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NTRODUCTION TO E-INSURANCEE-insurance can be broadly defined asthe application of Internet and relatedinformation technologies (IT) to the production and distribution of insurance services.In a narrower sense, it can be defined as the provision of an insurance cover wherebyan insurance policy is solicited, offered, negotiated and contracted online. While

payment, policy delivery and claims processing may all be done online as well,technical and regulatory constraints may not allow these elements to be subjected tofull e-commerce application in certain countries. However, insurance legislationworldwide is being continuously modified to accommodate online payment and

policy delivery, and outside the discussion of einsurance metrics, these elementsshould be included in the narrow definition. The anticipated efficiency effect of e-insurance is twofold: E-insurance should reduce internal administration andmanagement costs by automating business processes, permitting real-time networkingof company departments, and improving management information. It should reducethe commissions paid to intermediaries since it can be sold directly to clients. For insurance sold to individuals, agents typically receive a commission of 10 to 15

percent for non-life policy sales and renewals and from 35 to 100 percent for lifeinsurance policies in the first policy year, but much less on renewal. However, someof the income gained in commissions that are not paid to intermediaries must be spenton online customer acquisition and marketing. Assuming cost savings do materializein a competitive market, they would be passed on to consumers thereby allowing themto buy more insurance, or other products or services. Since insurance penetration(Premiums as a percentage of GDP) in developing countries is only of that indeveloped countries, the efficiency gains created by e-insurance may contributesubstantially to growth in insurance spending and thus intensify its indisputable rolein promoting trade and development. Of the $2.5 trillion worth of global insurance

premiums, about 1 percent could qualify as e-insurance , according to the broaddefinition. Little, if any of the premiums earned in developing countries, could bedescribed as e-insurance according to the

narrow definition. In stark contrast, the majority of the $100 billion global reinsurance business is traded using some form of electronic medium. Considered along withinitial reports indicating that online premium rates are more competitive, this could

point to acceleration in online distribution of insurance covers measured by theoverall value of insured assets. Considered along with initial reports indicating thatonline premium rates are more competitive, this could point to acceleration in online

distribution of insurance covers measured by the overall value of insured assets.During the height of the dot.com euphoria, expectations for e-insurance growth werevery strong, and many insurance and reinsurance companies and intermediaries havecontinued to invest in their e-commerce capabilities. Swiss Res research arm SIGMAestimates that by 2007 e-insurance will have 5 to 10 percent market share instandardized personal lines insurance Figure 1 indicates forecasts that 7 percent of global premiums will qualify as e-insurance by 2007.

Figure 1.


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NEE D OF E-INSURANCE :Recent developments in information technology (IT) andweb-enabled systems have made it easier for insurers to run global operations in away that would not have been possible even two years ago. Insurers are alreadyreaping advantages from IT improvements in internal efficiencies in areas as diverseas underwriting, claims, policy administration, financial reporting and humanresources. But efficiencies go beyond these internal ones. In the coming years, the

internet will have at least two major effects on the insurance industry: costefficiencies and broader distribution. These efficiencies will come as insurersexperience a greater availability of data from the internet and the transfer of business

processes from manual-related or computer-related systems to newer communicationrelated systems. Such internet-style technology will reduce cost, reduce the level of effort and improve accessibility to large-scale data. Data accumulation becomes mucheasier under the internet approach and thus affects costs and value of insurance. Theinternet will bring insurers to a whole new audience, and will allow them to samplenew markets that would have been too expensive to enter. Making informationavailable to potential customers and the ability to market products to the newaudience will have a tremendous impact. TH E WE BSIT E :-COMPARISO N OFI N SURA N CE I N DUSTRI E S OFF E RI N G V/S CUSTOM E R EX PE CTATIO N Todays customers have certain basic expectations about their insurers websitewithout which they will turn to other more interactive sites. As the website is a touch

point for consumers and insurers; it should have the following basic features: Functionality: Many insurers have made plans to add capabilities to their sites such as

problem resolution. But such functions as claims handling, self-administration of policies, online billing and bill payment may have not yet been executed to thesatisfaction of the site visitor.

Timely response: Todays sophisticated web surfers do not complain when they geta lack of response from an insurers website they just take their business someplaceelse. The Customer Respect Group discovered this gaffe in its Summer 2004 OnlineCustomer Respect Study. 27% of carriers surveyed do not reply at all to onlineinquiries and another 25% answer only about half of their inquiries. As a result onlineusers will abandon a visit to a site and go to a competitors site to make a purchase if they have a less than satisfying experience. Response time should therefore beaddressed more seriously. Financial products and services features: Customers willvisit an insurance site more often if it has a wider breadth of financial products andservice features. For example, N ationwide, Usaa and Prudential insurance companies(all of which offer an extensive array of products that can be bought online) averagethree visits per customer each month, as opposed to one monthly visit per user to siteswith narrower offerings. Moreover, in another survey supporting this point of view, itappeared that 45% of consumers are less likely to use their insurance sites if productsand services such as financial aggregation are provided elsewhere. Connectivity and

easy site navigation: Insurers need to ensure that the consumers online experience isas convenient as possible. In Policyholder Self Service report by Gomez Inc. it wasestablished that currently the average visit to insurance sites lasts about 10 minutes,which means that insurers have a very short time in which to impress the consumer with the value of their site before they move on. In that same report it was also foundthat more than half of those who were unsuccessful at performing self service say thatthey are unlikely to try again, while successful self service will likely draw people

back (74.7%) It can be concluded from the above that the basics of an attractive


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website is still not perfected by established insurers, which sheds some light on whythe number of online customers are not yet up to expectation.

ADOPTIO N OF E -COMM E RCE TO I N SURA N CE :Certain industries, such astravel, banking, and retail, have embraced the emerging technologies that makeelectronic commerce possible. Some firms have gone as far as completely revampingtheir business processes. The insurance industry has made real progress inimplementing some of the technologies of e-commerce, but the industry has beenslow to adopt others. This is because insurers must carefully select which applicationsto implement, weighing the costs and benefits. Some applications of ecommerce usedin other industries do not easily fit the business of insurance. Many others, however,

present insurers with interesting possibilities . A typical e-commerce transaction can be divided into the following five phases 1. Search 2. Valuation 3. Logistics 4.Transaction 5. After-sales services The first four stages of e-commerce describedabove directly lend themselves to analogous steps for purchasing an insurance productonline. Consumers search from different insurance companies for products that theyare willing to purchase. They evaluate the products from different companies todetermine the one which best suits their needs. The insurance company then conveysthe terms of the insurance policy to the customer and the customer responds withdetails including a description of the entity being insured, the terms and the durationof the insurance policy. When both the customer and insurance company agree to goahead with the transaction, the buyer pays the initial premium to the insurancecompany and the policy certificate is sent to the buyer. The after sales phase of e-insurance is however considerably different from e-commerce. In e-commerce,human intervention is required for activities in the post-sales phase such as repair or replacement of parts. However, a major interaction between an insurer and theinsurance company occurs in the post-sales phase if the insurer submits a claim for theamount insured. Online claim settlement involves complex interactions between the

