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44 India's Best IT Implementations of the year 2005
Continued from page: 5
Friday, June 03, 2005
Maximum Business Impact GIS-based Risk Mgmt System ICICI Lombard
Project Head: Naganathan Sriram, National Manager-Technology
Location: Mumbai
ICICI Lombard, a joint venture between ICICI Bank and US-based Fairfax Financial Holdings, is a general insurance company, which deals in insurance of personal, business and rural products, including house, motor, health, fire and special perils, industrial risk, corporate cover, tea crop, and many others. In the insurance business, success of a company depends largely on its ability to identify, quantify and manage the risk associated while issuing policies. The insurance premium for any policy depends upon the risk associated with it.
Typically, premium for, say, a motor vehicle is calculated on the basis of the price and age of vehicle. However, there are several other parameters, which can help better predict the risks associated with a policy. Factors such as distance to work, route driven, auto theft statistics for work and home can play an equally important role while underwriting motor vehicle policies. Thus, apart from the conventional parameters used for underwriting, factors which have a geographical component can and should be used to calculate risk involved in underwriting. Similarly, property insurers can use geographical data such as distance to fire station, windstorm risk pattern, distance from sea cost, and floodplain for calculating policy premiums. In conclusion, each and every object or event has got a geographical component, as at any point of time everything has to be somewhere.
As said above, the working rule for the insurance business is to minimize risk or, to better align pricing with risk, and geographical data can play an important role in achieving that. A way to utilize this data in the insurance business can have a tremendous impact on the overall business. This is precisely what ICICI Lombard has done in its Geographical Information System (GIS)-based risk management system. Any point on the surface of earth can be identified by a latitude and longitude pair. Once this pair of information is defined for an area, the area can then be linked to many other types of information available about that area. The information could be in the form of demographic data, weather pattern, flood susceptibility, seismic zone, etc on a macro level and in the form of the condition of roads and intersections, theft statistics or distance from fire station at a micro level. A GIS represents such geographical information about a particular area or location onto visual geographical maps.
GIS plots different types of geographical data as separate layers on the map. So, you can have a layer of, say, rainfall pattern data plotted on to the map, another layer could be about disaster zones. This GIS information when combined with, the static and moving location of objects which are to be insured, such as house, motor vehicle or factory, can give valuable insights into deciding policy premium prices. A visual representation in the form of maps, gives an easy way of looking at and understanding data, thus enabling better decision making, identification and management of risk involved with various geographical locations, enhances policy processing, reduce cost, manage customers and accounts better.
ICICI Lombard is presently using four layers of data that includes spatial, demographic, rainfall pattern and disaster zone information. The system is used for reinsurance, underwriting, customer service, rural and agricultural business group, and marketing. It facilitates online tracking of various risks down to the pin code level in any geographical location. The company, in coordination with World Bank, has introduced Weather Insurance, a GIS that provides weather information like rainfall patterns can give much better understanding and decision making for weather underwriting.
Apart from managing risk, the GIS system is helpful in marketing activities. It can give details such as number of policy holders in a particular location, which can be used to make marketing efforts for areas where the number is less and to cross-sell other products where the number is more. Pre-underwritten products can be offered to customers based on risk analysis provided by the GIS for separate locations.
The GIS is also actively used by sales and other field personnel, who are probably not well versed to understand and analyze complex reports, but the same data presented in the form of a visual map lets them understand it better, allowing them to be more analytical as well as be more productive.
The project started in November 2004 and the application uses ASP.NET to deliver GIS content over the Web. The maps are provided by MapInfo's MapXtreme software to the ASP.NET system. Oracle8i is used to store all GIS data, which is provided by various vendors. The hardware cost, which includes a Dual-Xeon server, was Rs 2 lakhs. Application software and development cost comes out to be Rs 30 lakhs. Considering these numbers, the overall cost of the project is not too high, whereas, the returns offered are much higher.
Though, the results cannot be quantified in absolute financial terms, it is clear that such a system can definitely have a very great impact on the way an insurance business operates. Along with it, the quality of data presentation through maps is much higher than reports or charts. Being a Web-based application, it can be accessed all across the country by various agents, sales personnel, branch offices, etc.
Bottom line
Offering best priced products in the insurance industry, while simultaneously enhancing profits, requires managing the risk associated with underwriting in the most efficient way. However, a very, if not the most, important factor for calculating this risk, which had traditionally been ignored by most insurance companies, is the geographical component of data and its applicability to determine product pricing. ICICI Lombard's GIS based Risk Management System, aims at accumulating, processing and presenting that geographical data, which can be used to create better insurance products for both the customers and the company.
The GIS project, while managing risk also helps in other business activities, such as marketing and customer care. Considering the importance of location based data for insurance industry, this GIS based risk management system does become the project which can have the maximum impact on a business.
It helps insurers assess risk more efficiently by tracking accumalation in real time. It also helps the organization better align processes with risk and thereby provide pro-active customer service.
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