1 2 3 12 Previous Next

SAP for Insurance

175 Posts

Introduction

 

SEPA stands for ‘Single Euro Payment Area’. It’s a financial system that is designed to create efficiency for countries using the currency Euro by providing a unified system in which to perform financial transactions. The SEPA seeks to create a improved system for credit transfers, an improved debit system and a cheaper way for individuals and firms to make transactions within member countries or regions. Implementation of SEPA makes the customers life at ease. Irrespective of the national area customers will be able to perform euro payments and also they need only one bank account in the euro zone.

 

The SEPA introduces two payment methods intended to replace national methods: the “SCT” credit transfer and the “SDD” direct debit which are based on a “mandate”.

 

The legal framework for SEPA is defined by a consortium of European banks, the European Payments Council. In parallel, the European Commission has regulated the framework for this migration, by setting ending dates to the national instruments.

 

 

A brief background about SEPA

 

The development of SEPA is being driven by various key stakeholders. The European Commission (EC) is pushing developments forward to enable the establishment of a truly internal European market . SEPA is the vehicle for implementing this vision within the payments business. The development of the New Legal Framework (NLF), which is to be finalized in the coming months, will build the legal foundation for a single payments market.

 

The NLF is to be implemented in the local laws of the different EU countries. The introduction of the euro was just the first step towards creating the SEPA. The EC initiated further efforts to allow cross-border euro payments to be made under the same conditions as within national borders.

 

We shall have a look on how to implement this basic functionality in the FSCD system in this blog.

 

 

Beginning of Regulatory framework for SEPA


The implementation of SEPA falls within the regulatory framework defined by the European directive on Payment Services (2007/64/EC of 13 November 2007). SEPA aims at creating a single euro payments area (SEPA), a geographical area where each user will be able to make payments in euros under identical conditions. For this purpose, the SEPA introduces two payment methods, intended to replace the national methods of the various Member

 

  1. European domestic credit transfers in euros, the SCT (SEPA Credit Transfer)
  2. European domestic debit transfers in euros, the SDD (SEPA Direct Debit).

 

SEPA in FSCD / Contract Accounting

 

All the rules and messages defining the SEPA standard have been defined by the European Payments Council, (EPC), the decision-making and coordination body in the field of payments, and have been formalized in a set of “Rulebooks” and “Implementation Guidelines”, which do not have legally binding force but which set the frame for the implementation of the SEPA.

 

The below mentioned basic steps should be done for Implementation of SEPA in SAP FSCD / Contract Accounting system:


1. SEPA Activation for Mandate Management

 

Following are the activities which are to be done as part of this:

 

SEPA mandate management has to be activated for the usage with SDD CORE and SDD B2B from FSCD payment processing.  Apart from activating the SEPA Mandate management we need to maintain the SEPA Mandate management modifiable fields.

 

Below is the path for activating the SEPA Mandate Management and maintain the modifiable fields.

 

IMG -> Financial Accounting -> Contract Accounts Receivable and Payable -> Business Transactions -> Incoming Payments -> Management of SEPA Mandates -> General Settings.

 

Activation.jpg

or in T-code SM30 you can put in the table V_SEPA_CUST

V_SEPA_CUST.jpg

 

Once SEPA functionality is activated and you can start using the Mandate Screens. You can view the mandate details in SEPA_MANDATE table once the mandates are created / migrated using FSEPA_M1 (Create) , FSEPA_M2 (Change) and FSEPA_M3 (Display)

 

Mandate ID.jpg

 

In the transactions for creating, displaying, and changing mandates, we can select mandates on the initial screen using the following criteria:

  • ID of the mandate
  • Creditor ID of the company code
  • IBAN
  • Customer
  • Paying company code

You can uniquely identify a mandate using the creditor identification number (creditor ID) and the mandate reference (mandate ID).

 


2. Configuring SEPA DMEE

 

Creation of new DMEE Payment Format tree for SEPA credit transfer and SEPA direct debit. SEPA_CT and SEPA_DD are the DMEE formats provided by SAP.

 

It is always better to copy the DMEE formats and create new ones. If there is any custom requirement for any country create a user exit and assign to the field that needs to be changed dynamically.

 

For SDD

sepa sdd dmee.jpg

 

For SCT

 

sepa sct dmee.jpg

 

 

3. SEPA Payment Medium Format


Define Payment Medium Formats using T-Code FQP3 for FICA. The payment medium format controls how payment orders and debit memo orders to the bank are created.

FQP3.jpg

 

Following event modules should be configured

Function Modules.jpg

 

 

T-code FBZP: payment method creation, first in Country and then in Company code

 

For SDD

Payment method sdd.jpg

Permitted Currencies may be selected as EURO

 

For SCT

Payment method sct.jpg

Permitted Currencies may be selected as EURO


Once these basic configurations are done you can create SDD and SCT files using FPY1 provided the existing settings and configuration exists for other payment formats. The CAs having SEPA payment method will have respective SEPA xml outputs and only if IBAN is activated in their bank master data and bank configuration in FPP1 / FPP2. The house banks in FI12 also needs to have their IBAN defined in their bank accounts.

Analytics.jpg

 

The insurance industry is changing rapidly. The shifting market and resulting challenges in the industry have a lot of companies scrambling for answers to their problems – is yours one of them?

 

The answer can be described in one word – analytics. But before looking to the answer, let’s discuss exactly what the current challenges are in the insurance industry.


