Early Days of Computerisation
In the late 1950s, when the benefits of commercial data processing were being realised, the insurance industry was one of the first to take to business automation. At that time, the objective was still to automise boring, repetitive and labour intensive accounting tasks in the back office. With the introduction of large mainframes like to IBM/360 and the IBM/370 in the early 1960’s, much of the data entry of accounting information and the production of massive reports were computerised. Third part vendors developed software for the insurance companies and this included MIS as well as back office automation of accounting. It was not till very much later in the 1970s and 1980s that the printing of policy papers and claims cheques were automated. Even then, most of these were done on IBM systems like the 43XX, 3XXXX, AS/400 and later on the System/390.
In India too the insurance companies were among the first to adopt computerization in the early 1960s. Here too much of the automation was in the area of accounting. Owing to the general lack of computing infrastructure, insurance companies got their data processing done through data processing centres like Mafatlal Computing Centre, Tata Computer Centre and such newly formed data centres. These centres initially had unit record machines (URMs) till they obtained computers like the IBM 1401, and the British ICL 1900 series of computers.
When the insurance companies were nationalised, computerisation received a serious setback as the trade unions took the same approach as their counterparts in the nationalised banks who discouraged computerisation, as they felt it was against the working class, and would affect the growth of jobs in the financial sector. Hence, there was virtually, no computerisation in the insurance companies all through the 1970s and the 1980s except what back office data processing which was given out to be done by the data processing centres.
LIC started earlier than GIC, and in the early 1980s procured its first mainframe computer, the ICL 1900 series computer in 1982. The choice of the ICL computer looked it in for further replacement by the ICL 2900 series, and till early 1990, LIC continued with the use of the ICL range of computers, which by then had become obsolete. Software was being developed mostly by the hardware vendors themselves as part of the implementation of hardware.
Back Office Computerisation in Insurance Companies
In the mid-1980s the banks in India commenced computerisation under the Rangarajan Committee recommendations for automation in banking. This gave an impetus for the insurance companies to go in for computerisation. In 1986, NIIT was appointed as the consultant, and specialists were recruited from the open market to play the role of system analyst, and systems engineers. These specialists were employed at GIC as well as the four subsidiaries. Care teams were set up and assigned the task of developing software in the areas of underwriting, claims and accounting. The hardware platforms were similar to what was adapted by the nationalised banks. These were similar to what was adapted by the nationalised banks. These were UNIX systems and the development software was Unify RDBMS, C and COBOL.
These were mostly referred to as DO (Divisional Office) and RO (Regional Office) system. Branch offices were not computerised. Branch documents were sent to their respective Divisional Offices were they were entered into their DO system.
Because of union restrictions, only back office computerisation was permitted. Two cadres of staff were created: the programmer, and the data-entry operator. The programmer was wrongly named, and he was the only cadre who was allowed to start-up and shut-down the computer, take printouts, take backups, and assign log-in rights to various data-entry operators. The data-entry operators were the only cadre who would actually sit on the terminals, call up the screens and enter data into the system from policy documents, claims registers and various other accounting documents. Front Office computerisation was not allowed.
Progress of Back Office Computerisation
The Head Offices monitored the progress of implementation of the computer systems on a monthly basis. Very soon the progress of implementation was failing well behind schedule, and the backlog of data-entry was pilling up at every Divisional and Branch Office. An attempt was made in 1992 to outsource the data-entry of back logs, but this did not work, as no computer company was prepared to accept data from locations other than the metros.
It may be recalled that in 1986, core groups were formed to develop the DO and RO systems. In addition to this, some very specify software was also developed by the teams in the subsidiaries. United India team developed a fairly robust accounting software, but this was implemented only at United India. Similarly, Oriental Insurance developed a fairly robust reinsurance system, but in the interest of rapid implementation, it removed several checks and balances that would have ensured that all necessary data was captured. The software eventually was implemented, but it could not capture critical operations data and hence was of little use by the reinsurance underwriters. Only accounting information was available. This serious loss of opportunity was partly rectified when the SWIFT operations were centralised into GIC in 1991.
The reinsurance software was taken from Oriental and rewritten to suit the SWIFT operations at GIC. The platform for rewriting this software was FoxPro. This software, though cumbersome and not totally complete, served as the backbone of SWIFT operations in GIC for most of the decade.
In 1998, this software was completely written program by program on Oracle for two reasons. The GIC Management Services Division (MSD) officers had recently trained in the Oracle platform and needed a live system to test out their Oracle skills. The second reason was that it was decided to completely rewrite the SWIFT software in Oracle to make it Y2k compliant.
Computerisation in the 1990s
The Malhotra Committee Report devoted one full chapter to computerisation in insurance. The senior management was by now aware that in order to meet the new challenges of globalisation, it would have to embark upon a massive computerisation plan. A plan was mooted in 1994 to form a separate IT company as a joint venture with a strong computer hardware company. This joint venture company would supply computer hardware, networking components and application software for the insurance industry. It would also absorb all the IT officers from the corporation, who by now were leaving for greener pastures. Digital Equipment Corporation, the hardware company with whom the joint venture was being discussed, meanwhile got into serious financial difficulty and was eventually bought out by Compaq. The joint venture to form an IT company fell through. It the next 6 years, the concept of forming a joint venture IT company kept coming up, but was never really accepted by management.
