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SAP for Insurance

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In-Force Business Configurator (IFBC) is used to administer and amend the information, in the form of templates that is relevant for policy management. Therefore, we can create, change, and delete the templates in the IFBC in FSPM. A template describes the runtime behavior of an object in in-force business.

 

Role of IFBC.jpg

 

 

Since the IFBC is a configurable part of the policy management system you can create and edit templates, it checks the consistency of these. When you configure a template, you enter data about interface control and the structure information that is required for managing data. If you classify certain characteristics as being relevant for the IFBC, you can control these using the IFBC, provided the associated entity has also been classified as relevant for the IFBC. The IFBC copies the Customizing settings for the field modifiers and for default values and permitted value ranges, and really does not influence any functions that are defined in business rules or business functions.

 

Policy templates are the central control of the In-Force Business Configuration are part of the individual Customizing, and control the behavior of the objects (sales product, product, premium and so on) during operation runtime.

 

A template determines how an object is to behave at runtime in the policy management system. You can create templates for the objects you have marked as IFBC-relevant in the PBT (Policy Based Technology) .

 

Policy templates contain information, such as product assignment; behavior of the characteristics of the entities like field modification, default values, value ranges; and instances of the entities that influence in-force business attributes.

 

To simplify the creation of new templates in a SAP system, you can use copy function available.

 

These are the three types of copying policy templates:

1) Copying of the template with references to the dependent subtemplates.

2) Copying of the template with all main axis subtemplates.

3) Copying of all templates and all of subtemplates to new templates.

 

IFBC Conf Policy Template.jpg

 

These templates simplify day-to-day business. You can define default values for all the fields classified as relevant for the IFBC. Therefore, IFBC can configure the policy business object for the policy management system and create templates containing the product knowledge relevant for in-force business. The IFBC also manages data that can be defined in a product engine, such as Product Engine (msg.PM). The IFBC, therefore, contains functions for copying static product data from a product engine to the IFBC templates.

 

The In-Force Business Configurator is used in two different places; the FS-PM and the product engine.

In FS-PM, it ;

1) Supports the policy instance;

2) Based upon templates

3) Manages business objects and attributes in concrete policy context

4) Supports product installation

5) Sets default of attributes, values, or range of selections

6) Defines Obligatory, Optional, Edit, and Hide options of fields

7) And defines cardinalities.

 

These are the component that FS-PM gets from the product management:

1) Product structure, which contains classes and objects regarding the main axis, lateral objects, and internal objects.

2) Relevant attributes, which includes all relevant attributes that are actually established from the reference model.

3) Premium calculation, which is a method that is called on the highest level and which triggers methods for calculation on the lower levels

4) Tariff, which is a standard property-liability insurance premium set by a rating bureau for a particular class of risk.

5) Profit, which is calculated based on used premium calculations and tariffs

6) Discount or Charges, which is defined by a customer and is dependent on a product structure.

7) Rules, which defines the structure of some sales products.

 

All of these are imported in a compilate which then should be imported within the IFBC.

Dear Community,

 

... just follow SAPforInsurance@Twitter

 

Best regards

 

Boris

FollowMe@Twitter

Dear Insurance Community,

 

today I am very glad to announce that our Insurance Community has been refreshed. This will allow you to better question, discuss and share content just doing your business - Insurance business. In general, we are having some rules how the communities have to look like so I did my best to be conform bringing more value to you. 

 

... just enjoy and blog

 

Best regards

 

Boris

 

BORIS GREVEN

Cloud Business Strategy | Insurance GTM Lead | IBU Insurance

SAP SE | Dietmar-Hopp-Allee 16 | 69190 Walldorf Germany

Dear Insurance Community,

 

here you will find two amazing blogs about the SAP HANA Cloud Platform:

 

SAP HANA Cloud Platform - Setting the Stage (Part 1)

SAP HANA Cloud Platform - Setting the Stage (Part 2)

 

...just try it

 

 

HCP offers a set of higher-level services, which provide specialized capabilities as needed for specific scenarios such as:

 

 

ENJOY & HAVE FUN

 

Best regards

 

Boris

 

 