Market drivers

 

The digital transformation in insurance is fundamentally changing the way insurance carriers do business, adding complexity to an already complex environment. New competition from technologically savvy companies in digital and online spaces is a constant concern. These non-traditional sources are creating increased price sensitivity and are accelerating the push toward digitization. In order to stay competitive, traditional insurers need to find a way to know their market, know their customers, and reach those customers in a digital way. If traditional companies can keep up in the digital sphere, they can outpace the upstart competition.

 

In addition to reaching customers, changes are occurring in the revenue side of the business. Investment incomes are decreasing, and are no longer the steady revenue drivers that they once were. With greater insight into other potential sources of revenue, insurers can offset this change in the market. That insight can come from improved analytics.

 

Challenges


As a result of the new market drivers in the industry, there are new challenges facing insurers.

 

As sources of revenue for the insurance industry change, the role of the CFO changes as well. The CFO has to become more of a business partner to the other business units. This partnership involves becoming a source of more information and insight, and advising based on that information. With an ever-increasing amount of data from which to pull information and insight, the CFO needs to improve analytics to support this changing role.

 

New regulatory and legal requirements, such as Solvency II and IFRS, are also adding complexity to the job of the CFO. In order to ensure compliance, improved and innovative processes need to be put in place, and many companies are turning to the CFO to take the lead. Add to that increased pressure to improve capital and liquidity positions, and the need for insight in order for a CFO to operate is now higher than ever before.

 

Meeting the challenges with SAP solutions


Now back to the answer – analytics. It goes without saying that insurance companies have massive amounts of data. But most companies are not using that data effectively. And even if they have analytics in place, it usually takes time - and several people and departments - to get answers to even the most basic questions.

How to install msg.pm Designer on HANA DB.

 

1. First of all, you need to install HANA DB on separate hardware/environment. I assume this step is straight forward. So, will not be describing details of it.

This has to be SUSE Linux system as Windows is not officially supported.

 

2. In the Windows environment where msg.pm software will be installed you will need to meet some prerequisites before you proceed with installation.

I used Windows Server 2012 R2 Standard in my case. In addition to this you need to install:

- C++ libraries need to be installed (vcredist_x86_2005.exe),

- HANA client has to be installed in the msg.pm environment to be able to communicate with HANA DB. Ideally both HANA DB and HANA Client should be on the same revision. But it will work also, if they are not the same. In some cases, you have to upgrade HANA client to match HANA DB revision.

 

According to 2015 msg.pm install guide, requirements are to have minimum revision 73 on HANA DB and minimum 74 on HANA client. I installed HANA revision 102.

 

Capture4.JPG

 

Pay attention that HANA client installation will also install different version of C++ libraries. But for msg.pm Designer you will need separate 2005 version as specified above.


3. Once the above are installed, you need to configure ODBC Data Source for HANA DB, as per the below screenshot. It has to be under System DSN:

 

Capture1.JPG

 

4. Configure HANA server details and test the connection:

Capture2.JPG

 

5. You can test it with SYSTEM user to verify connectivity. But to install DB schema, you will need to create different user on HANA and grant some admin privileges.

 

6. As I wasn't sure what privileges I need exactly, I granted pretty much the same system privileges from SYSTEM user to my MSG_USER that will serve as admin to connect to MSG.PM designer. This user needs to be able to create new schema and perform other admin operations. That's why needs more admin privileges.

 

7. We should be able to start installation using the executable file and make sure you specify installation user with administrative privileges to execute it.

Capture3.JPG

8. Once installation is done, you will have to install database to generate schema and tables using the MsginstallDatabaseU executable program in *\PMDesigner\bin directory of your installation forlder. You will need a license number to start the process of installation.

 

Capture5.JPG

 

9. Once installation is completed, you can verify the schema in HANA Studio :

Capture6.JPG

10. You can also log on to the Designer using the menu shortcuts created during installation:

 

Capture7.JPG

 

11. Log on using HANA user that was created prior to installation:

Capture8.JPG

 

12. You will have to logon to Security Designer to generate security configuration on your database. Here you will have to use your HANA connection from ODBC and log on with the same admin user created for MSG installation on HANA.

 

Capture9.JPG

 

Those are the major steps, as far as I remember. It's only the beginning of configuration nightmare required to get msg.pm running fully.

Enjoy and please update this blog, if you have some additional experience.

 

Mateusz

Insurance companies are facing many challenges today, including increased price sensitivity from customers and greater pressure from competitors. They have historically struggled to get an accurate view of which products, customers, regions, and segments are really profitable. In the new world of digital collaborative business models, this will become crucial.

While insurers are continually looking for ways to improve profitability and cost management, this is often difficult because these companies do not have the right tools to manage their risk and finance processes.

 

 

A recent IDC Global survey found that financial services firms have a strong need for solutions that consolidate these processes. “Leading insurers are increasingly looking to consolidate their operations onto a single, integrated IT platform that provides both efficiency and business intelligence,” says Li-May Chew, research director, IDC Financial Insights.

 

An evident need, but few onboard today

 

Despite this apparent need, the survey results revealed that these companies are still at varied levels of integration when it comes to connecting their risk and finance offices through technology. “Respondents to our latest survey with SAP indicate that C-suite leaders are most concerned with expanded regulatory environments and economic uncertainty,” says Chew. However, only half of the companies are achieving some level of integration.

 

“By adopting new technology solutions like those from SAP, companies can work smarter and better plan and predict future changes in the market,” Chew adds. And a key opportunity in this area is the ability to process and analyze vast amounts of corporate data that can help these firms better accommodate allocations and thereby increase profitability and cost management.

