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Indian Insurance Sector -

Issues and ChallengesOpening up of the insurance sector will fostercompetition, innovation and product variations.

However, in this context one has to consider variousissues at stake.

These include demand for pension plan, separatenessof banking from insurance sector, role of IT, possibleuse of postal network for selling insurance products

 And above all, the role of Insurance Regulatory  Authority.

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 After independence, the business of India Insurance

grew at a faster place ascompetition amongst the Indian

companies intensified. Thedecision of nationalization of lifeinsurance business took place in1956 when 245 India and foreign

insurance provident societies were first merged and then

nationalized. It paved the way towards the establishment of 

Life Insurance was to raise themuch needed funds for rapid

industrialization and self-reliance in heavy industries.

   

eneral Insurance followed suitand 196 ¡   ; the Insurance Act was

amended to allow for socialcontrol over the generalinsurance business.

Subsequently in 197 ¢   , non-lifeinsurance business was

nationalized and the   

eneralInsurance £  

usiness(Nationalization) Act, 1972 was

promulgated.

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Insurance sector - Hurdles:

Insurance companies create products andgo out to find customers. They do not create

products that the market wants.

Insurance awareness among the generalpublic is low.

Term- Insurance Plants are notpromoted.

Unit -linked assurances are not available.

Insurance covers are expensive. Inefficientmanagement and low investment yield are

responsible for the high premium charged by Indian Insurance companies Investment

restrictions have been responsible for 10w yields.

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Returns fromInsurance Products

are low.

There is a dearth of innovative and buyer-friendly 

insurance products.

Most agents anddevelopment officersare interested only in

producing new 

 business servicing.Existing customers

satisfactorily has not been a priority for

them

There is no marketresearch worth the

name andcomputerization is

 woefully inade uate.

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Need of the Hour - Operational excellence

Process innovation:

� Further rationalization of core policy administration,underwriting and claims management processes to formµmega processes¶ across multiple products will enhance scale,

standardization and operational agility 

Service innovation:

� Only insurance organizations with the foresight to capturecritical client data at multiple stages of the customer

interaction lifecycle and to leverage this knowledge will fully realize cross-sell and up-sell opportunities and improvedservice capability 

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Technology innovation:

People factorsaside, regardless

of the sharedservices model

adopted by theinsurance org,innovation andsuccess within

technology environments will be supported by 

focusing on 3critical elements:

 A modularand

customizablepolicy 

administration, ratings andclaims engine

 A single

reporting and businessintelligence

enginestrategy 

Taking asingle view of the

customer

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Trends and opportunities

Process innovation:

� Process innovation involves re-engineering key operationalprocedures to identify duplication, inefficiencies or synergies in theform of insurance mega processes. Recent market trends includeusing offshore service providers to complete commoditized, non- value-add operational tasks and processing.

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Service innovation

Service innovation focuses on bringing insurers closer to

customers to increase

penetration and retentionthrough cross-selling or up-

selling product lines andimproving satisfaction.

 A modular and customizable policy administration, ratings and claims

solution

 A single reporting and businessintelligence engine strategy 

The all-important single customer view 

Technology innovation:

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