insurer, the insurance company and possibly legal and judicial authorities and, in anautomated environment, requires close interactions between humans and automatedagents. This phase is therefore the most difficult to implement over the Internet andonline insurance sites mostly rely on human intervention for this phase. Insurancecompanies offering proper services through Internet can be classified into thefollowing categories: Web Sites: Almost every insurance company has homepage

providing information about the company and products. However, these homepagesare little more than passive online versions of the companys brochures. ProductPortals: Portals are sites that provide a collection of links to sites of interest. Point-of-Sale Portals: Unlike most other commodities, the sale of insurance products isinitiated by the sellers. Certain sits exploit this approach by offering insurance

products while selling insurable goods such as cars or while providing information on

health or college education. Intermediate Brokers: Brokers are intermediate sites thatdo not sell insurance products directly but assist clients in matching their requirementswith the policies offered by insurance companies. Reverse Auction: In this case, theclient is usually an organization interested in group insurance. The client announcesits requirements and selects the best offer made by an insurance company. Aggregators: Aggregators are sites that compare quotes from different insurancecompanies. The service is often supplemented with general information on productsas well.


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THE I N TE R NE T A N D I N SURA N CE : IMPACT A N D IMPLICATIO N S :TheInternet and life insurance: impact and implications Current position of Internet usage

by life insurance companies Stages of incorporation of Internet into existing businesses can be broadly categorized into four main stages. Web Presence Stage Toobtain on-line quotes on a contract that they may be interested in and the activities of the company are largely targeted activities. However there is no processing of the

information past this stage and a customer must obtain an application form to processthe transaction any further. Interaction Stage This is where a company uses web

pages to provide information about their products and services i.e. corporateinformation, to include financial statements and balance sheets. This stage is very

basic and apart from raising brand awareness, there is no real significant impact andincorporation into existing businesses. Transaction stage This is where the companyhas enhanced information technology and may even have facilities for customers to

place orders and transactions E naction stage Here the company has used the net andIT, to redefine their business and are known as e-enabled businesses. The emphasis ison interactive customer relationship management and full integration of Internetfacilities into the company. An example of such a company might be Cisco systems.Currently most companies are in the interaction stage and thus need to upgrade their

business value by making the Internet an integral part of their business value anddespite the insurance industrys hesitancy to embrace the Internet as a channel for distribution, the outlook over the next five years is very positive. While the onlineinsurance marketplace represented only about $1.9 billion in premiums ($1.6 billionnet-influenced sales and $0.3 billion online sales) in 1999, this market is 7

expected to grow to $11.1 billion in premiums ($7 billion net-influenced sales and$4.1 billion online sales) by 2003. Implications for life companies Survival of thefittest One possible impact of the Internet in the future will be the position wherebyonly a small number of companies shall exist owing to economies of scale incommoditization. Having established a strong brand, their support services for their

products will be diverse and be innovative and technological. Inclusion a mutichanneldistribution strategy along with bundling a variety of secondary related products willhelp them to provide insurance products for both the long and the short term. Thesecompanies will be the result of the merger and acquisition of several existing financialcompanies and may be a global venture. Profit margins although deliberately kept lowwill exist and the emphasis shall be on high volume, minimum unit cost sales, withheavy investment of capital in advanced technology. The target sector will be theaverage person who has relatively simple insurance needs. Customers may find thatloyalty discounts exists and they shall be quite happy to purchase other products fromthese big market players. Specialisation Here each company will choose toconcentrate on their core business competencies outsourcing non-critical componentsand leaving the distribution of their products to independent firms, such as

supermarkets, who have a wider consumer base. There shall be a trend towards avirtual office environment. Communication between manufacturers and distributors(B2B) would be by using extranet facilities and allow one to one marketing. It will beimperative, from a competitive point of view, for insurers, to offer online transactiveservices and to participate in B2B online exchanges. On the positive side, theexpansion of this B2B ecommerce should result in cost-savings for policyadministration. The industry would see a deregulation with branding and diversity of the distributors customer base becoming key sources of competitive advantage.


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White label products would become increasingly common as competition increasesand new players emerge.

The resulting effects will be the demise of many small and medium sized companiesand a reduction in the number of Independent Financial Advisors. Team as well asself-education support in the form of information available to the customer on theInternet. As innovative products and quality of service become overriding issues,administration becomes complex and expensive and indeed customers may choose toforms C2C alliances to sell second hand endowments, for example. A N iche scenarioAs the number of people surfing on-line increases every day and wealthier and moreeducated customers display sophistication about them a niche market might developin the future to meet the complex financial requirements of such customers, who havecomplex financial needs. These needs will include continual personal expert advicethrough channels such as Independent Financial Advisors or a Direct Sales ForceTeam as well as self-education support in the form of information available to thecustomer on the Internet. As innovative products and quality of service becomeoverriding issues, administration becomes complex and expensive and indeedcustomers may choose to forms C2C alliances to sell second hand endowments, for example. The Internet and other markets: impact and implications Impact oninsurance brokers The market in which insurance brokers operate is very diverse.Consequently, the potential of e-commerce is also diverse. An investment broker willadvise on which type of investment product or investment fund matches a customersrisk tolerances and personal circumstances, including tax issues. These factors arevariable and hence the broker is, from a business point of view, in a good position.Moreover, customers are aware that insurance is a necessity and not a luxury andhence are prepared to take time to seek advice in relation to a lower-cost best valueapproach. Within the corporate market, brokers are aware of the importance of a bestvalue approach in terms of cost and creditworthiness. Brokers also advise oncorporate pension issues in terms of selection of investment managers and assessmentof solvency risk. Direct dealing insurers however, who promote cutting out themiddleman, are replacing the role of the non-life broker.