 

Better cost and revenue allocation leads to greater profits

Cost and Rev Alloc.png

 

To take advantage of this opportunity, insurance companies are turning to the SAP Cost and Revenue Allocation for Financial Products application powered by the SAP HANA platform. Now, with this software from SAP, insurance companies can maintain and execute complex allocation models to create the data foundation for flexible, real-time, high-speed profitability analysis of insurance products.

 

With this application, companies can improve business processes and overcome technical limitations in the allocation of costs and revenue in real-time data analysis at the most granular level.

 

The application enables companies to process higher volumes of data, gain a more detailed analysis of data, and accommodate a wide variety of allocation rules so they can manage profitability and performance measurement better.

 

Having the ability to process core data points quickly across the entire organization gives insurers the insight they need to stay ahead of their competitors and increase their return on investment.

 

The SAP application leverages the technical capabilities of SAP HANA and unleashes the potential of in-memory technology as the application logic moves to the SAP HANA database layer for accessing source data on-the-fly. It is also designed to work seamlessly with the SAP S/4HANA Finance solution and the SAP Insurance Analyzer analytic applications.

 

To learn more about the full power of this solution, watch this short solution overview video.

Also, join SAP on March 10-11 for an informative 2 day workshop in Waldorf (register here).

“Run Simple” has been a very catchy phrase since its inceptions as SAP’s new theme which rolled out at its annual SapphireNow user conference in Orlando as a brand message SAP adopted way back in June 2014. A very good strategy adopted by SAP to convey its message to its existing customers and to attract potential customers. This gave brownie points and an edge over its competitors I must say and it works and works quite well! Everyone loves it.

 

Now comes the not-so-simple part, different core application in SAP for Insurance. In the “SAP for Insurance” world we have this value map which demonstrates how different core processing application modules like FS-QUO, FS-PM, FS-CD, ICM (cross industry solution), FS-CM, and FS-RI can be used to take care of Core Insurance Operations. This is the current landscape model which is being projected as Customer Centric model.

 

 

Current Customer Centric Model.jpg

 

This Customer Centric model having different core insurance application, has certain limitations;

 

  1. Complex landscape – if you notice the applications are based on the life-cycle of an Insurance policy. For an Insurance policy each application component kicks in depending upon the stage of the insurance policy.
  2. Data footprint is large as there is header and detailed table structure of the database. Data models of each application have a varied design.
  3. No Real-time processes – Data has to be pushed or pulled through different applications.
  4. Batch jobs take extensive time to complete. Failed batch jobs are a night mare for Insurers.
  5. Data replication, duplication, aggregates are common because of the complex landscape.

 


Simple Insurance – A new vision

 

This Customer Centric model can be remodeled to make SAP for Insurance, simple. Now we have a new catch line “Simple Insurance”.

How can this Simple Insurance model be structured?  I want this model to be as simple as it sounds and which suits the title Simple Insurance. I want the best of what the entire existing SAP core insurance applications have in a single carton based on real-time analysis of financial and operational business scenarios. ERP-system-from-scratch for different SAP Insurance components (and then putting in time and resources to integrate them) is a Big No.

 

Here is what simple Insurance should be devised of, and what every Insurers would prefer to have;

 

  1. Simpler landscape with less interfaces to other SAP/ Non SAP system components.
  2. Smaller data footprint when it comes to management of data.
  3. Real-time processes across life-cycle of a policy. In short don't have to depend upon internal interfaces as the unified architecture takes care of this.
  4. No hassles related to batch jobs / time and resource consuming batch jobs.
  5. No data replication, no duplication and no aggregates.

 

What the Insurers are looking for are;

 

From user’s perspective

  • Simple administration – Customers and Insurers are interested in having a user manage the entire life-cycle of a policy of a customer at different stages. The user with minimal systems training can be trained for this to take care of complex requests rather than the current trend of imparting specialized training to users to handle complex request where they can handle only certain stages of the life-cycle of the policy. If the simple insurance landscape allows this then customer service touch point provided can close the gap between the customer/ policyholder and the Insurer.
  • Simpler user experience - For both the online customer and the Insurer. No one wants to run door to door to get their requests attended / queries answered or attended to. Instead a single window to handle such things is very much convenient. In the same way no one would prefer to navigate to different SAP applications to get things done. It would be wonderful to have a single window which is much user friendly rather than referring to some t-code cheat sheet or having to access various links to different SAP components.

 

From IT management perspective

  • Simple to implement – Minimal use of tools to guide and configure the application. And less time to go live.
  • Simpler development – From an IT management perspective, usually an enhancement in one of the core applications triggers enhancements in other dependent SAP core application(s). Each of these core applications being at a different version of enhancement pack makes the whole IT development process crumble some.

 

Here is what the modern SAP Insurance landscape would look like with HANA for real time analysis;

Capture landscape.JPG

 

“Simple Insurance” can be modeled as shown below by having a simple architecture where we have core systems acting as a unified application.

unified Capture landscape.JPG

For e.g.; we have this SAP Policy Management (FS-PM) where the Insurer can control the whole life cycle of a contract policy, starting from the creation of an application, through policy issuance and ongoing contract maintenance, and up to the termination of the contract with the Insurance customer.

For this SAP Policy Management (FS–PM) provides interfaces for the integration of other SAP Insurance components. Taking some of the SAP components which are mentioned below as an e.g.:

  • Collections and Disbursements (FS-CD)
  • Claims Management (FS-CM)
  • Incentive and Commission Management (FS-ICM) and Portfolio Assignment (PFO)
  • Reinsurance (FS-RI)

 

Now these SAP Insurance components have their own architecture to manage the respective Insurance business process with its own database. It is like the Insurer has to implement each SAP insurance components as a separate ERP. In the figure below I have just considered FS-PM’s interfaces to the other main SAP insurance components while there can be many and with non SAP systems as well.

