The impact of e-commerce on the Iranian insurance companies

Abstract: The conditions for doing business are rapidly changing. The Internet and
related advances in information technology significantly affect financial
services in general and insurance markets and institutions in particular.
The growing importance of e-commerce represents a watershed event for
insurance markets and institutions, as it does for most industries. By
lowering information costs, e-commerce will enable insurers to classify,
underwrite, and price risk as well as settle claims more accurately and
efficiently. Overall, the Internet will significantly enhance the
efficiency of insurance markets and institutions and benefit consumers by
lowering transaction and information costs. The effects of e-commerce are
the subjects of intense debate in insurance industry. The foundation for the
purpose of this research has been created by a prospective study to explore
the impact of application of e-commerce on the Iranian insurance industry.

In order to fulfill the purpose of this study, a frame of reference has
been emerged based on a vast literature review. With the focus at
quantitative research as a general approach and descriptive research as the
type of research in this study, a structured questionnaire was used as the
data collection instrument. To accomplish this, a survey of 258 people (in
almost all active insurance companies in Iran) has been carried out. The
respondents from almost every department within the targeted insurance
companies were randomly chosen. We have focused on the perception of
insurers regarding the subject of study, and thus, the perception of other
stakeholder such as insurance agents/brokers and even their customers have
been suggested for future research, due to limitation and demarcation of
this research.

This dissertation has been organized in the seven chapters. An
introduction this study, problem statements and research questions were
presented in chapter one. The second chapter was devoted to literature
review. The emerged frame of reference was provided in the third chapter
and our research methodology was discussed in the fourth chapter. Data
presentation and analysis were done in accordance with the research
questions and the frame of reference in chapter five and six, respectively.
Finally, in the last chapter findings and conclusions were drawn by
answering the research questions.

With respect to the findings, we conclude that the Iranian insurance
companies were positively looked at e-commerce and its application in their
companies. Their attitude and views toward e-commerce was positive so that
they found that e-commerce would be an opportunity rather than a challenge
or even a threat for insurance industry. They highly believed that e-
commerce would affect on insurance companies and, thus, their companies
should embrace e-commerce. Lack of skilled staffs in e-commerce application
and scarcity of IT experts were the most infrastructure requirements which
they found that the Iranian insures were suffering from. Whereas they were
well equipped with hardware and networking as well as general and
professional insurance software required in e-commerce applications.
Lagging of other supportive sectors (e.g., e-Banking and
Telecommunications), lack of appropriate legislation and regulation (e.g.,
copy right, digital signature, …), low Internet usage and fewer users,
traditionally attitudes and views over the companies and scarcity of skilled
staffs were the five top major obstacles which would hinder the Iranian
insurers to embrace e-commerce.

E-commerce is potentially applicable to marketing and sales as well as
R&D with respect to insurance value chain. On the other hand, as far as
insurance products concern, auto (motor) insurance, marine and aviation,
life insurance and fire insurance were highly perceived to suitable to e-
commerce (sale online). Finally, the Iranian insurance companies were
chiefly believed that in the case of e-commerce application they would get
these top five benefits: brand and image promotion (as a pioneer and modern
company), extended corporation with partners (specially in the reinsurance
cases), lower invest for establishing the sales and after sales services
network, cost reduction in value chain management (e.g. product/service
development) and decentralization and no restrictions imposed by national
borders.