Moreover, the position of the smaller retail insurance broker is very different to their larger competitors. By a combination of web-based marketing sites and the facility of transmission of data between systems using a standard interchange facility mayfacilitate low cost electronic trading for brokers which may be paramount to thesurvival of the smaller broker. Webenabled TVs would increase the potential marketand thus provide even greater savings. Also Internet usage allows an alternative to thetraditional manned claims desk by allowing free exchange of information on claims

procedures. All, however, face the threat of disintermediation and broker commissionrates are under threat. This has been partially due to the Internet, as customers go

direct with the underwriters. Brokers have responded to this by increasing the rangeof risk management services that they offer. However, this still does not deal with theissue of the Internet being responsible for edging them out of the market altogether, asthe development of a Universal E lectronic Data Interchange allows communication

between customers and insurers that is more direct. N ot all is bad news. Indeed theInternet can be advantageous for the broker in terms of providing them with a faster more cost efficient method of transferring information globally and hence enablingthem to pass on the savings to their customers and hence attract more business. TheInternet is also changing the role of the broker from an intermediary to an


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infomediary who conveys information to the customer. As markets becomeincreasingly dependent on standardised information such as the FTS E indices, the

broker becomes the supplier of information that affects these indices. In essence, theInternet could speed up trends that are already present in the market. If this is the casethen only those brokers, who are continually re-evaluating their role and its changesdue to the Internet, will be able to reap the full benefits. Indeed ignorance of this

technology may result in significant consequences. Implications for reinsurers Thistopic is somewhat difficult to address, as reinsurers have minimal Internet basedactivity. The problems they face are different to brokers as they are not involved somuch in the transfer of information and they are more the risk bearers. The ease of information

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sharing allows customers accounts to be continually monitored by reinsurers. It willalso mean that they are up to date, thus making renewal simpler. Moreover, this datais easily manipulated and stored thus decreasing administrative costs. Within theLondon market this advantage is readily apparent with organisations such as Lloydsenjoying the increased efficiency gain. However, the Internet facilitates competitors inthe reinsurance industry such as the Bermuda reinsurance centre. These centers have

benefited greatly from the impact of the Internet as distance and location has been atraditional barrier to entry. Furthermore, such centres are in anideal situation to

postulate legislation for newer forms of e-commerce that would complement their existing tax position and hence generate even further business. These competitorshave undoubtedly affected the traditional market share that Lloyds enjoys and thus itis imperative that such points should be considered.

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POT EN TIAL E FFE CT OFE-INSURANCE

O N I N SURA N CE I N SDUSTRYInsurance and the broader area of financial services are industries where electroniccommerce will play a significant role. These information-intensive industries arefertile ground for the play of forces that have spawned e-commerce. The evolution of the use of ecommerce by insurance companies and intermediaries raises a number of issues with respect to the impact of this technology on the industry and its regulation.Any discussion of the impact of e-commerce on insurance must address some of theissues affecting the major players in the insurance electronic marketplace1: Insurancecompany (Insurers), Consumers, Insurance agents, Other service providers, andGovernment /Society (through the supervisory authority).

E ach group has a direct interest in the evolution of the electronic market. E ach is

affected to some extent by the technological change that is revamping electroniccommerce. The interests and roles of these different stakeholders must be addressedso that change is promoted and managed effectively, rather than impeded by thosethat feel threatened by it. E ffect of E -commerce On Insurance Companies Insurancecompanies have regarded the Internet mainly as another channel of distribution for their products. Compared to online stock brokerage and online banking, developmentof the Internet in the insurance industry has been somewhat cautious. Websites mainlyserve to provide information about the company and its products. Many insurersespecially in developing economies have not seized the opportunities created by


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ecommerce for making all business processes more efficient, beginning with theonline

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sale of policies. But the growing number of those who have embraced the technologyis most encouraging . There are some factors, which make the online selling of insurance products difficult:1. The complexity of some products, e.g., tax-efficientlife insurance policies, increases the consumers need for specific advice. It has notyet been possible to automate the provision of information; although it can beassumed that continuing advances in technology will create new opportunities for automated solutions. The complexity of many insurance products can often bereduced by design modifications. 2. In many cases, it is difficult to standardize claimssettlement for example, as this involves a large amount of investigation and decision-making. This process often involves people and companies who are not in acontractual relation with the insurer. 3. The Internet is particularly suitable for

products where contact with the company is more frequent. Insurance is usually takenout infrequently, every couple of years or even once in a lifetime. Once a policy has

been concluded, with some types of insurance the insurer and the policyholder have barely any contact, unless an insured event occurs. Also, existing insurance policiescan often only be cancelled with a certain amount of effort. This makes the switch toan Internet insurer more difficult. 4. Many consumers still view the Internet as aninsecure medium. This prevents large transactions being concluded via the Internet,and it deters the transmission of confidential information, both of which are essentialaspects of insurance policies. 5. In personal line especially, regulatory hurdles makeInternet distribution difficult. For example, as e-commerce increases the number of cross border transactions, licensing requirements in all jurisdictions where suchtransactions occur also apply. Competition and Market Penetration The Internetenables new entrants to the market to avoid the expensive and lengthy process of setting up traditional distribution networks. E -commerce lowers market entry barriersand increasing competitive pressure in the insurance industry. In the past, manyinsurance products have been distributed mainly through captive agents or independent brokers. Since enormous investments are needed to build up such adistribution network, established insurers were generally well protected against new

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competitors. N ow the Internet provides new companies with instant access to theinsurance market at an affordable cost. Market transparency is improving, since

product and price information is more readily available through the Internet. Lower market entry barriers and higher market transparency are combining to intensify

competition and force prices down. This also makes it increasingly difficult for insurers to pass the comparatively high costs of traditional distribution onto the pricesit charges for its products. In life insurance especially, online distribution may changethe nature of the competition. Acquisition costs traditionally play a key role here.They often come to more than 100% of the new premiums, and are only amortizedover the course of a long policy term. For new entrants to the market, such a big cost

burden at the start of the insurance contract is a major barrier to entry, as they areunable to draw on a constant premium flow to finance new clients acquisition costs.If Internet insurers manage to reduce these acquisition costs significantly, it would


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become far easier for them to break into the market. On the other hand, Internetinsurers need to attract clients through advertising, and this entails substantial costs aswell. Furthermore, a certain amount of advice is normally required for many lifeinsurance products, because of their transaction volume and complexity. E ven if e-commerce lowers market entry barriers, start-up companies in particular need to

become sufficiently well known if they want to win significant market share. Another

important factor, particularly in the insurance industry, is that the client must haveconfidence in the insurance company. Online sales still carry an element of uncertainty for many clients. This is mainly because of unresolved legal aspects of online policy conclusion and premium payment, as well as concerns about data

protection. Therefore, insurers with an established brand name have a competitiveadvantage, as they naturally command a greater degree of confidence. N ewcompanies need to build up this goodwill from scratch, and this usually involves highadvertising and marketing expenses. The current disadvantage experienced by newInternet insurers should gradually become less important over time. First, confidencein the Internet as a distribution channel will improve as its penetration increases.Second, newcomers will be able to build up their weak reputations through secureratings or alliances with well-known Internet brand