Discrete landscape.JPG

The Simple Insurance architecture can be modeled to move from this architecture to a more simplified and robust architecture which shall meet with the consistently improving infrastructure ( like in memory based computing and database), and also use scalable options that can help Insurers meets future requirements.


This simple insurance architecture can portray as single ERP and face to the Insurer. This can be achieved by having a single component as shown below.

 

Integrated component.JPG

 

As the first step towards this simplicity, the core SAP insurance components can be concentrated upon and then the other SAP components like Finance and Risk, Procurement, HR & Investments can be looked at. Integration with the Cloud based solutions shall be an additional bonus.

 

Right now the concept of Simple Insurance is just an idea which Insurers would like to see as a reality in the future. Thus making the concept of having various complex SAP components knit together redundant. Instead have a common architectural framework with all the SAP components bundled in one unit.

FinTech.png

The products of banks and insurers such as financial instruments and risk coverage are predetermined for digitalization. Though most of the financial services companies are still focusing on their traditional business model whilst hundreds of ingenious FinTech companies are lining-up to challenge the establishment.

The traditional business model of financial services companies is based on collecting money from individuals or institutions in form of deposits or insurance premiums, managing assets and either lending to other individuals or offering financial protection for unforeseen events. The whole system is based on trust, collectivity and managing assets. In the financial crisis, trust was damaged and so the reputation. Also the interest rates of low-risk financial instruments got close to insignificant.

At the same time, hundreds of FinTechs are reinventing the financial services industry and challenging the traditional players. In Banking many of them focus on payments such as some already established players like PayPal, Google and since iPhone 6 and iOS 8.1 also Apple Pay. Some analysts think the perfect storm will be about Bitcoin and blockchain networks. Insurance is probably one of the last fortresses of the old economy. But the growing number of insurance FinTech companies conveys that that disruption also in insurance is about to happen and will be more exhaustive than replacing traditional brokers and agents by aggregators such as Moneysupermarket our Check24.

Evolution of the business model is not enough

In the past, the evolution of existing products and services and smaller adaptions to the business model was sufficient for banks and insurance carriers to stay in the market or even to increase market share. This proofed Charles Darwin’s theory of evolution and natural selection to be correct in the old economy. But the new economy is different. It is not any longer about slow evolution but about fast transformation.

What the Asteroid for the dinosaurs, I expect the FinTech companies to become for the established Financial Services organisations. We don’t now yet, if it will be one big Asteroid or several small ones. We don’t know when the first really big one will hit the ground hard. But we know they are on their way through time and space will redefine survival of the fittest for the financial services industry.

Three things successful FinTech companies have in common

The most successful FinTech companies do have a few key aspects in common which you won't attribute to many banks or insurance carriers:

      • They focus first and almost on the benefit for the customer and second on their benefit; their product is a mean to  serve their customer better
      • They are establishing a positive reputation by creating plenty of positive customer interactions; they are likeable brands
      • They are 100% digital and hence omni-present in the internet and social media


It is not only about the business model, it is also about technology to support the business model

Let’s keep in mind that the root cause for the global mega trends causing the new economy such as globalization and digital economy is solely technology. Hence technology is key to interact with the new reality, to leverage it’s opportunities and fight it’s challenges. While the established players are struggling with their legacy technology, the IT foundation of the FinTech companies is modern and state of the art. Technology leaders such as SAP, IBM and others recognized the opportunity and are collaborating with the new players. As a consequence their IT is out-of-the-box enabled for things like customer centricity, big data, social media and internet of things. Most banks and insurers still have a stony way ahead to get their.

The way out is to start from scratch on a greenfield

The smarter and most often wealthier established firms are working on initiatives to tackle the disruption. Here are some methods they are applying:

      • Establishing new brands or channels as spin-off on a greenfield
      • Collaboration with or funding of selected FinTechs
      • Initiating core transformation projects
      • Initiating Omni-Channel projects
      • Setup of innovation teams


Disruption is about radical adaption of the existing business model in financial services. A company needs to be fast, agile, well funded, excellent in organizational change management and free from any legacy technology to become successful. There are some great examples of established firms understanding and reacting accordingly such as Allianz and J.P.Morgan. Both companies were recently mentioned by Boston Consulting to be under the top 50 most innovative companies globally. The other banks and insurers not as innovative as the former examples will need to proof the above thesis wrong ...

 

Cost and Rev Alloc.png

We are pleased to introduce a new SAP Cost and Revenue Allocation for Financial Products video which showcases how insurers can achieve unmatched, real-time insights into profitability and performance metrics. 

 

Find out how the SAP Cost and Revenue Allocation solution helps insurers streamline risk and finance processes, connect fragmented data sources, and reduce IT and operational complexity while increasing profitability.

 

This is an optimized way to quickly (3:21 minutes) and effectively gain an understanding of the value of the SAP Cost and Revenue Allocation solution, which helps Insurance companies Run Simple.

 

Demo videos are constructed based upon the ‘day-in-the-life’ approach to using SAP solutions. 

  

Enjoy the video and please share your feedback.

Gone are the days when the CFO and CRO could work at opposite ends of the building – or, to opposite ends. The worlds of finance and risk data management in the insurance industry are changing on a daily basis, thanks to increasingly complex external regulations and the evolution of internal systems. The 2008 financial crisis forced both companies and regulators to reevaluate business structures and focus on solvency. In the ensuing seven years, the whole system has shifted - and it will continue to change.

