Best practices : from einsurance to etakaful

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Best practices from e-insurance to e-takaful

• 1st e-takaful seminar

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Overview

• E-business definition
• E-business strategy road map
• E-insurance overview
• E-takaful

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E-business
E-Business
Electronic commerce
m-commerce
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E-business

• Use of of electronic means to conduct an
  organizations business internally and/or
  externally
• Internal e-business
• Better info sharing, knowledge dissemination
• management reporting
• External e-business
• Formulation of a sales promotion,
• Collaboration with partners

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E-commerce

• Focus on facilitating transactions and selling of
  products and services online,
• By internet or any other telecom network,
• Encompasses all trading steps
• Online (marketing, ordering, distribution),
  e-payment
• Buy-side activities (suppliers)
• Selle-side activities (customers)

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m-commerce

• Subset of e-commerce
• Similar online activities
• Underlying technology is more specific
• Limited to mobile telecom networks
• Accessed through wireless hand-held devices
  (mobile phones, hand-held computers, personal
  digital assistants)

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Overview

• E-business definition
• E-business strategy road map
• E-insurance overview
• E-takaful

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E-business strategy roadmap

• Vision formulation
• Business objectives definition
• Customer value creation
• Market segmentation and targeting
• Organizational set up
• E-business model formulation

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Pre-requisites

• Managers need to be catalysts of change 
• Combine positive traits of both the  visionary 
  and the  efficient performer 
• High levels of both creativity and analytical
  ability
• Know that ideas by themselves are not enough to
  build a profitable business
• Able to find new ideas by analysing state-of-the
  art cies within their industry and across other
  industries

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Vision formulation

• Twofold goals
• Focus attention and effort of top management and
  employees around a common task
• Encourage creativity and innovation by expanding
  your thinking beyond the existing boundaries of
  the cy and its environment

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Business objectives definition

• Objectives have to be measurable
• Allow progress tracking
• Ex of savings amount due e-business strategy
  implementation

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Business objectives definition

• Objectives have to be measurable
• Allow progress tracking
• Ex of savings amount due e-business strategy
  implementation

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Customer value creation

• Low price
• Become cost leader within the industry
• Differentiation advantage
• Superior brand name, high service quality, broad
  product selection,
• Leverage information available to create benefits
  for your customers (by data mining techniques for
  instance)

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Market segmentation

• Closely linked to value creation
• Two steps
• Select criteria for dividing you market into
  segments
• age, income for instance
• Consumer (personal lines), corporate (commercial
  lines)
• Decide which segment to target
• Segments needs driven products and services

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Organizational set up

• What scale?
• Analysis of expected cost structure of e-business
  activities
• Analysis of each activity of the value chain
• Analysis of its underlying cost drivers
• What scope?
• Products scope
• Leverage the internet to establish partnerships
  with complementors
• How integrated?
• Which e-business activities to perform in-house
  and which ones to outsource?

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Organizational set up

• How to align physical-world strategy with
  e-strategy?
• Stragtegic decisions
• Branding, pricing, IT and channel conflict
• What structure?
• Integrated into the existing organization
• Leverage brand to attract customers to online
  channel
• Multi-channel offering becomes possible, cross
  promotions, shared IT
• Set up inside a separate entity

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Business model

• Cost structure?
• Consider individual parts of te value chain
• Production, IT, marketing, sales an after sales
  service
• How can we use internet to lower costs across the
  value chain?
• Revenue structure?
• Transaction fees, advertising revenues,
  subscription fees (in B2C e-commerce)
• Assess sustainability of business model
• Intensity of competition, substitutes, etc.
• Leveraging data mining techniques to analyse
  customer information

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Overview

• E-business definition
• E-business strategy road map
• E-insurance overview
• E-takaful

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Business models for e-insurance

• Insurance cys websites
• homepages of individual insurers
• Products portals
• Comprehensive standard websites for insurance
• Aggregators
• Internet insurance brokers
• Online risk markets
• Large risks placed with trading partners
• Point of sale portals
• product marketing through various theme-based
  pages