BORIS GREVEN

Cloud Business Strategy | Insurance GTM Lead | IBU Insurance

SAP SE | Dietmar-Hopp-Allee 16 | 69190 Walldorf Germany

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A new global survey of insurance executives sponsored by SAP was conducted by The Economist Intelligence Unit (EIU) in June 2014 and the study is now available here. 338 executives from various property/casualty and life companies were questioned about the future of insurance, and the results are providing fascinating insights. The respondents held senior positions, with 86% holding titles of vice-president or director level, or higher. Also the revenue levels of the responding companies were very impressive, with almost half (45%) collecting over US$1bn in premiums each year, and about one in five having annual premium income over US$10bn. Lastly, the regional makeup included: 36% in North America, 26% in Western Europe, 28% from the Asia-Pacific region, and the rest (10%) from the Middle East, Eastern Europe, Latin America and Africa. So let’s review some of the findings.      

 

Firstly, are insurers expecting change? You bet they are, with a majority (60%) of The Economist Intelligence Unit’s survey responding that they expect significant to massive change in the industry. However, an alarming discovery was that less than half (46%) believe their companies are “well prepared” for change. And where do they expect this change to occur? A plurality (42%) of respondents says the front office—the part of the organization closest to customers—is the most vulnerable to disruption. Furthermore, the highest level of agreement among the participants found that ‘companies that fail to simplify, streamline and improve the buyer’s experience will not survive’. The warning has clearly been issued and should be heeded.

                                                      

Regarding Insurance solutions, insurers have tended to build their own systems, but that is changing now. They are reassessing their core competency and dedicating their technological resources to strategic differentiation rather than commodity capabilities. Insurers are also turning to cloud computing solutions for the same reason as any other enterprise—rapid deployment and lower start-up costs, according to Matthew Josefowicz, of Novarica. Investments in online capabilities have become among the most important ways insurers attract independent agents and other distributors through “ease of doing business”. The respondents also believe Big data and Analytics can help them get a better handle on risk and return, pricing, portfolio risk management, product design and underwriting decisions.

 

In addition, the paper offers insights into competitive threats, underwriting changes, new types of distribution arrangements, innovative ways of interacting with customers, and more. Please share your feedback.

Although the last financial crisis made transparency a “must” for financial service providers, the reinsurance industry has long found transparency to be a precious asset. 

 

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Transparency helps reinsurers comply with government regulations, such as determining an adequate capital basis for financial strength. With the right data and insights, reinsurers can also better inform rating agencies, manage risk more effectively, and make better decisions about new business opportunities. The ability to gather, review, interpret, and analyze data is thus a critical success factor for reinsurers. It has become increasingly important in risk allocation networks – where reinsurers must decide how much risk to assume themselves and how much they should cede to network peers or the capital markets.

 

To acquire the information they need and use it effectively, reinsurers must efficiently manage the huge (Big Data) volumes of information at their fingertips for analysis and reporting. They can then use this information to create real-time insights that help executive managers, underwriters, asset managers, and other stakeholders make appropriate business decisions.

 

 

Big Data in action

 

 

For many years, as an example, reinsurers have modeled scenarios for natural catastrophes to determine the potential impact of hurricanes and other disasters on their risk portfolio. These models are fed huge amounts of data from different source systems – from underwriting experiences and loss metrics to actual histories of the catastrophes. The greater the amount of qualitative data that reinsurers can process about natural events and portfolio risk, the more successful they will be in making decisions about risk retention and distribution related to those events.

 

Similarly, reinsurers that can effectively analyze the behavior of long-tail claims can optimize their reserving processes and better secure the financial strength of their companies. Accurate, real-time measurement of company performance helps reinsurers take timely corrective measures, such as reducing retention limits or changing investments for greater capital availability.

 

 

 

New information technologies

 

 

More than half (53%) of reinsurers and other companies polled by SAP Performance Benchmarking report a gap between their access to Big Data and their analytics capabilities. As demand for transparency and effective management of Big Data increases, however, new technologies are emerging to help reinsurers gather and manage their information to gain real-time business insight.

 

Using solutions such as the SAP ERP and SAP Business Planning and Consolidation applications that leverage the SAP HANA platform for established analytics and data modeling, companies have increased insights into Big Data by 40%, according to SAP Performance Benchmarking. Tools like SAP Business Process Management software help reinsurers connect their risk evaluation, retention, and pricing process with processes for underwriting, claims, risk, and asset management. Such tools support the interchange of qualitative information among various stakeholders for optimized decision-making in the allocation of risk. 