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names. Successful alliances for Internet insurers are feasible with online banks or online brokers, as well as with quality portals such as AOL, Yahoo or Microsoft. E -commerce enables established companies in other sectors to cross over into insurance.Lateral entrants from other sectors can break into the insurance business with the helpof the Internet. The most likely candidates are companies who already have a well-known brand name and strong customer loyalty. These companies, such as banks or internet providers, could set up new, efficient e-commerce systems, without the

burden of legacy systems or conflicts with other distribution channels. They couldalso transfer their brand name to the insurance industry and utilize existing sources of finance. Benefits for Insurance Companies

The new e-commerce capabilities bring significant efficiency improvements indistribution, administration and claims settlement. The biggest cost block for a non-life insurer is usually claims payments. Online distribution brings a direct reduction indistribution costs. Additional savings potential comes from using e-commerce toautomate business processes. This in turn brings reductions in administration andclaims settlement costs. Modern information technologies also bring cost savings for claims

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payments. For example, better data analysis may improve risk selection, while thedetection of insurance fraud and tighter control by partner companies can help toreduce claims costs. In life insurance, claims costs are much less than in non-lifeinsurance, because of the high savings component. Distribution costs represent the

biggest cost block, which means that the bulk of the cost savings can be achieved indistribution. However, many life insurance products require a lot of advice, and aretherefore only partly suited to pure Internet distribution. For traditional insurers, theneed to adapt to the new e-commerce opportunities not only entails direct cost, in the


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form of substantial investments in the new information and communicationtechnologies, but also the indirect costs of having to change their existing businessmodels. Companies have to revamp their business processes and corporate structures,which leads to many different internal conflicts. Internet marketing threatenstraditional distribution channels and therefore tends to meet with strong resistancewithin the company. Many insurers avoid this problem in the short term by not

passing on to the customer the efficiency gains created by electronic distribution. Insome cases, the salesperson even receives a commission if a client in his or her areatakes out a contract online. Some insurers pursue a dual strategy and try to establish afoothold in countries where they have no significant market share by offering e-commerce solutions while still maintaining the traditional distribution channels intheir home market. This is not a strategy for long-term success; however, as the

potential efficiency gains in the home market are abandoned. Insurers selling over theInternet will have a substantial cost advantage over the lifetime of a customer, relativeto non-internet based insurers these efficiencies are primarily driven by reduced salescosts, lower customer service costs, and cheaper and better information gatheringabout the customer. At the same time, the use of e-commerce will demand the

progression and integration of various components of insurers information systems,many of which are still wedded to legacy mainframe platforms that are becomingincreasingly inefficient. According to E rnst and Young (1999), the average traditionaltransaction costs is $90, while the average transaction cost through a web enabledcustomer portal is $4.44.

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Figure shows the costs of traditional vs. online purchasing processes.

The structure of many insurance markets and the role of intermediaries (e.g.,insurance agents) will change dramatically. Currently, there are insurance malls thatallow one to obtain quotes from a number of companies almost instantaneously. If themajor functions of insurance agents have been information transmission andfacilitating transactions, ecommerce will make these functions much easier and lessexpensive for insurers and consumers. Certain agent functions will be disinter-mediated1 or replaced by an electronic market. The traditional agent role will likely

be diminished for standardized, commodity like products such as term-life,homeowners, renters, and auto insurance. E lectronic commerce will further thedecreasing use of the independent agency system relative to exclusive agent anddirect-response distribution systems. At the same time, the insurance agents role may

be enhanced in advising consumers on how to optimize their insurance purchases andin dealing with insurers in areas such as claims settlement, potentially valuableservices for consumers. Another interesting aspect of the economics of the Internet is

the existence of so-called network externalities. That is, the network becomes morevaluable the more people are connected to it. With the increased value of connectioncomes the decreased cost of

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distribution. Products with relatively high fixed costs and low value (such as travel,credit, or burial insurance) are relatively expensive to produce. Those customers pay ahigh price per dollar of coverage for these products. The Internet allows the


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disintermediation of this relatively high overhead for these low face-value products.This means that prices can be lowered and more insurance sold by reducing thetransaction costs of the exchange. Increased access through e-commerce also may

prompt some consumers to purchase broader, high-value insurance products tomanage their risk Top Obstacles And Concerns For Insurance Companies In view of trends concerning the growth of e-commerce in the general economy, it is interesting

to consider what the impact has been and is likely to be for the insurance industry in particular. Although other online financial services have already taken off quitevigorously, the insurance industrys involvement with and commitment to electroniccommerce lags far behind competitors in the banking and brokerage industries. Topobstacles for the insurance industry: Resistance to change Threat of agent/broker disintermediation Lack of technology/regulatory hindrances Threat of insurancecompany disintermediation Lack of industry vendor solutions Top ecommerceconcerns: Costs/impacts of moving off legacy systems Impact of legacy channelinvestments Lack of skilled information technology personnel Lack of e-businessstrategy Lack of enterprise technology architecture It is widely recognized that e-commerce will enable insurers to significantly lower costs, realize business processefficiencies, improve customer service and brand loyalty, and enable insurers to better

position themselves competitively.

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However, insurers cite as top obstacles factors such as resistance to change, threat of agent/broker/company disintermediation, lack of technology infrastructure, regulatoryhindrances, and lack of industry vendor solutions. Insurance Products Suitable For E -Commerce N ot all insurance products are equally suited to Internet distribution. Their suitability depends chiefly on how much advice is required. The more complex the

product and the bigger its financial scale or transaction volume, the greater the clientswillingness to pay for advice. Products that are particularly suitable for marketing onthe Internet are those that can be described and rated using a small number of

parameters, such as motor, private liability, homeowners, household contents andterm life insurance. These types of cover are also suitable for online pricecomparisons, which make the Internet even more attractive for potential clients. E -commerce also will have implications for the sale of more unique and complexinsurance and reinsurance products particularly those purchased by commercialenterprises. These transactions rely heavily on information and communication andecommerce can make this process more efficient. At the same time, the sale andservicing of complex insurance products will require different kinds of networksappropriate for individualized transactions. Security will be an importantconsideration here given the large amounts of insurance and proprietary informationat stake. Products that are not necessarily suitable for online marketing include most

life and pension products, health insurance and many commercial lines. But eventhese products can benefit from the huge opportunities for quality and serviceimprovements presented by ecommerce: If clients already have extensive productand risk expertise, the Internet can still be used as a marketing tool, despite the highcomplexity and transaction volume. Internet team room, for example, could supportthe consulting and negotiation process. E ven if the conclusion of the policy and theassociated advisory services occur with little or no online support, policyadministration or claims settlement can still benefit from such support. For example, aclient may seek independent advice


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when choosing a private health insurer, but is prepared to use online facilities to process and settle doctors bills. Brokers can use e-commerce solutions to bundletogether the needs of a large number of clients, handle the administration themselves,and then forward the data to the insurer. Modern communication technologies allowmore personalized products, faster response times, greater flexibility in covers and

better support for risk management. However, there are ongoing debates about thesuitability of individual insurance product for e-commerce. The conventional wisdomis that obligatory, very simple or low-price products do not require a sellers push andthus can be distributed through e-commerce. The greatest demand is for motor vehicleinsurance, followed by health, homeowners and term life insurance. The very desired

product to be sold on the net is shown in the Figure, whereas insurers selling onlinedirectly to clients are offering a very restricted portfolio of products.

