The document discusses best practices in transitioning insurance to e-insurance and takaful to e-takaful. It provides an overview of e-business definitions and strategies, and discusses how implementing e-business can increase efficiency across the insurance value chain through standardization, automation, and outsourcing. While certain complex insurance products are not well-suited for online sales, e-business lowers barriers to entry and increases transparency, competition and customer benefits. The document advocates for e-takaful to enhance transparency and empower policyholders in line with takaful's cooperative principles.

1. Sami Guellouz Dubaï 06-04-2005 1
Best practices :
from e-insurance to e-takaful
1st e-takaful seminar

2. Dubaï 06-
04-2005 2
Overview
E-business definition
E-business strategy road map
E-insurance overview
E-takaful

3. Dubaï 06-
04-2005 3
E-business
m-commerce
Electronic commerce
E-Business

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04-2005 4
E-business
Use of of electronic means to conduct
an organization’s 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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04-2005 5
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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04-2005 6
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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04-2005 8
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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04-2005 12
Business objectives definition
Objectives have to be measurable
Allow progress tracking
Ex : % of savings amount due e-
business strategy implementation

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04-2005 13
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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04-2005 14
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
 Segment’s needs driven products and services

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04-2005 15
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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04-2005 16
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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04-2005 17
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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04-2005 19
Business models for e-
insurance
Insurance cy’s 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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04-2005 21
Internet-product suitability
Low HighProduct complexity
LowTransactionvolumeHigh
* Large commercial risks
* Health insurance
* Commercial motor
* Household
* Motor
* Term life
More
advice/ Less
suitable
* Index linked life
products
* Annuity products

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04-2005 22
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 >
Commercial lines cost cut potential
 High level of advisory services and tailor made
products

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04-2005 24
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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04-2005 25
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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04-2005 26
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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04-2005 28
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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04-2005 29
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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04-2005 30
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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04-2005 32
Insurance not permissible
Uncertainty (Gharar)
Gambling (Maisir)
Interest (Riba)

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04-2005 33
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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04-2005 34
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 participant’s empowerment
(involved in the takaful concept)

35. Sami Guellouz Dubaï 06-04-2005 35
Thank you
Sources
Swiss Re, Sigma n° 5/2000
Strategies for e-business, Prentice
Hall, Financial Times