 

Technology such as the SAP HANA can help reinsurers gather and process information for real-time insight. In addition to modeling natural catastrophes, reinsurers can properly invest their assets and make strategic decisions about entering new markets and lines of business.

 

With this kind of support, reinsurers can transform the management of Big Data from an overwhelming challenge into a valuable asset for risk management that can significantly enhance their performance.

 

 

 

To learn more about how we can help you with your business challenges please have a look at SAP's Solution Explorer for the Insurance Industry: https://rapid.sap.com/se/#vm?indids=i_insurnce&lobids=all

 

What do you think about transparency at the insurance and reinsurance industry?

 

Continue the conversation in the comments below and on Twitter @SAPforInsurance.

The blog primarily discussed the Basic idea about reinsurance. Further, it highlights the risks associated with reinsurance and mitigation of risk. Reinsurance is a module included in SAP insurance business process. Additionally, it focuses on the complete solution of SAP FS-RI including Basic system, Prognosis and estimation and Loss. Finally, it recommends reinsurers who do not have SAP FS-RI, to adopt and automate their business and enjoy more profits.


Check out the full blog post at http://scn.sap.com/blogs/apoorv/2014/09/15/fs-ri-the-future-of-reinsurance

Did you know that 30% of the worldwide Reinsurance Gross Written Premium is managed through the SAP Reinsurance solution?

 

Rarely were the incentives for insurers to make strategic use of reinsurance higher than today!

With the strengthened capital requirements under Solvency II, any increase in reinsurance coverage will limit one’s risk exposure thus preserving equity for accelerated business growth.

 

Furthermore, over the last few years and as a consequence of the fierce competition from Natcat bonds, reinsurance conditions have developed favorably for the ceding parties, especially for the ones that can demonstrate transparency of their risk exposure and provide information of high quality.

 

While incentives to do so are high, developing and diversifying its Reinsurance portfolio while complying with new regulations can quickly become an overwhelming challenge for an Insurance company, and limits its operations and flexibility.

 

For almost 15 years, SAP has provided Insurance and Reinsurance companies with peace of mind for the management and administration of their Reinsurance processes. Today, more than 40 companies, ceding insurers and reinsurance carriers, small and large, from niche players to global leaders, all over the world, rely on SAP day after day for their Reinsurance related operations.

 

Beyond compliance to regulations, the utilization of the SAP proven and dedicated solution, SAP FS-RI, will tremendously simplify the end-to-end Reinsurance process, ensure accuracy of daily operations, speed payments and optimize cash management. SAP FS-RI automates assignment of claims to the corresponding Reinsurance programs, calculates complex treaty conditions, integrates with the accounting systems and creates the bordereau. The solution is designed to handle facultative and treaty reinsurance, proportional and non-proportional and it supports all market treaty types, thus reducing the risk of underwriting business without adequate coverage to high exposure.

 

Portfolio analysis and risk management, prognosis and estimations are streamlined by a holistic view on the reinsurance portfolio. Furthermore, the solution embeds the latest SAP technological developments, such as in-memory analytics, and state-of-the-art user interfaces, granting end-users a unique and satisfactory experience. Finally, it integrates with the legacy policies and claims systems and can be implemented without having to replace them.

 

The peace of mind of using an SAP solution will free resources in the organization and enable it to focus on topics it could not always ideally tackle. The organization can spend more time deepening customer intimacy, offering its clients new insurance products and services, developing new distribution channels and generally adapting to the challenges of the Digital era.

 

Since its origins, when merchants of the antiquity started to protect each other by mutualizing the risks associated with the transportation of goods, peace of mind is what Insurance provides individuals and businesses, allowing the safe development of modern society. With SAP specialized solutions and services, start enjoying peace of mind for your Reinsurance activities.

  ***Update***: as noted at the end of this blog, the session replays are now available here

 

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The agenda-packed content from Day 1 of the SAP Financial Services Forum set the bar very high for a follow-up act on Day 2, but the attendees were not to be disappointed. The general session kicked off with a thought leading presentation by Daniel Mayo (Chief Analyst, Ovum) about the role of the Cloud today and its impact on the Financials Industries market. His findings were based on over 400 interviews with Insurance companies and Banks to reveal how, and where, the Cloud is changing the industry. One of the key findings is that the Cloud is no longer just about cost savings, but is also being used for business development to launch new products more quickly. Another compelling fact: 66% of respondents claimed that they have adopted a “Cloud/SaaS-first”  strategy for new products. And, a very convincing 84% agree that SaaS allows organizations to respond more rapidly to market opportunities. Please read this SAP Ovum press release for more detail of this fascinating study.