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N ew Value Creation for Insurers The use of Internet technologies in the insuranceindustry is not just limited to distribution, but also has a fundamental impact onalmost all other production areas. The integration of all business processes in a unifiedinformation flow significantly reduces the cost of gathering and analyzinginformation. Since the efficient processing of information is a key factor for insurersin the creation of value, the use of new information and communication technologiesenables them to revamp and rationalize key links in the value chain. N ewlyestablished insurers are not burdened by legacy business systems and are able toexploit modern information and communication technologies in order to set best

practice benchmarks for the entire industry. This will exert significant pressure onestablished insurers to adapt their business model to the changing requirements for greater efficiency, speed and quality of service. In the past, the value creation of insurers has centered on the aspects of distribution, administration and claimssettlement. In these areas there are many routine tasks that could be automatedthrough the efficient use of information and communication technologies. The task would therefore embody less value creation. In the future, insurers will have to createa greater proportion of their added value through a higher standard of service. Pre-Internet and Internet-enabled Insurance Internet and e-commerce technologies arealready changing the structure of the insurance industry. The magnitude of the changecan be best appreciated by comparing Figure 2.10 and Figure 2.11. As shown inFigure 2.10, the pre-Internet insurance world is largely linear, with individuals(personal lines) or businesses (commercial lines) moving risk to insurers, sometimesdirectly, but more often through the intermediation of brokers and agents.Intermediaries are responsible for processing more than 90 per cent of all premiums

collected. The application of information technology increases diagonally down thechart and is most prevalent in the reinsurance sector.

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Figure 2.11 visualizes an Internet-enabled insurance industry and market. Its maincharacteristics are that technology can be evenly distributed and informationintermediation is no longer a necessity but a preference. Gone is the linear travel of

payments and risk information from client to (re)insurer. Buyers of personal and


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commercial insurance and reinsurance can choose to pursue multiple paths to acquire price and policy information. Insurers and reinsures have extended their reach throughtheir online incarnations. Brokers and agents may do so as well. Using data standardscan positively facilitate the resulting increase in communication and data exchange.

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Agents and brokers were an irreplaceable link in the pre-Internet insurance industry.Agents intermediated sales of policies to non-businesses, such as personal lifeinsurance, motor vehicle insurance, and homeowners insurance and various savingsand investment schemes. They also intermediated insurance for small and dismissed

business. Brokers intermediated insurance between large organizations, or businesses,and insurers, as well as between insurers and reinsures. Their economic role was toenhance market efficiency by diminishing information asymmetries between buyersand sellers caused by any of the following situations : The insurer is not fullyinformed of the scope of the demand, or the insured is not knowledgeable about theselection of insurance policies and prices available; or The insurer has not fullymastered the technical and economic details of the proposed risk, or the insured doesnot clearly understand the insurance policys proposed terms and conditions. In

practice, agents are generally authorized to sell policies from only one or a fewinsurers. Further, the terms and policy wordings of different insurers, even if distributed

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by the same agent, often do not match. To clarify these differences and enablecrosscomparisons is perhaps the most important role of the agent. Outsourcing of Insurance Functions N ew information and communication technologies are making iteasier for insurers to break up the value chain. Individual functions, such asunderwriting, policy administration, claims management, investment or risk management can be optimized within the business divisions or outsourced to a rapidlygrowing number of specialized external providers. Claims management, underwritingand some parts of risk management are particularly suitable for outsourcing tospecialized providers. Rising cost pressure will force traditional providers to reviewtheir fully integrated business model. Traditional insurers perform almost all stages of the value creation process themselves. However, a number of functions in the valuecreation process may be outsourced or assigned to specialized service providers atgreater efficiency and lower costs. E xamples are listed in Figure 2.12. It, also, showsthe value chain of a typical insurer. Traditional insurers perform almost all stages of the value creation process themselves. The bottom half of the figure provides a list of specialized providers that handle individual functions in the disintegrated business

model. This would allow insurers to concentrate on those links in the value chain theyenjoy a competitive advantage(s) .

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E ffects of E -commerce On Customers E -commerce opens up new ways of reducingcosts. Simultaneously hardening competition will ensure that these benefits are passedon to the consumer. The Internet offers a number of possibilities for increasing thevalue creation for consumers by means of increased transparency and improved


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services, not just in the area of sales. Consumers might believe that they can getdifferent and better service though the Internet. This can be seen today in a number of limited examples. The Internet user, usually an above-average earner, well informedand price conscious, likes to have several quotes to compare. Consumers can obtainquotes for a number of companies. This is the idea behind the strategy of aggregators,also known as navigators, supermarket sites or malls. In some cases, consumers can

see rating agencies evaluations of insurers. The Internet and outsourcing can provideadditional cost savings to the consumer. By removing layers of inefficiencies,technology can bring the customer closer to the insurance contract. Consumers willalso obtain price comparisons for relatively generic contracts. For example, for manyonline insurers, they can compare prices for annual renewable-term life insurance. Or,they can compare insurers rates for a standard set of auto insurance coverage for agiven vehicle and driver characteristics. 25

Consumers also could have access to internal records to see where their claims are interms of payment, when their next annuity payment is due, and how their mutual fundis performing. This can be done without calling a burdensome voice-mail system,

being put on hold, or finding a person who can give them the desired informationefficiently. In addition to personal lines, commercial lines are also likely to benefitfrom innovations over the Internet. Large consumers of insurance could build or

participate in outsourcing market auctions. Certain relatively standardized blocks of business (fleet auto or workers compensation) could be put up for bid. This woulddisinter-mediate the broker or agent from a number of transactions unless they werethe real market makers. At the same time, intermediaries (i.e., brokers and agents)could provide additional risk management advice to commercial buyers andqualitative information about different insurers. E -commerce can bring a substantialimprovement to service quality.).Advantage are: Continuous service (24hours/7 days) Depth of available information, such as price comparisons, productinformation N o restrictions imposed by national borders Faster response timesAnonymity More transparency and speed of claims management

. These advantages virtually constitute a catalog of requirements for insurerssuccessful Internet presence. At present many websites are cluttered and difficult tonavigate. Many insurance websites do not allow price comparisons. If a client wantsto compare quotes from several companies, the client still has to fill in a questionnairewith each insurer. Insurance clients may use the Internet to place a large risk themselves. These reverse auctions are particularly suited to big corporate clientswho put their insurance requirements out to tender and then select the mostcompetitive offer. A purchasing group could also use this facility; an automobileassociation, for example, looking for the cheapest insurance cover for its members.Although individual policies could be put out to tender in personal lines, this would

however require very efficient search engines or aggregators on the part of the insurer,in order to keep the search costs for such small risks within reasonable limits.