 

Finance and risk data are becoming more dependent on each other, and data systems as a whole are under a new level of scrutiny. Reports that reflect outdated data won’t satisfy regulators or shareholders.

 

So when you think about your current finance and risk data management solutions, ask yourself:

 

Do I have the right data?

 

Can I stand behind it?

 

Is it accurately reflecting my business?

 

 

From siloes to integration

From the outside, regulatory pressures are forcing you to update reporting systems in order to be in compliance and present accurate date when needed. And as you expand, you need to make sure your company is in compliance with regulations around the world. But with separate finance and risk data systems, there is a lag between starting a report and getting the results. In such a quickly changing industry, that time could make the resulting data instantly outdated. You need real-time data, and you need it now.  The answer is one common platform that integrates finance and risk data management, with controls in place to make sure you are always in compliance. With a common platform, data is current and reporting is faster and instantly integrated.

 

Integration pressures aren’t just external. Internally, constantly evolving systems on the front end and back end are producing massive amounts of data. But these siloed systems aren’t working together. Every insurance company has a front-end system that processes transactions; in fact you probably have many of them. On the back end is the general ledger and reporting structure. In between there is a black hole of data management. It’s a patchwork solution for now, but it is a danger zone heading into the future. Achieving cross-platform control of Big Data requires an integrated and automated approach. By integrating risk data and finance on a common platform, you create a central solution that is working with the front end and the back end.

 

In addition to pressures both internal and external, you need the best platform that will help your company succeed. Real-time insight is becoming more and more important to that success. Integrated finance and risk data supports processes from strategy to planning and consolidation. Siloed processes slow down your company and keep you from the best possible information available.


 

Benefitting from an IFRA platform


With an integrated finance and risk architecture (IFRA) platform, all accounting, risk, regulatory, and reporting functions come from the same platform. You get a unified data model - a consistent repository of granular data across finance and risk. The benefits of an IFRA platform are real.


On the regulatory side, an IFRA platform instantly integrates regulations and mandates, so you can always know that you are in compliance. Some of these regulations involve risk-adjusted data, which is part of the integration of finance and risk. Sharing data with regulators is a quick process with an IFRA platform, and, crucially, it avoids multiple copies of data for which your company could be penalized.


Internally, a common view of assets and liabilities in one data model  gives your shareholders an immediate view into the business, generates better reports, and can help improve your front-end system. You also have a full audit trail for all data, from source system through to general ledger, and a reconciliation cockpit that detects data discrepancies and sends automated alerts. Ultimately with an IFRA platform, you can:

 

  • Increase business agility and efficiency
  • Reduce risk and complexity
  • Improve cost control and profitability
  • Drive competitive advantage and growth
  • Simplify and strengthen compliance

 

An IFRA platform provides unique value for all of your stakeholders, especially your C-suite.  For the CIO, who needs to simplify the landscape, there is immediate access to the highest quality information. The CFO gets accounting transparency and automated processes that improve speed and precision. The CRO can focus on actuarial analysis instead of administration, and can define information consistently across the enterprise. And the CEO has the most important tool in today’s digital economy - fast access to accurate information.

 

The best way for your company to get ahead is to create a future-ready system that satisfies today’s regulations and is also prepared for what might come tomorrow. 


Check out our recent Webinar and read the IDC white paper, sponsored by SAP:  “Risk–Finance Collaboration at Global Insurers: A Partnership in Transition” to learn more about integrating finance and risk data management.



This article was written by Marc Kamphausen, Global Head of Core Insurance Solutions, SAP

 

There is an urgent need for insurance carriers to redefine their business model – driven by global mega trends, the financial crisis, and evolving customer needs. I expect that insurance carriers that are unwilling – or unable – to redefine their business model will die the corporate death within the next 10 years.

 

We are living in a digital world. While generation X experienced the change in technology over time, generations Y and Z were born into the new digital reality and have different technology needs and expectations. If these generations require insurance, they don't rely on the traditional intermediaries or brokers. They start their search engine; look for aggregators; or check Twitter, Facebook, and other social media for recommendations.

 

While technology needs and expectations vary between generations and regions, one thing is obvious: insurance carriers need to tackle the challenges of the digital economy today to survive!

 

Creating a positive customer experience

 

I believe that owning customer data and creating positive customer interactions are essential to delivering personalized, meaningful customer experiences. Traditional insurance carriers are often perceived as anonymous and bureaucratic organizations with only a few customer interactions, such as:

 

  • Invoicing and billing
  • Cross-selling activities
  • Claim settlements

 

The majority of interactions with insurance carriers are not considered positive. Creating a positive experience means providing unique services to consumers, such as those provided by Google.

 

No company creates more customer interactions than Google. And no insurance carrier knows as much about its customers as Google. As Gartner pointed out in its ITxpo symposium, Google invests in aggregators, smart home technology firms, and smaller FinTech companies. Google is also way ahead in developing self-driving cars – which aren't only a thread to the automotive industry but to the insurance sector as well.

 

How to fight the premature corporate death?

 

In my opinion, offering useful services and creating a unique benefit for policy holders will create positive customer interactions without intermediaries. And owning customer data and delivering positive interactions are key to building a likable brand. These are the factors that keep customers with the same insurance carrier, instead of running through aggregators to find the cheapest coverage every year.

 

Technology is causing the disruption. And technology is the way out.