 

For the Insurance track attendees, the session breakouts then focused on Telematics and the ‘Uberfication’ of Financial Services.                              

 

Swiss Mobiliar- Patric Deflorin, (Head of Personal Lines Insurance, Swiss Mobiliar) addressed the impact of Telematics on the car Insurance business, and whether it is a trend or a necessity. The technical applications and services supported by telematics are growing, and new business cases are continually being developed. However, the Insurance industry is being challenged, both on a coverage side as well as on the product side. Ultimately, there is a need for telematic-based Insurance products and he shared his approach for a compelling business case.

 

Synergy Group- Dr. Paul Marsden (Digital Strategist, Synergy Group) led a thought-provoking session on the ‘Uberfication’ of the Insurance industry. The focus was on what lessons the Financial Services should learn from Uber, the disruptive on-demand mobile taxi service valued at $18bn. This coming wave of 'Uber innovation' will create a perfect storm of three disruptive trends, impacting: on-demand, mobile and services. This ‘digital disruption’ is one that leads to the warning: Uberfy your marketing, or get Uberfied! 

 

Clearly, Day 2 of the SAP Financial Services Forum  offered another stellar opportunity for the attendees to enrich their market trend awareness. And everyone should have come away with ideas on how they can transform their business by using innovative technologies such as in-memory computing, omnichannel, cloud and analytic solutions.

 

If you couldn’t attend the forum, we plan on making the session replays available shortly

***Update***: as noted at the end of this blog, the session replays are now available here

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The Grange Tower Bridge Hotel is abuzz, as over 450 registrants gathered for the fourth annual SAP Financial Services Forum flagship event. The turnout for the two day event includes 25 press and analyst registrants, 18 sponsoring partners, and 28 speakers from leading organizations, including AOK, Munich Re, Achmea, and Swiss Mobiliar. For the sports-minded, there is even an Interactive SAP Soccer Showcase showing how the FIFA World Cup champions used SAP HANA to improve player performance. Overall, a smashing event (London, after all); so let’s review the Day 1 highlights.                    

 

AOK Systems- Udo Patzelt, (Head of Product Management, AOK) discussed oscare®, their break-through solution for Health Insurance, which has been ‘future-proofed’ with SAP. This leading solution for health insurance covers a remarkable 53% of the German market, including all of the core and support processes that are required. Oscare is well positioned for the future, as it will be incorporating SAP HANA and the SAP Mobile Platform as part of its innovative underpinnings.

 

Next up, Achmea Insurance Group- Erwin Kersten, (Change Manager for Claims and BI, Achmea) spoke about how they are transforming their business end-to-end with SAP as the underlying platform. The presentation took a deep dive into this transformation from vision to execution, with a focus on claims management. The compelling topics included multi-label, on-line claims handling, fraud detection as well as Big Data, all being key components of their challenging transformation.

 

Wieger Wagenaar, an Independent board member, discussed the topic of the prevailing trends within the Insurance industry. The new future of Insurance is one that has a multichannel approach with an online presence, is digitalizing as much content as possible, and is delivering dynamic pricing to its customers. Wieger proposed that these new drivers are rapidly developing, and will be used for personalizing Insurance, in a sector where global trust is still unfortunately very low.

 

Munich Re – Dr. Rainer Janssen (CIO, Munich Re) addressed the road to SAP HANA within their highly integrated SAP environment, which includes an SAP BW based global data warehouse that supports all reporting requirements. The introduction of HANA did not just provide yet another new technology, but offered the opportunity for a complete revamp of the IT landscape. The presentation described their approach to this project and how they manage the connections with other parallel projects in their portfolio, including interactions with other technologies and partners.

 

Lastly, Allianz SE – Dr. Jens Hanker (Executive Vice President, Allianz) presented the topic of their ongoing finance transformation in Insurance. The new IFRS accounting standards will have a significant impact on systems, processes and financials, and Allianz is taking action now. With multiple lines of business in more than 70 countries, and over 100 entities, the work has already begun to ensure compliance readiness with the upcoming regulations. Gaps were identified and they determined that an ’industrial strength’ solution was necessary for their new technical accounting, which SAP is providing.                           