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I N TE R NE T A N D CURR EN T ISSU EE I N THE I N SURA N CE I N DUSTRY TheInternet is acting as a catalyst to accelerate change in many of the areas is identified inthe section before. In the following, role and effect of Internet on these issues aregiven Globalization The Internet is a global medium and increases the transparency of


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all products including financial services products. The key and most difficult aspect,of entering a foreign market is securing distribution channels. The Internet providesglobal distribution potential, though there are still a number of barriers including taxregimes, regulatory requirements, brand and cultural issues. N ew E ntrants Low

barriers to entry on the Internet facilitate new entrants. In the financial servicesindustry the major entry barrier is distribution, which the Internet can overcome. The

internet emphasizes the importance of competency in direct marketing techniques and branding which encourages retailers to enter the market. Regulation and DeregulationThe Internet acts as a push mechanism for the government to pressurize the industryinto providing alternative cheaper solutions such as stakeholder pensions. At the sametime the N et pulls regulatory change, as consumers become more demanding due toits transparency. The Internet may lead to products becoming more customer-centric,with few boundaries between say banking and insurance, which will influence theregulatory environment. Socio-cultural Changes The Internet itself may have

profound changes on working and living patterns, making working lives even moreflexible. This will influence the financial products people want to buy, and when theywant to buy it. For example long-term regular premium products may no longer meetcustomer needs.

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CHALL EN GE S Due to the complexities involved in insurance processes, manycompanies fear that the upfront costs of implementing an e-business solution may betoo significant to warrant the return on investment. The highly complex, detailed andmulti-faceted nature of the insurance business may also make the execution of theseservices appear overwhelming: The insurance cycle consists of numerous, detailedsteps requiring extensive personal data to complete many processes. The work consists of the generation of printed policies, priced by compiling and analyzingreams of data, and then serviced with monthly paper invoices for the lifetime of thecustomer or until a claim must be processed on paper. The multiple variances andunique requirements among states and jurisdictions require additional workarounds. Operational challenges are compounded by the ongoing struggle for compliance withnumerous, ever-changing regulations. After attempting to apply hardware andsoftware packages that were cumbersome to integrate and delivered minimal costsavings upon execution, many companies have been left with a negative perception of

paperless solution providers. Attempting to attain the cost savings of paperless processing, many companies subscribed to new technological solutions for core processes such as underwriting, claims payment, policy administration andcorrespondent support. However, now these companies are realizing that thesetechnologies are on disparate systems supporting segmented business sectors. Withoutconnectivity between the information, companies still rely on paper trails, data re-

entry and costly courier/mailing services to bridge the gaps. Because each uniquedatabase must be updated when information changes, even the most basic policytransaction can take weeks to be processed. Many proponents of e-business servicesare touting expensive new technologies and difficult alterations to time-honored

processing workflows. This has led to the perception that, to eliminate paper, businesses must first buy in to something even more expensive and difficult toimplement. Fortunately, this is not the case when companies consider theserequirements before moving to an e-business services solution.1


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R E GULATORY A N D SUP E RVISORY ISSU E S A N D I N SURA N CE O N THE I N TE R NE T The development of e-commerce, particularly on the Internet, presentsnew challenges and concerns for insurance regulators and supervisors fromdeveloped, as well as developing countries. 1. Background The establishment of Internet-based insurance businesses offers both individual insurance consumers andinsurers and intermediaries potential efficiency and cost benefits. Einsurance improves information symmetry and market transparency conditions and mayenhance competition that can lead to reduced prices. For insurance regulators fromdeveloping countries, Internet-based supervisory tools may increase efficiency bystreamlining and speeding up reporting from insurance enterprises. The possibilitiesoffered by Internet communication can also greatly improve the delivery of information to the public, insurers and local and international investors regardingmarket conditions, rights and obligations. Also, secure Internet communication could

be a major tool for fostering international cooperation among regulators to improvethe security of insurance markets. From the perspective of a supervisory authority in adeveloping country, major concerns pertaining to e-insurance relate to cross-border activities and how to safeguard the interests of consumers if they contract policies inother jurisdictions. However, as most countries continue to require local licensing for insurers offering products in the domestic market and prohibit cross-border activity,cross-border trade in personal lines and mass insurance products has not expanded.Also, the cost of establishing e-insurance platforms, along with related marketingcosts, has deterred financially unsound operators from establishing a significant web

presence. E-insurance provides a new channel for distributing insurance productsthat accelerates transaction processes, creating more opportunities for fraud. Itimposes on supervisors the burden of developing supervision methods that permitquick responses to threats to the interests of insurance consumers. However, theemergence of e-insurance does not fundamentally alter the principles on whichtodays insurance supervision is based. For regulators, the essential question relatingto e-insurance , as well as to other distribution methods, is how to protect

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insurance consumers. Supervisors have therefore approached e-insurance operationsin the same way they supervise business and market of traditional insuranceoperations, including rate monitoring, surveying the marketing of insurance products,responding to public complaints, conducting consumer education and fraudmonitoring. To tackle the particularities of e-insurance supervision, the InternationalAssociation of Insurance Supervisors (IAIS) established a working group on e-commerceand the Internet. This working group has issued The Principles on the

Supervision of Insurance Activities on the Internet that were approved by the IAIS atits annual conference in Cape Town on 10 October 2000. More generally, insurancesupervisory authorities have the same concerns as those regulating other e-businesses,

particularly e-finance businesses: business continuity, personal data privacy, payment procedures and security, electronic signatures and IT platforms. 2.Supervision_of_established E -insurance_operations E-insurance was once perceivedas a distribution channel that would erase national boundaries, since a single e-insurance platform established in one jurisdiction could offer insurance servicesglobally. This has not occurred, since in most countries the establishment of a locally


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licensed business is required before insurance services can be offered to domesticconsumers. E-insurance platforms thus fall under the laws and regulations of therespective jurisdictions where services are offered. More precisely, existingregulations relating to market conduct determine how insurance providers mayconduct their business online. Competition rules and transparency and informationrequirements form the core of market conduct regulations. Monitoring of rates,

marketing of insurance products, handling of public complaints, consumer educationand fraud are areas included under this aspect of supervision. 3.Approval_of_rates,_terms,_conditions and_contractual_documentation In manydeveloping countries, insurers are required to file rates, terms; conditions andcontractual documentation for approval by supervisory authorities before theunderlying product is offered to the public . E-insurance offerings too, are governed

by such Requirements. Often minimum and maximum rates are established for compulsory individual insurance products such as motor vehicle insurance,workmens compensation

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and some fire exposures. This is making it difficult for e-insurance operators toundercut prices offered by traditional competitors. Supervisory authorities should pay

particular attention to the terms, conditions and contractual documentation that are presented on insurance providers websites. The supervisory authority should ensurethat the contractual relationships have a legal basis that is not prejudicial to theinterests of the insured, since the insured does not generally participate in thenegotiations relating to policy clauses. In the case of life insurance, supervisors shouldrequire that certain clauses be contained in the policies published on websites. Thisincludes clauses such as incontestability, under which the insurer, after a certain

period, can no longer contest statements made by applicants. Also, a clause on noforfeiture should be shown. Such a clause protects the cash value of the policy and

provides for a grace period after the premium is due, during which the policy cannotlapse. Such a clause is particularly pertinent for Internet transactions wherecontracting and payment cannot occur at the same time. In the developing countrycontext, because of a general lack of insurance education and in order to allowconsumers to make informed decisions, a large degree of comparability betweencontracts offered over the web should be maintained during the initial phase of establishing e-insurance operations. Two other problems to be addressed are that (a)Because of different hardware and software configurations, information presented onthe web may look different to different viewers, and (b) Computer proficiency maylead to an unintended contractual result. Certain guidelines regulating basic websitecontent may be needed: for example, companies could be required to inform who isthe supervising body and who are the final risk carriers in the cases where purchases

are made from an agents or brokers website.E

lectronic signatures are important notonly to confirm the existence of a contract but also for specifying the starting date of the purchased insurance coverage. The validity and effectiveness of a contract may beinfluenced by failures in data transmission. A consumer may be under the impressionthat a contract is in place, while the insurer may have received corrupted data thatdoes not allow a policy to be issued. The existence of a problem may not be obviousuntil the insured attempts to make claim under the nonexistent policy. Also, after a

policy takes effect, it may be necessary to cancel, change or


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complement it. Possible reasons for such an intervention include the discovery of anerror or a fundamental change in the insureds risk profile. In such a case, it may be

prudent to ask whether online insurance products should carry a return or exchangeof goods policy and what kind of security is needed to prevent accidental or unauthorized cancellation. Also, supervisors should determine whether an insurer

posting offerings on the Internet is discriminating against certain categories of consumers. The traditional roles of supervisors - to ensure that compulsory mass

products or personal lines are affordable and available, and to ensure the fair treatment of consumers - should be maintained with regard to products offered on theInternet. 4. Marketing_of_ E -insurance_products_ Supervisory bodies should preservethe fairness of information presented to consumers and should attentively monitor themarketing of e-insurance products. Advertisements should not be misleading, pastexperience should not be used to predict future results, and products should notmisrepresent benefits. Often insurers differentiate their products from those of competitors by inaccurately describing or overstating advantages and benefits. Whenan intermediary (an agent or broker) offers insurance products over the Internet, sucha seller should be required to obtain a license before establishing a presence on theweb. The licensing procedure should require the intermediary to undergo competencetests, and the its e-insurance platform and website should be screened in the same wayas those established by insurers. 5. Combating_fraud_ Supervisors and regulatorstypically maintain that sales over the Internet increase opportunities for insurancefraud, money laundering and the mis-selling of insurance products. Some criminalgroups engage in mass subscription of single policies under false or given identities,redeeming the policies quickly thereafter in order to launder money. As no directcontact is established between parties to an insurance contract established via theInternet, e-insurance is an obvious target for money laundering operations.Supervisors should ensure that e-insurance providers have sound mechanisms in placefor authenticating the identity of policyholders.

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Also, to trace unsound or fraudulent operators and consumers, it is paramount thatsupervisory authorities establish communication networks among themselves to shareinformation on such perpetrators. E -insurance, like other e-finance businesses, is atrisk from both internal and external security threats (infiltration, corruption and theftof customer data files). Increased connectivity, in particular the connection of internalnetworks with the Internet, introduces new vulnerabilities that require the deploymentof more advanced and effective security tools. Regulators should take steps to ensurethat einsurance providers have the necessary security in place to protect the integrity

of information and the privacy and confidentiality of policyholders data, whether thedata storage is performed by the e-insurance provider or outsourced to Internet service providers. 6. Public_Complaints Internet-based reporting and monitoring of publiccomplaints could prove an indispensable tool for insurance supervisors. In a number of countries, formal offices within the supervisory authority have been established torespond to insurance customers' complaints. Their purpose is to streamlineadministrative procedures and sometimes to serve as an alternative to judiciary

proceedings. For supervisors, the monitoring of complaints provides a very usefulsource of information for holding insurers responsible for their offered services. To


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resolve complaints, supervisors should facilitate communication between insurers andcomplaining customers. They should make sure that companies have complied withthe law and have responded promptly and fairly, and they should inform insurers of

problems that customers experience with contract language, customer service or technical aspects of the website. Also, websites posting insurance offerings shouldgive contact information for the official authority dealing with consumer complaints,

and the site should clearly describe the mechanism for dispute settlement. One of thesimplest and most useful Internet tools is the FAQ (frequently asked questions) page.A well-structured, comprehensive and easily navigable FAQ page can satisfy the vastmajority of public queries. 7. Consumer_education To build consumers awarenessand understanding of insurance and to improve market efficiency, consumer education is paramount. E -insurance offerings should include

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educational material to help consumers understand the products they buy. Also,supervisory authorities should provide guidance and educational material on their websites for consumers interested in purchasing insurance online. Insurance laws,regulations and statistics can be made more easily and widely accessible through theInternet. Most Latin American and Asian as well as many African and Central andE astern E uropean insurance supervisory authorities have already established websitesdesigned to inform the public. 8. Supervisory_efficiency The advantages that theelectronic format offers for compiling and processing data allow supervisors to devotemore time and resources to analyzing periodic financial reporting by insurers. Manysupervisors in developing and emerging markets have dedicated web sites for thesubmission and processing of reporting from insurance companies, and several havedeveloped Internet-based solutions. The E gyptian Insurance Supervisory Authority isoffering a financial reporting application, on a cooperative basis to its counterparts inother African countries. Whenever an insurance provider establishes an einsuranceoperation in a country, a continuous dialogue should be established between the e-insurer and the regulatory body to resolve areas of uncertainty before the operation islaunched, and to contribute to regulatory development. Authorities should continuallyadapt their insurance legislation to the needs of their insurance consumers, taking intoaccount shifting consumer interests. 9. Supervising_cross-border E -insurance_activities Among factors that have inhibited the development of cross-

border e-insurance are the wide variations regulatory and supervisory requirements between national and state jurisdictions. If an e-insurance operator wants to offer services in several jurisdictions, it needs to undergo obtain licenses and comply withthe respective jurisdictions supervisory, tax and other authorities. It may be difficultto incorporate all the different and sometimes contradictory requirements into a singlee-insurance platform. Recent studies have concluded that the actual differences

between national approaches are so extensive that e-insurers are unlikely to do business on a multicountry basis in the near future. A more likely development would be increased targeted penetration of

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national markets, with whose regulatory and supervisory requirements e-insurers arefamiliar. To avoid being indicted by a national supervisory authority for unlawfullyoffering insurance services in that national market, e-insurers should clearly indicate


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on their website their identity (address, home country) and the jurisdictions in whichthey are legally permitted to provide insurance services. Also, e-insurance providersshould post strong specific disclaimers and risk warnings directed to citizens of countries where the e-insurer is not authorized to operate. The home countrysupervisory authority should oblige e-insurers to post such disclaimers and warnings.The growth of cross-border e-insurance will necessitate a harmonization of regulatory

and supervisory frameworks, the recognition by insurers of home country regulatorsand of home country complaints and dispute settlement mechanisms. Thus it willrequire extensive cooperation between regulatory bodies around the world. Suchdevelopments could be part of international negotiations on the opening of nationalfinancial markets such as those conducted under the aegis of the World TradeOrganization.

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CO N CLUSIO N It is evident that the insurance industry is gearing up for e-insurance.Insurers, intermediaries and reinsurers are investing in IT and trying to determine the

proper business model to follow. The fundamentally information heavy nature of theinsurance product will eventually make full e-business treatment a workable option

provided that efficiencies do materialise and are passed on to consumers. To succeedas einsurance, it has to be cheaper and better than the traditional offline option. TodayIT is widely used to handle communication with intermediaries, policy processing,

premium notices, market analysis, sales forecast and accounting. Clearly, insurance isan information-intensive enterprise and is thus suitable for ecommerce. Many insurersand intermediaries have realised that e-insurance is not just about distributinginsurance products on the internet and have incorporated their e-business plans intotheir overall business strategy.Adopting e-insurance and introducing change in ITsystems is an incremental process, not an event, and should stem from a fundamentalneed to re-engineer and modernise business processes in order to better respond toclient demand, as well as to the clients own adoption of internet technology.Substantial investments may be required and open communication with stakeholdersand policyholders should be a given. Insurers should focus on growth as well as oncost reduction. E fficiencies may materialise, but forecasts and calculations must notundermine the costs of online client acquisition, retention and marketing, in particular if the insurer is of the internet pure-play type. Website functionality is an issue in itsown right, requiring a proper definition of customer and product profiles. It also needs

precise interlocking with powerful backoffice IT. Insurers and intermediaries need toexamine how they can achieve the most possible value added through an online

presence. A fundamental problem of all insurance websites is the low rate of repeatvisits by existing customers. Increasing repeat visits, as well as new traffic to theinsurers website is essential. Unfortunately, there is no clear recipe for success and e-

insurers may have to look very closely at the internet habits, demographics andlifestyles of their clients to find answers. Once improvements are achieved, theexisting e-insurance infrastructure must be used to market financial products relatedto a customers insured assets, within the

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limitations set by insurance and financial regulations of the market. Regular updatesare a requisite feature. Online traffic should be analyses from the point of view of how


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it can be converted to income and whether the website and the general ITinfrastructure are well matched. The same applies to insurance supervisors andregulators. The power of the internet should be harnessed to improve consumer

protection and education and awareness building. It can also be used to receive and process periodic financial reports, thereby freeing up resources for supervisingmanagement and insurance practices. Also, national insurance supervisors can use

internet technologies to communicate among themselves and co-ordinate activitiesrelated to preventing fraud and money laundering. E -insurance faces three seriouschallenges. The first is to redefine the relationships between insurers and their agentsand brokers. The second is to bring existing pre-internet computerised data systemsout of the back office and online, onto the World Wide Web. The third challenge is tointerface the business process of insurance to a fully functional website given the factthat most existing customers are unlikely to make frequent repeat visits to a site.While ecommerce has not changed insurance products greatly, insurance companiesand brokers need to be innovative in their use of ecommerce channels to ensure thatthey continue to meet public need and also to address public concerns (especiallyregarding security). They also need to ensure that their ecommerce strategies meet thecommercial threats that may arise from new the e-insurance. There is a great needto ensure that ecommerce channels are integrated properly with more conventionaltrading methods and the online customer relationship is managed appropriately.E commerce is here to stay and it is already the preferred mode of doing businessaround the world. Proactive steps should be taken as there is no place for laggards inthis cyber world. Insurers need to realise that online insurance should not be takenlightly. These endeavors require real commitment and leadership to reap the rewardsof smarter, more robust business processes. Meanwhile, it appears that insurers areunfortunately not making the best out of the web.

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REFERENCE: Dasgupta, Prithviraj And Sengupta, Kasturi, (2002), E-Commerce In The

Indian Insurance Industry: Prospects And Future, Journal Of E lectronic CommerceResearch IAIS, (2000), Principles On The Supervision Of Insurance Activities On

The Internet, International Association Of Insurance Supervisors.(www.iaisweb.org). SwissRe, (2000), The Impact Of E -Business On The InsuranceIndustry:

Pressure To Adapt Chance To Reinvent, Sigma Series N o. 5, Zurich. U N CTAD,(2002), E -Commerce And Development Report 2002, Chapter

8, United Nations Conference On Trade And Development, United Nations, NewYork. (http://r0.unctad.org/ecommerce/ecommerce_en/edr02_en.htm

Swiss Re: The impact of e-business on the insurance industry: Pressure to adapt chance to reinvent, sigma N o. 5/2000.


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Schmitz, Stefan, W., (2000), The Effects Of Electronic Commerce On The

Structure Of Intermediation, Journal Of Computer-Mediated Communication,5 (3). (http://www.ascusc.org/jcmc/vol5/issue3/schmitz.htmrl). Iran E-Commerce:

(http://www.iranecommerce.net/articles/insurance_managemen.htm) E-Business W@Tch, (2002), ICT & E-Business In The Insurance And

Pension Funding Services Sector, The European E-Business Market Watch,Sector Report, No.5.(http://www.empirica.biz/empirica/themen/ebusiness/documents/no05-ii_insurance.pdf).

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