Computerization and the PSU insurance giants

Smitha M

The insurance sector which was nationalized in the year 1956 was opened for

foreign investments in the year 2000.

The insurance sector in India can be divided broadly into life and non-life

insurance. Pre 2000 the life segment of the insurance sector was the strong hold

of Life Insurance Corporation (LIC) and the non-life insurance sector was the

stronghold of General Insurance Corporation ( GIC) and its four subsidiaries.

With the opening up of the segment the life segment of the insurance sector

has had 13 new entities in the past three years.

Fig Market Share

* Fig shows the market share in terms of new business underwritten.

In a short span of three years the private players has managed to capture a 8

per cent market share. What is even more starling is that till 2002 these

players only had a market share of 2 per cent.

The non- life insurance segment has seen an increase of 20 per cent on gross

premium levels. Before 2000 the non life segment was dominated by the PSU, GIC

and its four subsidies: New India Assurance (NIA), United India Insurance (UII),

National Insurance (NI) and Oriental Insurance (OI). The private players have

gained almost 10 per cent market share in the last three years.

 Fig: Market share of Non-life insurance

The market share of private players was 3 per cent in 2001-02.

Computerization in LIC

The 1990s saw LIC aggressively using IT to improve performance. It was one of

the first few firms in India to start using IT. Way back in 1965 LIC had started

using the main frame systems. But most of the processes were still manual and

error prone.

The 1980s was the time LIC started using computers for back end processing.

In 1995 front- end processing was introduced. The networking of LIC branches

started in 1997. So far the firm has spent between Rs. 80-100 crores on this

project

Fig : Organizational Structure of LIC

The present status of the LIC networking project:

• All the 100 divisional offices have achieved 100 per cent computerization.
• MAN implemented in 89 cities
• Total number of divisional offices connected to the MAN and WAN : 89
• Total number of branches connected to the WAN: 1428

LIC has also started online services. Using this service LIC policy holders

of the 89 MAN and WAN connected divisional offices can obtain the policy status

online. The policy holders belonging to these divisional offices can also make

online premium payments. About 70,000 policy holders have registered online and

premium payment to the tune of Rs. 86,28,410 was achieved till April 2002.

Another project of LIC, in implementation stage, is the migration from SCO

Unix platform to Linux.

Computerization in GIC

GIC does not directly undertake insurance activities. It is a re-insurance

body. The insurance activities are carried out by its four subsidiaries.

Non-life insurance players have adapted IT more readily and rapidly compared to

the LIC.

Computerization of the branches of the NIA, UII, NI and OI is 100 per cent

complete. All these firms are now looking at networking their branches using

WAN.

At present though GIC and its four subsidiaries have online presence.

Customers cannot view status of their policies or pay premium online. The

networking of branches is essential for this to occur. In June 2003 NI has

initiated a Rs 31 crore project to set up a network called NICNet.

GIC has proposed an Rs 1.5 billion investment on data warehousing, data

mining and decision support system solutions.

All the four subsidiaries are actively looking at implementation of data

warehousing technologies to gain competitive advantage and provide end customers

with maximum benefits.

Business Assessment:

• LIC plans to complete computerization of the rest of its branches in the
  
  next few years
• LIC plans to cover all its 100 divisional offices under MAN network
• Networking of LIC branches to be extended to all 2048 branches from the
  
  current 1428 branches
• GIC is looking for implementation of data warehousing and data mining
  
  solution and has earmarked Rs 1.5 billion for this.