 

So you can see that Day 1 of the SAP Financial Services Forum  included a fully packed agenda, with content-rich topics. Can’t wait for Day 2 tomorrow…and look out for another update!

 

If you couldn’t attend the forum, we plan on making the session replays available shortly.

An agent is very important person for a company. They bring business for the company. The company can be dealing in any industry like paper industry, food and beverages industry, banking, insurance, automotive, stationary, real estate, manufacturing etc. Name the industry and they have multiple agents working for them. All these agents are paid commissions and incentives for the business they bring for the company.

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All the agent’s commissions and incentives are to be maintained in hard copy or as soft copy using some file management system or some business automation solution. The process of incentive and commission payment is not that simple and may not be handled by many business solutions. SAP has a dedicated module, FS-ICM, for the incentive and commission management needs of the business. It is flexible and can provide solution to any complex business scenario in the incentive and commission management.


SAP is the leading ERP vendor in the market. FS-ICM is the solution provided by SAP to cater to all the business requirements related to incentives and commission. FS-ICM allows one to create business objects (BO) according to the requirements on which commission needs to be created and then these BOs can be customized and modeled accordingly. FS-ICM provides very simple interface (NetWeaver portal) for the users to maintain the standard commission contracts. From standard commission contracts, individual commission contracts can be created. In commission contracts multiple agreements can be added. The agreements are nothing but the set of rules set to calculate the final remuneration of an agent. These agreements can be customized according to the company's predefined standards. The agreements can be participation, activity, valuation, remuneration, remuneration clearing, remuneration scheduling, flat rate, guarantee, target, retention etc. Commission case is created from the contract whenever sales happen.


There can be multiple partners involved in a sale. They can also be maintained in the commission contract. The participation can be direct or indirect participation. The participation can be determined using the organizational plan, via partnership, via previous commission cases or via contract to contract relationship. ICM differs between the direct and indirect participation. It is also possible to connect multiple individual commission contracts via contact to contract relationship.

The valuation process in ICM is used to determine the base amount on which the remuneration will be calculated. Remuneration process is where the commission rules and commission percentages are applied to calculate the actual commission. The incentive and commission valuation can be triggered from higher level system or from same level manually. High level system contains business objects, participants etc.                       

                       

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The tasks are fully automated. Once commission contract is created with all the agreements and a commission case is triggered, the system accepts the case, calculates the valuation amount according to the agreement, calculates according to the multiple agreements defined, calculated the remuneration amount, if scheduling is required than schedules the payments else post it to the calculation and disbursement (SAP FS-CD). There is very little or no user interaction required.


ICM covers profit sharing, incentives payment and target achievements also. Profit sharing, bonuses, incentives can be achieved by the Additional Commission Case agreement and can be run periodically. ICM has various predefined reports than can give the overview of commission cases, list of commission case participants, remuneration for commission documents etc. If any other complexity is to be simplified, it can be achieved using multiple BADIs available for customizing.

It would not be wrong to finally say that FS-ICM can support various scenarios related to the incentive and commission cases.

Marketing, Sales and Distribution undoubtedly are the most dynamic operations of any industry.  Very frequently new marketing strategies are devised and new schemes are launched, new distribution channels are launched and existing ones are reorganized.  Add to that the effect of Mergers and Acquisitions, Expansion to New territories and Tie Up’s.

 

All of these activities directly impact how your Sales Team is compensated and incentivized. To reflect these changing business requirements, compensation analysts are always under pressure to launch new compensation plans,  make changes to existing ones, design new bonus schemes, change commission rules etc.

 

These requirements can be easily addressed if your ICM solution is built and implemented on the principles of Rule Based Modularization (can also be termed as Object Oriented Approach).

 

Let’s understand what we mean by Rule Based Modularization and how can this help business to rapidly respond to changing business needs:-

 

Compensation Plans for sales agents are not a single entity in itself, instead they are built using variety of rules like

 

- On which transactions commission is paid?

- Who gets the commission?

- How is commission rate determined?

- What happens in scenarios like cancellations, reductions?

- On what Basis Incentives are calculated and paid?

- How Targets and Quotas are maintained?

- What is frequency of Calculation for Incentive?

- What’s the frequency of payment?


