Wednesday, 30 October 2013

Insurance e-repository - Leveraging Analytics
Following on the heels of the UIDAI initiative comes Insurance Repository, another innovative service.
Currently, a customer has to submit the entire set of KYC documents every time he or she takes up a new policy. Insurance Repository helps dematerialise the policy details, obviating the need to submit a new set of documents.
According to the new facility, a customer enrols with an Insurance Repository services vendor for an e-insurance account which accords the customer a unique ID. All the KYC-related information is fed into this account. After this, any new policy details will be electronically transmitted by the insurer to this account.
Payment and agent details can be viewed through this platform. The customer can also file complaints through this site.
However, the initiative has both pros and cons.


Although it may take time to dematerialise the old policies of the customers, which are in paper format, it’s a good initiative as it helps to reduce the cost of administrative overheads.
This should also help reduce premium rates to some extent in the long run. As a good early bird offer, the insurers should offer a small incentive for e-insurance account opening.
It can track policies across insurers, so that customers can compare theservices in a better manner.
Policy terms and conditions have always been printed in small-sized font. Insurers should now have enough space to print in bigger sizes. The Insurance Regulatory and Development Authority (IRDA) can also think about how to overcome the challenges that were faced earlier due to lack of space and the costs involved.
Undelivered policies are a big problem for insurance companies. E-insurance is one way of dealing with this. Sometimes, undelivered policies could actually be dummy documents used in rackets to make false claims.
Money, time and effort are wasted to store insurance policies, adding to administrative costs. The loss of policies has its costs: inserting an advertisement in the papers, preparing indemnity bonds, and so on. All this can be avoided through e-insurance.
The insurance sector is still struggling to overcome the penetration challenges even after a decade. One reason for this is the difficulty in tracking customer behaviour as the data is only available with the company, or with the IRDA. It’s too big a project for the IRDA to handle.
Now it is possible to keep track of customers across companies in the form of small data marts to analyse by IRDA or through the Insurance Repository services or insurers. This kind of data analysis can help study customer behaviour across products, their investment pattern, loyalty, influence of the agent/distributor/online purchase, premium payment pattern, and so on. This in turn can help customers and insurers plan well across segments. Advanced techniques such as like data mining, self- organising maps and so on can help categorise the customers.
All these analyses can be done without loss of privacy and without revealing competitive information as it is a study only at the macro level; no sensitive information is given out. This, in turn, can help customers, the IRDA, insurance companies, third party administrators, brokers and agents frame new strategies to improve the industry.


It is better to keep track of the proportion of usage based on customer profile analysis;disproportionate usage would sound a warning.
There have been instances when a customer has been issued a policy without his/her own knowledge.
In such cases, fraudsters would misuse documents submitted for some other purpose like opening of a bank account or a credit card application, for this purpose. Or, forged documents are used to compromise the KYC.
Since e-insurance accounts call for one-time KYC, there is potential for fraud. The way to get around this is to impose more stringent norms for KYC so that authenticity is verified in multiple ways like calling customers and visiting them in person.
Also, the process of dematerialising old paper policies should be speeded up. Efforts to integrate the demat account between e-insurance and SEBI, banks are worth considering.
With the e-insurance account becoming like a bank account, and insurance policies having a good investment component, sharing of access details with agents or third parties could be dangerous. Hence, insurers and repository companies should adopt best practices from credit card companies and online banking services.
Although internet has good reach across India, not all rural people have access to it. Financial literacy is yet to catch up.
Hence, the much sought after issues in the insurance sector such as rural penetration and micro insurance policies may have to wait for a while to get into demat stage.
However, insurers and insurance repository companies need to keep a watch on rural usage.
Earlier, insurance policies were delivered to the residence of the rural customer. Under the pretence of getting them the all-inclusive e-insurance account, fraudsters could easily fool rural customers. Flagging such scenarios can help act in the interest of rural beneficiaries.
An overall check by pooling the accounts to avoid duplicate e-insurance account will be a good initiative.
There are instances of people having multiple PAN cards. That should not be repeated for e-insurance accounts. Severe penalties can act as a deterrent.