 

It is obvious that the main driver of global mega trends is technology. If technology is the cause of disruption, then technology must be a key element to mitigating its impact. And, if insurance companies are able to transform their business model to support the latest technology, it may even help drive the insurance business to new heights.

 

Today, some insurance carriers are investing in technology, like user portals and apps for mobile devices. However, redefining the business model will require more than that. To become successful in the digital economy, insurance companies need to transform their business model, as well as their technology, according to a recent report published by Ovum.

 

Insurance carriers should really start redefining their business model and transforming it now, or they are going to die the premature corporate death!

 

Please watch the recent webinar: Core Transformation: A Critical Imperative for the Insurance Industry

Also,check out the Ovum Global Infographic

ovum_SAP_header.jpg

What would happen if Google decided to enter the insurance market? Would the established players be nimble enough to compete? Or, more likely, would aging and disparate IT systems slow their attempts to respond to the market’s desire for more customer-centric experiences? That question was discussed during the recent webinar Core Transformation: A Critical Imperative for the Insurance Industry, presented by Charles Juniper, principal of insurance technology at Ovum, and Marc Kamphausen, global head of insurance solutions for SAP.


Established insurers could be at a disadvantage

Technology is one of the major root causes of disruption in the insurance industry in recent years, so technology is going to have to be part of the solution, Kamphausen and Juniper pointed out during the session. However, established insurers’ lack of modernization in their core operations systems could be a significant disadvantage when customers increasingly view insurance as a commodity. That means insurers must create an omnichannel experience that incorporates mobile technology, social media, and emerging technologies to create a satisfying and unique customer experience.


Change is coming to the insurance sector, but slowly

The good news is that carriers are making strong attempts to align their IT initiatives with their business priorities, according to a recent wide-ranging study by Ovum. In a shift from studies conducted only two or three years ago, fewer companies listed the containment of IT costs as a top business priority. Now enterprises are more concerned with creating a customer-centric experience and gaining insight into business intelligence.

However, many companies may be more than two years away from achieving modernized core operations systems.

The majority of established carriers continue to operate on multiple, disparate platforms. Ovum’s research shows that 28% of carriers operate on 11-20 core platforms, and 31% operate on 6-10 core platforms. In addition, more than 40% of insurers continue to run a mix of in-house software and commercial, off-the-shelf systems.


Customer experience matters more than ever

 

While there were some regional differences, the majority of carriers that participated in Ovum’s research study listed the following as among the top five benefits that they hope to achieve with core operational modernization efforts:

  1. 1.     Improved customer experience
  2. 2.     Better response to new market opportunities
  3. 3.     Improved customer retention
  4. 4.     Better ability to rapidly launch new products
  5. 5.     Reduced IT costs

The Ovum study also showed that increasing integrated channel functionality is a key goal for 42% of insurers. Those insurers were attempting to implement core processing architectures that integrate communication channels and core processing functionality within a single platform.


Technology is an easier sell

Juniper and Kamphausen pointed out that CIOs and IT groups are doing a better job of justifying technical expenses in a way that demonstrates the business benefits. Plus, as IT becomes more integral to the core business of insurance, business groups inside insurance enterprises have a better understanding of the need for the technology. Finally, Kamphausen advised that carriers should remain aware of changes in social media if they want to provide a truly customer-centric omnichannel experience and be prepared for potential new competition.


To learn more about the state of core operations modernization in insurance, download the complimentary white paper, Core Operations Modernization in the Global Insurance Industry.

Also, check out the Ovum Global Infographic.

SAP Policy Management, group insurance add on

 

The insurance market is ever evolving. Insurance companies need end-to-end solutions provided by single vendors that are integrated into one suite. SAP Policy Management (FS-PM) has long been the answer to fast and flexible insurance policy administration. With the release of the new SAP Policy Management, group insurance add on, FS-PM is the hands-down winner for group insurance as well.

 

SAP Policy Management (FS-PM) is a comprehensive policy management system that gives primary insurers a wide breadth of control over the administration of insurance policies. It gives insurers the perfect platform for making informed and transparent business decisions in areas such as claims, financial accounting, commissions, collections, and disbursements. FS-PM provides for product and policy management across diverse lines of business including life, auto, health, property, and casualty insurance, and enables customer-specific customizing and configuration for each line of business.

 

SAP Policy Management, group insurance add on expands upon this flexibility by simplifying the creation and maintenance of master policies. The extension makes the management of complex products for large companies as easy to manage as simple insurance products for individuals with single policies.

 

Improve Your Group Business with the Extension for Group Insurance

 

The extension for group insurance enables you to do the following:

•Preconfigure Master Policy templates in the In-Force Business Configurator just as you preconfigure other templates

•Maintain and display information relating to partners, collection type, premium, and commission data, all at the Master Policy level

•Manually rate premiums based on price per unit (otherwise known as premium per piece)

•Target product module groups to define where maintained information shall default

•Default policy, contract, and coverage information from your master policies to assigned policies

•Manually plan correspondence in the Create Master Policy, Change Master Policy, and Display Master Policy business processes

•Select a subset of policies from Master Policy and save a result set for use in the Mass Change and future business processes

•Perform Mass Changes via Mass BTX on a bigger number of policies assigned to a Master Policy

•RFC-function modules to Create Master Policy, Change Master Policy, Create Sample Application and Release Applications

 

With the addition of a new header, you always have sight of your master policy name, number, template ID, and master policy partner throughout the Create/Change/Display Master Policy processes.