Now if there is a system which allows business and IT to set up complex compensation plans by creating first Individual Rules like the one mentioned above and then later clubbing them together in desired manner, then one can quickly respond to business needs by making a change to only that portion which is affected. Also launching a new plan will be much easier as you can reuse existing rule-set and only create the new ones which are required.


SAP FS-ICM (Incentives and Commission Management) solution imbibes this concept as its core principle and is totally built on Object Oriented Approach. 

Let’s discuss 3 main building blocks of FS-ICM solution:


Rules (Types): This means all the individual entities of compensation plan are first created in system in form of Reusable Rules (Remuneration Types, Activity Types, Participation Roles, Settlement Rules, and Scheduling Rules etc.).

 

Some examples:

Activity Types: New Business, Cancellation, Change etc.

Participation Roles: Direct Agent, Overriding Agent, Consulting Agent

Remuneration Types: Direct Sales Commission, Service Commission,   SPIFF’s etc.

Settlement Type: Monthly Payment, Annual Payment, Agent Payments


Rule-Sets (Agreements): These rules are then grouped together at multiple levels into Agreements (Participation Agreement, Activity Agreement, Remuneration Agreement, Settlement Agreement, and Scheduling Agreement). Now the beauty about agreements is that you can group existing rules\types in different combinations and create Agreements for various roles\ channels etc.

 

For ex. With 2 Commission Types – Direct Commission, Overriding Commission you can create various sets of agreements based on Business Requirements:

a)      Junior Agent Commissions Agreement –  only Direct Commissions

b)      Manager Commissions Agreement–only Overriding Commission

c)      Senior Agent Commissions Agreement – comprises both Direct and Overriding Commission

 

Templates (Standard Contract, Package, Compensation Plan etc.): When someone joins the company, he doesn’t get a custom made employment contract (unless he is some C-level executive ;)), instead his contract is copied from a template with some strict boundaries of individualization. To simplify and speed up the process of onboarding every company has its own sets of templates per job level, job functions etc. This helps in standardisation and logical grouping of rules.

 

Similar concept is also followed in FS-ICM where one can create Standard Contracts. Standard Contracts is logical grouping of Agreements and Rules. Templates are also synonymous to your Compensation Plans.

When an agent joins, he always inherits agreements and rules of mentioned Standard Contract. Business has the capability to select desired rules available from template and also individualize the rules to a certain extent.

 

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FS-ICM: Rule Based Modularization

 

With FS-ICM, changes in business can easily be reflected in a non-disruptive way as it involves just changing that particular rule which is affected or creating a new rule and adding it to existing or new agreement.

 

You can also scale up your application scope quickly to cover new channels, agent roles etc. by quickly configuring New Agreements and Standard Contracts by reusing existing Rules.

 

With these 3 principles of Rule Based Modularization, SAP FS-ICM leverages Object Oriented Approach of software design to the fullest and helps in implementing Modular and hence a Scalable Solution.

My neighbor and I have the same car insurance from the same carrier.  We pay
the same premiums. He drives his car every day. Due to my travel schedule, I
hardly ever use my car. He loves driving fast. My friends say I drive like a
granddad. Are our risk profiles the same? Clearly not, but it is often too
complicated and expensive for insurers to get enough detailed information about
the risk profile of the insured objects, our behavior, our health, and our
properties to reflect that in the premiums or service they provide. 

 

This is changing. New technology is emerging that is making it feasible, and cheap to connect to insured objects, as well as our health.

It is not just about being able to assess risk better and make premiums more fair, it is also opening up new customer service opportunities. 

 

   

Insurers (and non-insurers) of all kinds are exploring business
models that give them greater contact with the customers and objects they
insure. Once based simply on statistical estimations, risk management can now
incorporate very specific information about these customers and objects. In
addition to the usage profile, car insurers can track automobile locations, speed,
and safety – enabling them to offer other services.. Health insurers can
monitor how frequently their customers use the gym or their level of fitness.
Home insurers can identify weak points in security systems or other hazards.

 

   

Strengthening the customer connection

 

Such capabilities are made possible by telematics
and mobile technologies that have become more sophisticated and less expensive.
They are being employed by new industry entrants such as Google that already
have strong connections with their customers. After the 2011 purchase of
BeatthatQuote.com, a British online insurance aggregator, Google recently bought
Nest Labs, a producer of smart thermostats and smoke detectors – opening a potential link between home
insurance and home monitoring systems. No announcements have been made, but
Google (and many other e-commerce players) are rumored to be working on new business strategies that could disrupt
the traditional insurance model.