Systems studies and Office Computerisation
In 1994, it was decided that the subsidiary companies should develop their own computerisation plans. Each of the subsidiaries appointed a computer consultant to advise them on their IT plans. United India as the first to start the ball rolling. It appointed Tata Consultancy services (TCS) to prepare the IT Plan. However, its recommendations were not taken seriously. Oriental was the next company, which asked CMC to make the study. It also asked them to develop its front office software. This software was developed in Microsoft Access, and even before it was fully tested, Oriental Insurance started rolling out the software at its branches.
Although the choice of MC Access as the development tool was to be questioned repeatedly for the next 6 years, but Oriental steadily went ahead with its rollouts till most of the branches were covered by the software. Since it was the first to start (in 1994), it also suffered from having the oldest hardware, which resulted in the software not performing optimally.
National also chose CMC to do its systems study. The only result of this is that it rushed ahead and bought large quantities of hardware and deployed them in every branch, but it did not have the necessary software. Hence, the MSD of National developed software in-house, but developed the software in the only language their officers were trained in: FoxPro.
New India was the last to get its Systems study done, from TCS. By now TCS had benefited by the experience of three previous studies. It also drew upon its overseas experience and the study that emerged was clearly the best of the lot. New India had also developed a front office software using Oracle which did not quite take off. It later employed Mafatlal Consultancy Services to develop an integrated software which covered both the front office and the back office modules. This was the first serious effort by any company to develop and integrated software.
A Common Approach
By now all subsidiaries were in different software platforms and were finding it difficult it difficult to integrate their front office software to the back office software. Around this time, in 1995, the Corporation had decided to take on a Head of the Information Technology Management Group (Head-ITMG) on contract from the market. However, not much progress was made in this direction.
As investment is one of the most essential activities in the insurance business and is basically responsible for making up for the losses suffered in underwriting business, it was essential to develop computerised system for investment operations.
Starting with this document, the development and implementation of software for Investment operations was outsourced to Mafatlal Consultancy Services. It was developed within a time span of about five and a half years. The software was improved for GIC and its subsidiaries. This was also the first time attendant advantage was that investment operations within the industry was streamlined.
Connectivity Within the Industry
In 1996, another project was initiated which changed the way the industry carried out its communications. A VSAT-base network was set up which connected the Head Offices of GIC, the four subsidiaries, and TAC. This service was provided by the National informatics Centre (NIC). Internet access was made available at the Head Offices through this service. Local Area Network was implemented at the Head Offices of GIC and the subsidiaries. E-mail was given to the executives and officers at the head offices. Thus every senior executive had a unique e-mail address which he had printed on his visiting cards. GIC and the subsidiaries set up their own web sites within the “nic in” domain.
Communication became very speedy not only within the industry, but also between major customers and business partners within the country and around the world. All this happened within the year of Internet services becoming popular in the country. The services were not very good but in those days it was as good or as bad as available elsewhere in the country. The project hence never moved on to the next phase of connecting up to the Regional Office level. However, regions could connect to the Head Offices through a dial up connection.
Reinsurance Software Package
It was realised as early as 1995 that there was urgent need for software for reinsurance operations. However, no progress was made in this field.
Integrated Software for Underwriting and Claims
The most important application software for the industry would naturally be the application that would interface with the customer, and that was the software for underwriting and claims management. Every company had its own project for the same, but they could not be very productive because they always attempted to integrate their front office software to their ageing back office software.
All the subsidiaries made concerted efforts to develop the integrated software for underwriting and claim but nothing substantial was achieved in this area.
Much of 1999 went in Y2k remediation. This took up lots of time and money, but at least ensured that a lot of very old computers were replaced. GIC and subsidiaries also took up plenty of time and energy in formulating a strategy for the exclusion of Y2k related claims. Road shows were conducted repeatedly in major cities to educate the branch managers and key customers about the Y2k exclusions. Y2k audit also took up considerable effort, as these were monitored at the level of a national Y2k task force consisting of all leading ministries.
What Will IT be Like in the Coming Years?
The Malhotra committee had recommended that Information Technology should be used as the enabler to give the insurance industry its cutting edge over competition. It would help in reducing administrative costs and these savings could be used to build on its customer service and brand building. This can be done most effectively through the use of efficient IT infrastructure. It can be argued that much of the Internet related technology developed only in the last four years, and were not fully available to the nationalised insurance companies. It is also true that with all the problems of working in a public sector environment, several quality projects like networking, implementation of investment management software and the implementation of the integrated software for underwriting and claims management brought the IT preparedness of the industry to a fairly decent level. Rugged use of IT in the year 2001 will tell whether at all the nationalised insurance companies will give competition a run for their money.
Some of the IT solution that are essential for the working of a modern insurance company are given below. This will help build brand, strengthen loyalty from customers and business partners (agent mostly), and ensure a lean and mean company.
1. A good web site through which customers can actually transact business.
2. A good back office infrastructure which can deliver insurance products and documents. This would be connected with a rugged computer network.
3. A study call centre fully integrated with all operations which will interact with the customer for all his requirements. The objective would be to ensure that all channels of business are fully integrated.
4. A rugged data warehouse which would provide the backbone for Customer Relationship Management (CRM), Data Mining, and channel integration.
5. Excellent storage management with failsafe disaster recovery infrastructure.
Global best practices are best possible only when the IT infrastructure uses best-of-class components. This will enable the company to work efficiently with the bare minimum staff strength and devote all its energies to customer care. The customer today is very demanding and will not do business if he feels that he is not getting excellent service. It is essential to provide him service levels even beyond his expectations if his loyalty to the insurance company is to be assured.