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E-insurance difficulties

• Complexity of some products
• Claims settlement difficult to standardise
• Internet suited for products where the contact
  with the cy is more frequent
• Internet viewed as insecure medium for high
  amounts
• Regulation (licences)

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Internet-product suitability
High
Large commercial risks
Health insurance
Commercial motor
Transaction volume
Annuity products
More advice/ Less suitable
Motor
Index linked life products
Household
Term life
Low
Low
High
Product complexity
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E-insurance advantages

• Important market share gain potential
• Standardised personal lines insurance
• Limited suitability for sale via internet
• Most life and pension products, health insurance,
  commercial insurance
• Enormous potential for improvements in quality
  and service levels
• Better tailored products
• Shorter reponse times
• Greater flexibility in cover structure
• Better risk management support

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E-business increases efficiency

• Sales, administration, claims settlement, claims
  payment expenses
• decrease for both personal and commercial lines
• Personal lines cost cut potential gt Commercial
  lines cost cut potential
• High level of advisory services and tailor made
  products

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Market entry barriers lowered

• New entrants can avoid long and expensive setting
  up of traditional sales network
• Lateral from other sectors benefit from easier
  access
• Financial services, internet cies, banks, online
  brokers, internet service providers
• Internet presence and brand name to add insurance
  to their product range
• More efficiency
• Established insurers face growing competitive
  pressure

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Towards more integrated e-business models

• E-business makes it possible to disseminate
  information quickly and in large volumes
• Traditional value chain is deconstructed and
  certain links are outsourced to specialist
  providers

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Internet impact on value chain

• Product development rating
• Standardisation, data availability and analysis,
  new risks
• Marketing
• New marketing opportunities, deintermediation,
  reintermediation
• Administration
• Standardisation, automation
• Asset management
• Better information
• Claims management
• Automation, proximity to the customer, additional
  services

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Potential providers

• Product development rating
• Actuarial firms
• Marketing
• Trading cies, financial services providers,
  virtual brokers and markets
• Administration
• Policy administrators, IT companies
• Asset management
• Asset managers, funds, banks
• Claims management
• Professional claims managers, call centres,
  Repair companies

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Role of traditional brokers is shifting

• Standard products
• Considerable competition
• Products that need more advice and for which
  prices and benefits are not easy to compare
• Using e-business, more finance management and
  risk consulting services
• Ex complex pension products, commercial lines

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Customers benefits

• Greater transparency, lower prices and improved
  services
• E-business opens up new ways of reducing costs
• Hardening competition ensures that these benefits
  are passed on to the customer
• Internet offers a number of possibilities of
  increasing the value creation for customers by
  means of increased transparency and improved
  services

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E-insurance conclusion

• From purely info and communication medium to
  important distribution channel
• Focus from selling products to consumers (B2C) to
  selling to commercial clients (B2B).
• Internet does not only impact the distribution
  but the entire business process
• Challenge of continuously optimizing the business
  processes

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Overview

• E-business definition
• E-business strategy road map
• E-insurance overview
• E-takaful

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Insurance not permissible

• Uncertainty (Gharar)
• Gambling (Maisir)
• Interest (Riba)

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E-takaful

• Prevent al-gharar, uncertainty and ambiguity in
  the transaction
• Provide to the consumers with comparative
  informations between products available
• Lead to more informed decision by consumers
• Scope of the cover, benefits and exclusions
• Rate of tabarru for takaful vs saving

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E-takaful

• Young industry
• Can leverage on the conventional insurance
  e-experience
• Comprehensive e-business strategies should be
  built (eventhough takaful is a high level brand)
• Takafulconcept internet suitability
• E-business enhances the transparency (involved by
  the takaful concept)
• E-business favor the participants empowerment
  (involved in the takaful concept)

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Thank you

• Sources
• Swiss Re, Sigma n 5/2000
• Strategies for e-business, Prentice Hall,
  Financial Times