    

Consider too, Discovery – a South African insurer that offers
programs for monitoring fitness, safety, and other risk factors. Customers who sign
up for the programs and meet certain health and safety thresholds can qualify
for lower premiums as well as discounts on a variety of products and services.
The focus is not on financial service but protection and health services.

    

In fact, such innovations are now increasingly expected by many
customers, especially millennials who are used to this in other industries. To
manage risk more profitably and, more importantly, to provide new services,
insurers must rethink old business models, consider adopting new types of
connectivity, and leverage the information this connectivity produces to provide new services..

 

 

  
Making the most of Big Data

But all the huge new data that will be generated from these new models is only useful if it can be collected, managed, and used.
This requires a technology platform that can receive and readily aggregate and
analyze huge volumes of data. More than half (53%) of companies surveyed in a recent SAP Performance Benchmark survey
report a big gap between their access to Big Data and their capabilities for
analyzing this information.[AS1]

 

  

Advanced technology for gathering and analyzing large volumes
of data can achieve this as well as help them meet new regulatory standards for data security, customer
privacy, and operational transparency. A robust platform can help insurers
address the standards of individual countries and make the necessary
adaptations as these standards evolve.

   

 

The move to new business models is beginning.
With the proper support, insurers can turn this trend into a big opportunity. 

 

 

Insurers will increasingly need to view insurance as being more than a Financial Service.
Successful insurers will increasingly view their business as providing protection and improvement Services in a much wider sense.

 

My neighbor and I may not be paying the same premiums for much longer.

 

  

The following links provide additional information on this subject:

   

    

Author: Li-May Chew, Associate Research Director, Financial Services Advisory, IDC Financial Insights Asia/Pacific

 

 

This post follows my earlier blog on how mounting economic, financial and competitive pressures across the globe are driving insurers to seek greater collaboration between their risk and finance offices.

 

In a global IDC Financial Insights study commissioned by SAP to better understand these trends, we found that the most convincing reason for collaboration is to enhance financial forecasting. Indeed, two heads are better than one, with the support of flexible business analytics and valuation engines to manage a range of risk and finance requirements, including reporting, planning, and capital management. For instance, an insurer with greater awareness of its exposure to natural disaster risks within a geographic region and how it would impact capital will be able to make quicker, more informed decisions. Another critical driver is to enhance the timeliness, accuracy and completeness of information, and thus obtain a 360-view for effective decision making. The advantages of being able to respond more swiftly to regulatory requirements and to achieve cost savings from operating off common data sets are also spurring integrational activities.

 

 

Insurers' Top Drivers for a Risk-Finance Integration

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Going Beyond Paying Lip Service

 

While institutions need little convincing of the benefits of enhanced integration, they are still figuring out the most effective level of collaboration. Amongst the insurers we spoke with, 48% have consolidated risk with finance, albeit a handful (9%) professed to be currently well-integrated and satisfied with the results. When we make reference to integration - we are referring to collaborative initiatives around capital project evaluations, globalization strategies, financing decisions and budgeting. Nonetheless, it is heartening to note that another 39% of respondents are one stage behind and ironing out their integration kinks, while 35% have concrete plans to achieve consolidation in the coming months.

 

Conversely, only 13% point to a lack of formalized implementation plans, while just three interviewees or 4% admitted to having no near-term risk-finance policies. These insurers without integration plans may have a pessimistic viewpoint that alignment is practically unachievable. For instance, one might feel that if risk was called upon to influence the profit-and-loss decisions, tension and conflicts would arise and lead to a more unproductive environment.

 

 

Extent of Progress in Implementation

 

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While there is almost unanimity in the need for coordinated interactions, the interdepartmental partnerships of these insures are still largely in transition, and finalizing on a desired level of integration remains a challenge. I still have more discoveries from this survey to share, and my next posting should be able to shed some light around the technological innovations that will enhance the risk-finance collaboration for our readers. Look out for that final installment!

 

Note: IDC Financial Insights' White Paper (Risk-Finance Collaboration at Global Insurers: A Partnership in Transition) is now available. If you are from a financial institution, do write me at lmchew@idc.com to request for a complimentary copy..

