The Hindu Business Line : Insurers have to spend much on IT to survive

Insurance companies will be soaking up high-priced IT to survive in the free price era scheduled on January 1. Insurance outfits will need computer knowhow to analyse and grasp loads of data ahead of pricing their products.

Expenditure to double

Non-life insurers could see expenditure on IT double from 2 per cent of the annual budget to over 5 per cent from next year. For setting up a centralised core architecture (hardware, software, branch networking and training personnel), each of the four public sector general insurers will have to shell out more than Rs 100 crore, going by analyst estimates.

New India Assurance, the largest non-life insurance player, plans to set up a centralised system and has bids on hand from TCS, Wipro, HCL and CMC. For data analysis, New India has bought MIDAS (Motor Insurance Data Analysis Software) from Insurance Assist India Private Ltd. The software has been put up at the head office and will be extended to other regional centres.

"MIDAS allows insurers to analyse data based on geography, demography and the makes of the vehicles. It allows one to arrive at the premium and track down fraudulent claims," said Mr Zubin Pardiwala, Chief Operating Officer, Insurance Assist.

For IT companies, the migration to free pricing of the motor, fire and engineering lines of business is a paying proposition. "Free-pricing is definitely an opportunity since it involves the collection of piles of data. Insurers would now require to access their own data to arrive at rates that are competitive," said Mr K Padmanabhan, Head, Insurance Practice, TCS.

TCS has customised software for General Insurance Corporation of India to manage the natural catastrophe and motor insurance pool. A "pool" is a fund created out of the contributions from insurance companies based on their individual exposure.

Help collect data

A senior GIC official said the software would help the corporation collect data and analyse data on a real time basis. For example, if a policy were issued in Guwahati, 2000 other operating offices in the pool would be able to access the information through a central server. A call centre will also be set up for registering claims.

Mr Anirudh Prabhakaran, Chief Operating Officer, 3i infotech has said revenues from insurance have seen a 30 per cent growth against 15-20 per cent last year.

"The insurance sector holds tremendous potential as new players are entering the segment. Existing players require IT to mine data as well as ramp up their service to customers and improve distribution," said Mr Anirudh.

Oriental Insurance Company has put up 3i infotech's Premia in 350 offices and plan to extend it to another 600 offices in a few months. Premia, is a core application for calculation of premium and tracking claims.

"There will certainly be a sizeable opportunity for IT companies as general insurance companies would like to launch new products with innovative covers", said Mr Vijay Chavan, Worldwide Financial Services Head, Mastek.

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