The Hindu Business Line : Now, insurance sector to outsource data management

In the case of general insurance, industry insiders say that lack of a comprehensive database has been an impediment in building a healthy claim-to-premium ratio.

According to the head of a leading broking house, the claim-to-premium ratio can be as bad as 300-400 per cent where the optimum ratio is about 70 per cent.

The lack of data is also considered a reason for the delay in detariffing as it would be difficult to institute a pricing mechanism.

A senior official with a public sector general insurance company said that his company has written to the Insurance Regulatory and Development Authority about providing a comprehensive database.

In the case of health insurance, there is inadequate data to grade hospitals and provide a price catalogue for various illnesses.

Mr Zubin Pardiwala, Chief Operating Officer , Insurance Assist Ltd, said, "The greatest problem that general insurers face is the lack of standardisation. They require a standardisation and a risk management tool. Maintaining a database will help create underwriting profit." Insurance Assist is a new BPO that provides database to insurers.

In the case of motor insurance, for instance, Mr Pardiwala said the database would provide information about the vehicle, garage, and claims history as well as surveyors of every policy. This will make it easy to detect discrepancies, he said.

According to Mr Sudhir Salian, Head, Health and Shop Insurance, ICICI Lombard, data is extremely crucial for pricing as well as settling claims. Something as basic as telephone numbers and addresses are needed even for sending renewal notices.

"A great challenge in collection of data is the non-utilisation of technology and a lack of centralisation. Manually collected data is most often rendered inaccessible," Mr Salian said.

The lack of data is particularly acute in detecting frauds. In a recent case, a man bought insurance policies from several domestic insurance companies and later claimed an aggregate Rs 60 lakh. As opposed to countries like the US, where insurance is issued to the driver, in India it is the vehicle that is insured. Hence, drivers in the US are apprehensive even about jumping signals because it would amount to paying a higher premium the next year.

Mr Nitin Dossa, Executive Chairman, Western India Automobile Association, said that while most might consider motor insurance to be an unprofitable business, insurance companies have been showing incorrect figures. If the claim is for say Rs 50 lakh, then they might only pay a fraction of the amount but continue to show outstanding losses, he said.

With data management being outsourced, there would be more transparency in transactions. A data warehouse would record information pertaining to every kind of activity.

While this might be the need of the hour for general insurance companies, life insurance companies are not lagging behind. Teradata, a division of ATM manufacturer NCR Corporation, will be providing data warehouse to LIC for a fee of Rs 45 crore. It has already set up a similar facility for ICICI Prudential.

According to Mr T.S. Vijayan, Managing Director, LIC, Teradata's warehousing solutions will empower LIC with tremendous analytical capabilities and help in designing customer-oriented insurance products.

So, the records of 160 million policies held by 130 million policyholders of LIC is now merely a click away.

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