Author: Li-May Chew, Associate Research Director, Financial Services Advisory, IDC Financial Insights Asia/Pacific

 

 

A perfect storm is brewing across the global insurance industry. Unless you have been hiding under a rock these past years, you would know how the volatile markets and intensifying profitability pressures from mounting consumer expectations and regulatory requirements are driving the entire financial services industry to revisit their value propositions and seek new, sustainable avenues for grow. In fact, there is a huge rally call for financial institutions - and insurers included - to realign strategies in response to these changing industry dynamics. And one such avenue that is beginning to catch attention is to explore the possibility that enhancing interdepartmental coordination between risk and finance could raise return on investments.

 

To better understand how this partnership between risk management and finance functions is evolving and if there are any key differences across various regions, SAP commissioned IDC Financial Insights to undertake a global study across 10 countries. Over the last three months, we interviewed 75 leading insurers across Europe, Middle East and Africa (EMEA), the North Americas (NA), Asia/Pacific (APAC) and Latin America (LATAM). Respondents were decision makers from the risk management and financial disciplines and include chief risk officers (CROs), chief finance officers (CFOs) and their deputies, with more than half of our respondents representing mid-size to large insurers with annual gross written premiums in excess of US$500 million. These aggregated survey results, our analysis of the global and regional trends, and essential guidance for insurers will be published in an upcoming IDC Financial Insights White Paper to be released by month’s end. By sharing the results and lessons learnt, we hope to have our readers incorporate these best practices when they themselves begin their own journey towards better interdivisional collaboration.

 

 

So, why a focus on the middle/back office functions of risk and finance?


Well, it was not too long ago when financial institutions deemed the CRO's role as a "nice to have" and not mission critical. However, the global financial crisis of 2008-09 presented us all with a rude awakening, and today's complex risk environmentis setting the stage for risk heads to ascend into the top echelons of management. Insights from a senior risk executive are now needed, as much to ensure day-to-day compliance at the process level, as to steer the strategic course of their businesses.


The role of the risk office is not the only one that is maturing in virtually every area. Responsibilities of financial practitioners are also elevating in importance, with many of whom we spoke with noting a shift beyond the traditional focus on transaction processing, financial reporting and tax compliance. Their roles have indeed gotten more interesting, and responsibilities broadened. For example, amongst others, finance heads are now tasked to implement robust financial performance management, and expected to collaborate with the risk office to ensure insightful analytics and improved financial forecasting.

 

Organizations are Redefining the Roles of Risk and Finance


As these risk and finance officers up their seniority stakes, their teams have to deal with several core issues. These include added stress from new or expanded regulatory risk requirements, and continued macroeconomic uncertainty, as indicated in the chart below. While some risk and finance heads may hesitate to make key investment decisions now, they do need to proactively respond to both regulatory developments and evolving economic conditions. They are also expected to focus on beefing up their accounting teams, enhancing corporate governance and disclosure frameworks, and raising compliance expenditures. Our conversations further revealed that insurers need to keep in synch with ongoing technological evolution. For instance, those who want to stay ahead of the game will need to implement advanced analytical tools for better business insights. Adopting processes to facilitate enterprise information management and centralizing data modeling for quality and efficiency are also key business future-proofing strategies.

 


Insurers' Top 3 Risk or Finance Pressures

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Note: Mean scores are based on a scale of 1-5, where 1 means the least and 5 means the most severe pressure. Source: IDC Financial Insights Global Insurance Survey on Risk and Finance, 2014 (with 75 respondents from unique organizations)


There is plenty more findings to share, so stay tuned for further research insights. Over my next two postings, I shall be revealing more interesting snippets from our survey results, including what factors are driving risk and finance to collaborate on an integrated platform, and how successful these have been. I will also highlight the technological innovations that will enhance collaboration.


Being able to effectively consolidate risk and finance for strategic business and technology decision making requires a complex balancing act for which  the "ideal" extent of integration is always under review,. These would undoubtedly be interesting and illuminating findings, not only for our readers from the insurance community, but for all organizations seeking to reap the rewards from better coordinated risk and finance interactions. So do watch this space for my follow-up posts!

 


Note: IDC Financial Insights' White Paper (Risk-Finance Collaboration at Global Insurers: A Partnership in Transition) will be available from end-July. If you are from a financial institution, do write me at lmchew@idc.com to request for a complimentary copy.

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