 

Raising the Benchmark

 

FS-PM sets the benchmark for speed, integration, and flexibility in insurance software. It maps process chains in real-time and provides sample content with cross-line of business basis processes, and it fully integrates with other insurance systems. With the extension for group insurance, you now have even more power to create and maintain master policies with the ease and flexibility you’ve always had with single policy processing. Have questions about SAP Policy Management, group insurance add on? Please contact SAP Peter Voigt, Björn Panter or Christian Lorenz.

 

Further materials:

 

Early Knowledge Transfer

SAP Help

Digital transformation is a key strategic initiative for every insurer. Digitalization holds great promise of both increasing revenue through increased customer loyalty, reduced costs and improved profitability.  Many insurers have begun defining a strategy and engaging on digital pilots but have encountered several challenges on their road to digitalization. The following highlights some of these key internal challenges and provides some recommendations to address them:

 

Legacy Technology

Insurers have processing systems that are often 20+ years old with deeply embedded business logic. Clearly, these systems cannot be easily ripped or replaced in total but insurers can look at building new capabilities using digitized business processes and applications. They can and should begin to look at using cloud technology for improved ability, performance and ease of maintenance. They can begin building “data lakes” to leverage more robust data. Similarly, they cannot rebuild or migrate existing data warehouses easily, but they can build analytic “sidecars” to support real-time analytics and their “hot” data needs. This will help as they transition to building new capabilities using the latest analytic technologies.


Slow Delivery

Insurance has always been conservative; even industry leaders are often more “fast followers” than “trail blazers”, compared to other industries. But insurers don’t have to digitize all their processes; they can selectively digitize processes or sub processes (e.g., for one product and line of business and apply to others using a “rinse and repeat” approach). They can also leverage development sandboxes to test new capabilities. Lastly they can use co-innovation approaches selectively with forward thinking customers, partners and collaborators. New product launches or new profit centers are great candidates.


Cultural Constraints

Change management is one of the hardest hurdles to overcome. Internal incentives and rewards can be developed for employees. External resistance from agents and intermediaries is more difficult, but can also be overcome by targeting innovators in existing partners, looking at new distribution partners and even adding additional channels or non-traditional digital partners.

 

Analytics are critical to digital success. Insurers not only need analytics technologies, but they also need improved analytics capabilities in modeling, data management and database management. And they need to include the use of real-time data and analytics throughout the customer life cycle, as well as the end-to-end supporting business processes. There will be winners and losers in the Digital Revolution; those who cannot adapt will be subject to acquisition by digital leaders.

The insurance industry is reaching a tipping point. With new technologies like connected cars entering the scene and a more informed consumer marketplace, Risk and Finance professionals in the insurance sector must break down departmental silos and work together to create a more integrated business model that drives new revenue streams.

 

Industry thought leaders, along with SAP’s own Pat Saporito, recently discussed how to accomplish this in the SAP Radio Show broadcast, Risk and Finance: 1 plus 1 equals 3. The broadcast examined findings from a recent SAP and IDC white paper stating that an integrated risk-finance profile can enable faster response times to evolving mandates and facilitate improved financial forecasting, enhance timelines, accuracy and completeness of information.

 

How Technology Has Changed the Game

Technology is fundamentally changing the nature of the insurance industry. The spread of digitization and consumer knowledge has changed the way companies must glean knowledge and assess risk.

 

Daniel Haudenschild, Partner – Financial Service Advisory at Ernst & Young, related a few examples that illustrate this new challenge: “First look at self-driving cars. How can a company insure a fleet of cars where the car is almost incapable of having an accident? Or a family that enjoys taking skiing trips wants to insure their equipment and their family members, creating the need for a policy that is a mixture of property and casualty. Scenarios like these are starting to pull the rug out from under classic insurers, struggling to keep up with these new demands.”

 

To poise themselves for success despite these rapidly changing external factors, insurers must get ahead of the change to recognize looming risk, performance and management issues before they happen and set up a plan of attack.

 

According to Pat Saporito, Senior Director in the Global Center of Excellence for Analytics at SAP, insurers are up against a “triple tsunami” that includes Big Data, Internet of Things and Industry Regulations. “If risk and finance professionals can establish a single data foundation, they will be able to generate consistent responses that will help the company minimize operational silos that impact customer satisfaction and new opportunities for revenue,” she said.

 

Technology has created an opportunity for companies to be agile despite new industry challenges. Insurers must see what’s happening both inside and outside their organizations and evaluate the impact it will have on their existing business models based on a synthesized set of data.

 

The Influence of IFRS

The International Financial Reporting Standards (IFRS) are becoming the global language for finance, but insurers have been slow to get on board due to the complex requirements and lack of finalized standards. After nearly 10 years of debate, the industry is nearing a consistent and transparent standard for insurance companies to report profits.

 

During the broadcast Francisco Nagari, who is the global IFRS insurance lead partner at Deloitte, stressed that the shift to a new and consistent reporting model is fundamental for the insurance industry as a whole. “Once investors will be able to compare and evaluate the cost of raising capital, it will become more affordable and straightforward for insurers,” said Nagari.

 

As insurance companies look to re-write their traditional models and shift into new market verticals, they must continue to operate as well-oiled business machines.

 

“Regulations will always shift, and insurers must deal with this, but there’s a need to get much more efficient at it,” said Haudenschild. “Insurers can no longer afford to keep investing in new technology solutions that help them meet compliance; they must be able to achieve compliance at the press of a button.”

 

Integration: The Path Forward

The wave of industry reporting standards from the IFRS are coming at just the right time.

 

“Everyone talks about the need to see what’s coming in the future, but it’s very hard to do this effectively with such a variation of data to analyze,” said Nagari. “Insurance accounting is very complicated, and the language must be kept simple or companies will not be able to see the change that’s happening within their organization.”

