause protects the
cash value of the policy and provides for a grace period after the premium is due, during
which the policy cannot lapse. Such a clause is particularly pertinent for Internet
transactions where contracting and payment cannot occur at the same time. In the
developing country context, because of a general lack of insurance education and in order
to allow consumers to make informed decisions, a large degree of comparability between
contracts offered over the web should be maintained during the initial phase of
establishing e-insurance operations. Two other problems to be addressed are that
(a) Because of different hardware and software configurations, information presented on
the web may look different to different viewers, and
(b) Computer proficiency may lead to an unintended contractual result. Certain
guidelines regulating basic website content may be needed: for example, companies
could be required to inform who is the supervising body and who are the final risk
carriers in the cases where purchases are made from an agent’s or broker’s website.
Electronic signatures are important not only to confirm the existence of a contract but
also for specifying the starting date of the purchased insurance coverage. The validity and
effectiveness of a contract may be influenced by failures in data transmission. A
consumer may be under the impression that a contract is in place, while the insurer may
have received corrupted data that does not allow a policy to be issued. The existence of a
problem may not be obvious until the insured attempts to make claim under the non-
existent policy. Also, after a policy takes effect, it may be necessary to cancel, change or

31
complement it. Possible reasons for such an intervention include the discovery of an error
or a fundamental change in the insured’s risk profile. In such a case, it may be prudent to
ask whether online insurance products should carry a “return or exchange of goods
policy” and what kind of security is needed to prevent accidental or unauthorized
cancellation.
Also, supervisors should determine whether an insurer posting offerings on the Internet is
discriminating against certain categories of consumers. The traditional roles of
supervisors - to ensure that compulsory mass products or personal lines are affordable
and available, and to ensure the fair treatment of consumers - should be maintained with
regard to products offered on the Internet.
4. Marketing_of_E-insurance_products_
Supervisory bodies should preserve the fairness of information presented to consumers
and should attentively monitor the marketing of e-insurance products. Advertisements
should not be misleading, past experience should not be used to predict future results, and
products should not misrepresent benefits. Often insurers differentiate their products from
those of competitors by inaccurately describing or overstating advantages and benefits.
When an intermediary (an agent or broker) offers insurance products over the Internet,
such a seller should be required to obtain a license before establishing a presence on the
web. The licensing procedure should require the intermediary to undergo competence
tests, and the its e-insurance platform and website should be screened in the same way as
those established by insurers.
5. Combating_fraud_
Supervisors and regulators typically maintain that sales over the Internet increase
opportunities for insurance fraud, money laundering and the mis-selling of insurance
products. Some criminal groups engage in mass subscription of single policies under
false or given identities, redeeming the policies quickly thereafter in order to launder
money. As no direct contact is established between parties to an insurance contract
established via the Internet, e-insurance is an obvious target for money laundering
operations. Supervisors should ensure that e-insurance providers have sound mechanisms
in place for authenticating the identity of policyholders.

32
Also, to trace unsound or fraudulent operators and consumers, it is paramount that
supervisory authorities establish communication networks among themselves to share
information on such perpetrators. E-insurance, like other e-finance businesses, is at risk
from both internal and external security threats (infiltration, corruption and theft of
customer data files). Increased connectivity, in particular the connection of internal
networks with the Internet, introduces new vulnerabilities that require the deployment of
more advanced and effective security tools. Regulators should take steps to ensure that e-
insurance providers have the necessary security in place to protect the integrity of
information and the privacy and confidentiality of policyholders’ data, whether the data
storage is performed by the e-insurance provider or outsourced to Internet service
providers.
6. Public_Complaints
Internet-based reporting and monitoring of public complaints could prove an
indispensable tool for insurance supervisors. In a number of countries, formal offices
within the supervisory authority have been established to respond to insurance customers'
complaints. Their purpose is to streamline administrative procedures and sometimes to
serve as an alternative to judiciary proceedings. For supervisors, the monitoring of
complaints provides a very useful source of information for holding insurers responsible
for their offered services. To resolve complaints, supervisors should facilitate
communication between insurers and complaining customers. They should make sure
that companies have complied with the law and have responded promptly and fairly, and
they should inform insurers of problems that customers experience with contract
language, customer service or technical aspects of the website. Also, websites posting
insurance offerings should give contact information for the official authority dealing with
consumer complaints, and the site should clearly describe the mechanism for dispute
settlement. One of the simplest and most useful Internet tools is the FAQ (frequently
asked questions) page. A well-structured, comprehensive and easily navigable FAQ page
can satisfy the vast majority of public queries.
7. Consumer_education
To build consumer’s awareness and understanding of insurance and to improve market
efficiency, consumer education is paramount. E-insurance offerings should include

33
educational material to help consumers understand the products they buy. Also,
supervisory authorities should provide guidance and educational material on their
websites for consumers interested in purchasing insurance online. Insurance laws,
regulations and statistics can be made more easily and widely accessible through the
Internet. Most Latin American and Asian as well as many African and Central and
Eastern European insurance supervisory authorities have already established websites
designed to inform the public.
8. Supervisory_efficiency
The advantages that the electronic format offers for compiling and processing data allow
supervisors to devote more time and resources to analyzing periodic financial reporting
by insurers. Many supervisors in developing and emerging markets have dedicated web
sites for the submission and processing of reporting from insurance companies, and
several have developed Internet-based solutions. The Egyptian Insurance Supervisory
Authority is offering a financial reporting application, on a cooperative basis to its
counterparts in other African countries. Whenever an insurance provider establishes an e-
insurance operation in a country, a continuous dialogue should be established between
the e-insurer and the regulatory body to resolve areas of uncertainty before the operation
is launched, and to contribute to regulatory development. Authorities should continually
adapt their insurance legislation to the needs of their insurance consumers, taking into
account shifting consumer interests.
9. Supervising_cross-border E-insurance_activities
Among factors that have inhibited the development of cross-border e-insurance are the
wide variations regulatory and supervisory requirements between national and state
jurisdictions. If an e-insurance operator wants to offer services in several jurisdictions, it
needs to undergo obtain licenses and comply with the respective jurisdictions’
supervisory, tax and other authorities. It may be difficult to incorporate all the different
and sometimes contradictory requirements into a single e-insurance platform.
Recent studies have concluded that the actual differences between national approaches
are so extensive that e-insurers are unlikely to do business on a multicountry basis in the
near future. A more likely development would be increased targeted penetration of

34
national markets, with whose regulatory and supervisory requirements e-insurers are
familiar.
To avoid being indicted by a national supervisory authority for unlawfully offering
insurance services in that national market, e-insurers should clearly indicate on their
website their identity (address, home country) and the jurisdictions in which they are
legally permitted to provide insurance services. Also, e-insurance providers should post
strong specific disclaimers and risk warnings directed to citizens of countries where the
e-insurer is not authorized to operate. The home country supervisory authority should
oblige e-insurers to post such disclaimers and warnings.
The growth of cross-border e-insurance will necessitate a harmonization of regulatory
and supervisory frameworks, the recognition by insurers of home country regulators and
of home country complaints and dispute settlement mechanisms. Thus it will require
extensive cooperation between regulatory bodies around the world. Such developments
could be part of international negotiations on the opening of national financial markets
such as those conducted under the aegis of the World Trade Organization.

35
CONCLUSION
It is evident that the insurance industry is gearing up for e-insurance. Insurers,
intermediaries and reinsurers are investing in IT and trying to determine the proper
business model to follow. The fundamentally information heavy nature of the insurance
product will eventually make full e-business treatment a workable option provided that
efficiencies do materialise and are passed on to consumers. To succeed as einsurance, it
has to be cheaper and better than the traditional offline option. Today IT is widely used to
handle communication with intermediaries, policy processing, premium notices, market
analysis, sales forecast and accounting. Clearly, insurance is an information-intensive
enterprise and is thus suitable for ecommerce. Many insurers and intermediaries have
realised that e-insurance is not just about distributing insurance products on the internet
and have incorporated their e-business plans into their overall business strategy.Adopting
e-insurance and introducing change in IT systems is an incremental process, not an event,
and should stem from a fundamental need to re-engineer and modernise business
processes in order to better respond to client demand, as well as to the client’s own
adoption of internet technology. Substantial investments may be required and open
communication with stakeholders and policyholders should be a given. Insurers should
focus on growth as well as on cost reduction. Efficiencies may materialise, but forecasts
and calculations must not undermine the costs of online client acquisition, retention and
marketing, in particular if the insurer is of the internet pure-play type.
Website functionality is an issue in its own right, requiring a proper definition of
customer and product profiles. It also needs precise interlocking with powerful back-
office IT. Insurers and intermediaries need to examine how they can achieve the most
possible value added through an online presence. A fundamental problem of all insurance
websites is the low rate of repeat visits by existing customers. Increasing repeat visits, as
well as new traffic to the insurer’s website is essential.
Unfortunately, there is no clear recipe for success and e-insurers may have to look
very closely at the internet habits, demographics and lifestyles of their clients to find
answers. Once improvements are achieved, the existing e-insurance infrastructure must
be used to market financial products related to a customer’s insured assets, within the

36
limitations set by insurance and financial regulations of the market. Regular updates are a
requisite feature. Online traffic should be analyses from the point of view of how it can
be converted to income and whether the website and the general IT infrastructure are well
matched.
The same applies to insurance supervisors and regulators. The power of the internet
should be harnessed to improve consumer protection and education and awareness
building. It can also be used to receive and process periodic financial reports, thereby
freeing up resources for supervising management and insurance practices. Also, national
insurance supervisors can use internet technologies to communicate among themselves
and co-ordinate activities related to preventing fraud and money laundering.
E-insurance faces three serious challenges. The first is to redefine the relationships
between insurers and their agents and brokers. The second is to bring existing pre-internet
computerised data systems out of the back office and online, onto the World Wide Web.
The third challenge is to interface the business process of insurance to a fully functional
website given the fact that most existing customers are unlikely to make frequent repeat
visits to a site.
While ecommerce has not changed insurance products greatly, insurance companies
and brokers need to be innovative in their use of ecommerce channels to ensure that they
continue to meet public need and also to address public concerns (especially regarding
security). They also need to ensure that their ecommerce strategies meet the commercial
threats that may arise from new the “e-insurance”. There is a great need to ensure that
ecommerce channels are integrated properly with more conventional trading methods and
the online customer relationship is managed appropriately.
Ecommerce is here to stay and it is already the preferred mode of doing business
around the world. Proactive steps should be taken as there is no place for laggards in this
cyber world. Insurers need to realise that online insurance should not be taken lightly.
These endeavors require real commitment and leadership to reap the rewards of smarter,
more robust business processes.
Meanwhile, it appears that insurers are unfortunately not making the best out of the web.

37
REFERENCE:-

• Dasgupta, Prithviraj And Sengupta, Kasturi, (2002), “E-Commerce In The


Indian Insurance Industry: Prospects And Future,” Journal Of Electronic
Commerce Research

• IAIS, (2000), “Principles On The Supervision Of Insurance Activities On


The Internet,” International Association Of Insurance Supervisors.
(www.iaisweb.org).

• SwissRe, (2000), “The Impact Of E-Business On The Insurance Industry:


Pressure To Adapt – Chance To Reinvent,” Sigma Series No. 5, Zurich.

• UNCTAD, (2002), “E-Commerce And Development Report 2002,” Chapter


8, United Nations Conference On Trade And Development, United Nations,
New York. (http://r0.unctad.org/ecommerce/ecommerce_en/edr02_en.htm

• Swiss Re: “The impact of e-business on the insurance industry: Pressure to adapt
– chance to reinvent”, sigma No. 5/2000.

• Schmitz, Stefan, W., (2000), “The Effects Of Electronic Commerce On The


Structure Of Intermediation,” Journal Of Computer-Mediated
Communication, 5 (3). (http://www.ascusc.org/jcmc/vol5/issue3/schmitz.htmrl).

• Iran E-Commerce:
(http://www.iranecommerce.net/articles/insurance_managemen.htm)

• E-Business W@Tch, (2002), “ICT & E-Business In The Insurance And


Pension Funding Services Sector,” The European E-Business Market Watch,
Sector Report, No.5.
(http://www.empirica.biz/empirica/themen/ebusiness/documents/no05-ii_insurance.pdf).

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