 

With true transformation previously hindered by the absence of a consistent regulatory framework on a global scale, insurers will now be set up for ongoing success in the very near future.

 

“Now is the time for insurers to integrate their risk and finance foundations so they have an agile technology platform that meet external indicators,” concluded Pat Saporito. “With the new IFRS formats and models, insurers will be able to fulfil any reporting requirements fairly seamlessly, as long as they have already addressed existing data governance and data silo issues.”

 

SAP is here to help insurers and financial executives with this transition. For more information visit www.sap.com/insurance.

Ovum Blog 2.jpg

(By Charles Juniper, Reprinted from the Digitalist Magazine)

 

As insurers increasingly focus on delivering a strong, consistent customer experience as the primary goal of core operations modernization, identifying the most appropriate systems architecture to enable this becomes a crucial question. Latest research from Ovum conducted on behalf of SAP and based on interviews with over 500 senior decision makers from the insurance industry examines this issue.

 

The integrated channel platform model emerges as the preferred solution for many insurers


The study reveals that 42% of insurers are attempting to implement a core processing architecture that integrates communications channels and core processing within a single platform. This ‘integrated channel platform’ model aligns well with the strategic goal of enhancing the customer experience and was strongly favoured among European and Central and Latin American insurers.

While a model that integrates digital channels, core processing and other functionality, such as customer analytics within a single platform, was the preferred choice of 29% of insurers highlighting a general trend towards more integration, it does show that carriers lack complete confidence in the maturity of this type of offerings currently.

 

Insurers in emerging markets are using cloud to rapidly implement core operations architectures


The study also revealed that for almost half of insurers it will take at least two years before they can support the business with the most appropriate core processing model.  This leaves many insurers at a significant competitive disadvantage and exposed to the threat from either carriers that are further advanced in their core operations transformation or from new entrants from outside the insurance industry, such as Google.

SaaS- based core operations platforms running on cloud infrastructure provide a means to move quickly to an integrated channel platform while minimizing initial capital investment. Insurers have been strong adopters of SaaS and cloud technology across the wider organization, but the study shows that only 6% of respondents are currently using the technology specifically in support of core operations. However, insurers in the emerging markets are being far more aggressive in the introduction of cloud to support core operations, with 24% and 19% of respondents in Central and Latin America and Asia-Pacific respectively moving toward the majority of core processing being performed on cloud within the next 24 months. This compares with only 10% of North American and 12% of European respondents.

 

Charles Juniper, Principal Analyst OVUM, shares his insights on digital transformation in the insurance sector in this video

 

Discover the related Ovum report Core Operations Modernization in the Global Insurance Industry with the accompanying Infographic

ageas logo.png

Ageas, an international insurance group headquartered in Brussels, is making history in its industry. Last week SAP issued a press release and I wanted to highlight the great news.

 

The company recently teamed up with SAP to adopt the industry’s first end-to-end insurance software in the cloud deployed by a single software vendor. This comprehensive insurance-in-a-box offering will allow Ageas to streamline its insurance processes from sales and operations to finance.

 

“The difficulty in building IT for an insurance company is that you need many components,” says Hans Van Wuijckhuijse, regional director, Business Development Asia, Ageas. “How nice would it be to say ‘here is a box and this is the box that contains everything you will need from day one as an insurance company? Plug it into the power outlet and it starts working for you.’” The ability to achieve this is the main reason that Van Wuijckhuijse turned to SAP, as this offering supports the full insurance lifecycle. It includes back- and front-end processes, with an all-inclusive set of integrated SAP solutions that help insurance companies operate their business in the cloud.

 

The global insurance group specializes in building insurance partnerships with banks and retailers, and its next target is Southeast Asia. “Ageas will launch the suite at its new joint venture in the Philippines and potentially use the new solution portfolio for other green-field operations. With this comprehensive set of next-generation enterprise software from SAP, Ageas gets to focus on its customers and the core of its business, instead of being in the business of also running a midscale technology services firm internally,” says Van Wuijckhuijse.

 

 

The hosted, end-to-end enterprise insurance software is built on SAP S/4HANA, which delivers simplified customer engagement tools through the SAP HANA platform. It includes over 30 SAP solutions and omnichannel functionality powered by software from hybris, an SAP company. Core insurance solutions support policy administration, quotation, underwriting, claims, commissions, collections and disbursements, as well as finance, procurement, HR and enterprise analytics. These are all deployed on SAP HANA Enterprise Cloud, a fully managed and secure cloud that offers flexibility and quick time to market.

 

“It’s the regular, complete suite that you would need to build a company,” say says Van Wuijckhuijse. “The big difference is that it’s all SAP.”  The software will enable the company to have the full functionality it needs on day one for its new markets. “Normally we are looking at a nine-month period to set up a company from scratch to sell the first policy. Now we expect to reduce that time to 6 months and to have a far more complete IT environment.” And the cost savings? Van Wuijckhuijse expects it to be between 20-40% within the first five years.

 

Beyond the robust platform functionality, SAP will be providing a simplified end-to-end engagement model, from subscription to services and from enablement to support. It will enable Ageas to streamline further its IT management and support, reduce total cost of ownership, accelerate its time to market, strengthen operational agility across lines of business and achieve transparency and compliance.

 

To learn more about this end-to-end solution, please read the announcement. Or watch an interview with Van Wuijckhuijse here. For more information on about SAP technology and insurance offerings, please visit sap.com/insurance.

Actions

Filter Blog

By author:
By date:
By tag: