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SAP for Insurance

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


In my third instalment on the findings from an SAP-commissioned survey, I want to touch on the main barriers preventing more effective collaboration between the risk and finance offices, and conversely – a couple of innovations that could enhance integrations. Even as our survey with 75 insurers globally shows unanimously that respondents need little convincing of the benefits of collaboration, there lies a couple of reasons why some organizations have not found more momentum for such integration projects. Why is it difficult for these two inter-connected business units that have so many similarities - and much to gain - to deepen their relationship?


First, there are the technology hurdles. IT hurdles like limitations from legacy technologies which result in a lack of scalability or interoperability of systems, as well as a lack of robust data systems continue to make it cumbersome to implement an integrated platform. The challenge to moving to an integrated solution is also compounded by issues around fragmented data sources and lack of common language usage implying that there is no single data reference point to support integrated risk-finance reporting.

 

What Makes or Breaks Integrational Success?

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Despite these issues to surmount, it is also comforting to know that insurers are allocating more funds to pursue stronger risk-finance partnerships. Market leaders are already widening their competitive edge by investing in innovations. These investment areas include implementing enterprise information management to integrate data from a variety of sources in real time, and steps to centralize data modeling and flow management. Monies are being directed towards Big Data and advanced analytics to drive intelligent insights and risk-informed decisions on capital optimization. Unified data platforms with compatible data sets and centralized data modeling and flow management are also on the list. Having integrated platforms will help to create an enterprisewide source of truth for the multi-purpose data model, yet reduce internal departmental disputes and total cost of ownership.


It is clear from our conversations that while there has generally been commendable progress, today's risk-finance partnerships are in transition. There is still work to be done as most insurers attempt to find equilibrium between ensuring effective cross-departmental interdependence while maintaining an ideal degree of independence necessary to preserve both departments' decision-making.


Are you likewise deliberating over the degree of risk-finance cohesiveness that is appropriate for your organization? We do have some actionable pointers on that in our recently released White Paper, so do reach out to me at lmchew@idc.com if you would like a complimentary copy of that document.

On this beautiful October day in New York, SAP welcomed hundreds of customers and partners at the Ritz Carlton Battery Park to discuss Transformation and Innovation at the 3rd annual SAP Financial Services Forum.

 

While the topic of change and transformation has been discussed within Financial Services and Insurance for years, the main dialogue at today’s Forum centered around the urgency for firms to innovate and evolve their business models to capture customer mindshare. More than ever, the industry is facing incredible pressure from non-traditional competitors who are seizing the mindshare – and the wallet share – of customers around the globe.

 

Ross Wainwright, SAP’s Global Head of Financial Services, shared several examples of how banks are being disintermediated, and in some cases entirely excluded from customer opportunities by new entrants ranging from Lending Club, PayPal, T-Mobile and many more.

 

Stephen Dubner, best-selling author of Freakonomics, challenged bankers and insurers to think beyond their traditional business models and to re-define their framework for engaging with customers. While Stephen acknowledged that predicting the future is hard, if not impossible, he spoke about the importance for firms to question their current business models in order to remain relevant in their customers’ eyes.

 

Complementing the discussion around transformation was a thought-provoking perspective offered by Jennifer Morgan, SAP’s North America President. Jennifer offered an action plan for organizations to leverage innovations such as Business Networks and Data Science to drive technology and business process simplification in order to achieve the agility required to respond to changing customer demands.

 

The trifecta of simplicity, transformation and innovation was beautifully summed up by Willie Stegmann, CIO at Standard Bank of South Africa (SBSA), who travelled to NYC from Johannesburg to share his experience in driving an enterprise-wide transformation agenda at SBSA. Willie recounted the highlights and lowlights of SBSA’s transformation journey, sharing how SBSA created market differentiation and customer loyalty by harnessing innovation and delivering unique capabilities to their customers.

 

With over 50 speakers at this year’s event, the discussion of change and innovation continues. We hope you’ll join the conversation on Twitter at #sapfsforum. You may also want to bookmark the event page, where we’ll soon share the presentations and videos from this week.

Insurance Market is constantly evolving and companies are focussing on complete end-to-end IT solution. SAP provides complete solution to both primary and reinsurance companies with far wide scope of implementing all systems like claims, collections, disbursements, financial accounting, commissions and etc. integrated in one suite. The report focuses on Insurance Market, SAP Policy Management and integration aspects of Policy Management. Finally, the report discusses that FS-PM efficiently deals with today‘s insurance market challenges by its fully integrated, strong but highly flexible product and process platform.

 

1. Insurance Market

 

Insurance market has grown and adapted with and around the industry as it has progressed and it is still evolving. The companies are now looking more on complete solution which provides an end-to-end solution rather than relying on multiple vendors to manage products across modules so as to get more transparency on entire business process and to have better control on processes across horizons, which give insurers a perfect platform for making key business decisions that today’s challenging environment demands. SAP provides complete solution to both primary and reinsurance companies with far wide scope of implementing all systems like claims, collections, disbursements, financial accounting, commissions and etc. integrated in one suite.

 

2. Introduction to SAP Policy Management

 

Policy management is comprehensive policy management system from SAP. For primary insurers it remains the key Module so as to provide a better control over the Policy Administration of Insurance Policies with wide scope ranging from simple Life Insurance Products for Individuals to very complex group Insurance product for bigger companies.

 

SAP Policy Management system is capable of delivering in diverse Line of business areas which includes Life, P&C (Properties and Casualties), Automobile and Health Insurance and it also allows full customer-specific customizing and configuration in all Line of Business .

 

3. Overview of SAP Policy Management:

 

SAP Policy Management system being an integral part in any Insurance Product does the job of Policy Administration which includes Quotation Management, Underwriting, and Endorsements.

 

Policy Management system is tightly integrated with Product Engine (msg.PM/Camilion) and also integrated with other SAP systems like:

 

  1. Claim Management (FS-CM)
  2. Incentives and Commission Management(FS-ICM)
  3. Collections and Disbursement Management(FS-CD)
  4. Re-insurance(FS-RI)
  5. Business Partner(BP)
  6. Financial Accounting(FI)
  7. Organizational Management
  8. Business Intelligence

 

This provides better agility and more detailed understanding of the environment and what’s going on for both customer and the insurer and also one can get a 360 degree overview of all neighbouring system in SAP FS-PM itself per policy.

 

FS-PM is based on contract model architecture (Policy, Contract, and Coverage) and it takes care of the contract management. The contract management encompasses all Lob independent information and processes in service oriented components such as:

 

  • The business objects are managed efficiently and centrally (e.g. application, contract, change option ...)
  • Changes to objects are documented in the Journal( Two-Dimensional Versioning )
  • Correspondence is created to document results or to request information to customers
  • Insurable objects are managed centrally
  • Fund management is the basis for fund related products (example: Unit Linked Products)
  • Accounting component provides dialogs, business functions and background processing for subledger relevant and GL relevant transactions
  • Different business transactions are available to be executed both in background and foreground
  • Update and better controlling of all business functions with Time Model Functions

 

4. Integration Aspects of Policy Management

 

FS-PM sets benchmarks in Insurance because it allows an integration of all insurance components and acquires a complete and flexible product-driven in-force business management which also meets future requirements with cross-LoB approach.

 

1.4.1. Product Management

 

  • Through a combination with Product Manager (msg.PM/Camilion):
    • Quicker introduction of new products (“Time to market“)
    • High flexibility in the development of new products

 

Communication from the product manager (msg.PM) and in-force business management is clearly structured and packaged. Data exchange takes place in two directions:

 

  • Reference model describes the properties of contract management and is imported to the product manager. The SAP data categories are mapped to the msg.PM data categories, such as ACCP Integer, Char string (max. 255 chars)
  • Data is imported to msg.PM from contract management, to allow calculations to be performed there and to enable the reconciliation process with the reference model. The reference model cannot be edited in the product manager
  • Data is exported from the product manager to contract manager - static product data and calculation results. In contract management the system administrator uses extension services for enhancements

 

1.4.2. Integration to other Insurance systems from FS-PM:

 

  • Business Partner (FS-BP): Policy reads data from the business partner to get e.g. the valid address of the business partner. Business partner is used across FS-PM main axis hierarchy in form of policy holder, premium payer, insured person etc.
  • Financial Accounting (FI): Non-CF accounting documents are transmitted to FI for the creation of a balance sheet.
  • Collection and Disbursement (FS-CD): Cash-Flows are exported to FS-CD. These are documents or payments (collections/disbursements) that Policy expects to be paid physically by the customer or insurance company. FS-CD may itself aggregate its documents and send it to FI.
  • Correspondence: The customers need to be informed about the change which happened to their policies; FS-PM sets a trigger in the correspondence tool that information has to be sent. At the point when the correspondence takes place (internal SAP system or customer system) the correspondence tool calls back to FS-PM to get the data of the contract.
  • Claim Management (FS-CM): In most cases the claims management system needs data from the policy management in order to process a damage or loss which was claimed by the customer. An update of the policy may happen in case of a damage or loss Example: When the policy changes from a receiving retirement plan (the customer paid premiums all the time) to a paying retirement plan (the customer retired => expects that the insurance company pays him back the money with interest during his retirement time until death)
  • Re-insurance (FS-RI): The FS-PM provides a BADI with can use all contract information of FS-PM to allow accumulation which is used for Reinsurance.
  • Incentive and commission management (FS-ICM): Communication happens via the PFO (position assignment). Distribution plans have to be exported finally to FS-ICM to regulate the amounts that an agent or manager gets.

 

5. Key features in Policy Management System

 

FS-PM allows full customer-specific customization and configuration on the FS-PM basis module. It can map process chains in real-time and provides suitable sample content with cross-line of business basis processes. Standard templates and classes are available for different processes, products and insurance mathematics in line of business Life and P&C.

 

As FS-PM is built on framework driven architecture, it makes it more flexible and accessible from customer’s perspective. The framework that’s used in policy management is Policy based Technology (PBT) which is 4-layers architecture and makes it possible to create/change/delete entities, fields and screens across FS-PM system providing better controllability and extensibility.

 

Policy Management system also makes it really flexible for Product configuration and maintenance with In-force business Configurator (IFBC) available within the package.

 

Policy management provides a wide range of business processes to be executed within like:

 

  • New Business
  • Change Business
  • Inquiry
  • Reset
  • Reversal
  • Update

 

5.1. Components within Policy Management

 

FS-PM itself comprises of many components integrated within for better control and performance on policy products which also encompasses check and derivation rules, Business rule validations and important components like:

 

  • Accounting Component (Non-Cashflow)
  • Cashflow Component
  • Fund Management
  • Journals
  • Taxes
  • Object Administration

 

5.2. Policy Based Technology Framework

 

SAP Policy Management system is build upon the Policy Based technology (PBT) framework which enables a very swift and efficient development environment for FS-PM components and most of the solutions within FS-PM. The PBT framework has four layered client-server architecture completely based on SAP technology. It offers a workplace with own design environment, generator and template classes and has a flexible process control.

 

The Different Layers within PBT workplace are:

 

  • Channel Layer: Transfers the data which are entered by the user in subordinate layers
  • Process Layer: Handles business Activities and processes, helps to define UI, and Monitors the channel layer.
  • Business Object Layer: Maintains the entity relationship and groups them in a business object
  • Data Access Layer: Manages all entities of data dictionary tables and generates classes to access database table.

 

The data exchange between different layers takes place in both directions. Each layer within PBT workplace has its own layer manager and the layer managers are responsible for communication between Layers.

 

Application Programming Interface (API) in PBT:

 

It represents the developed application logic and is capable of replacing or completing different layers in PBT except Channel layer. Because of the exchangeability of the single layers within the architecture the API can replace each functionality (except the functionality of the channel layer) across PBT Layers.

 

5.3. Time Model and Business Transaction

 

Policy management system uses Time Models Functions (TMF) and Business Transactions scheduler (BTS) to perform various date related processing both scheduled and unscheduled. The dates can be date specific or period specific (Example: Premium Collection run can be scheduled to run monthly). In most of the update processing activities to keep the system up-to-date both TMF and BTX (along with BTS) are used within FS-PM.

 

Time model is a component which takes care of updating the insurance policies or contracts without the intervention of user. It consists of granular classes called time model functions which perform a well defined business tasks based on external trigger like scheduled or unscheduled changes.

 

The Business Transactions (BTX) executes any changes to policy/application in different business processes available within FS-PM with no or very limited user intervention. For each of the business and technical processes a business transaction is available Example: Change of premium Payer, Create Policy loan etc.

 

6. Summary

 

With these features of FS-PM which makes it integrate with other SAP Insurance modules and at same time has its own components for management of data including great extendibility and customizable framework and a independent product definition module tightly integrated making it a efficient policy processing solution which helps to reduce redundancies and errors and therefore improve revenue and competitive strength. Efficient handling of renewal and mid-term adjustments, automation of mass processes, and identification of relevant risks helps to reduce costs and improve transparency.

 

FS-PM deals with today‘s insurance market challenges by its fully integrated, strong but highly flexible product and process platform.The integrated yet modular SAP platform gives insurers the opportunity to pace implementation of new solution components and take an evolutionary approach to legacy replacement.

 

References:

 

FS-PM 5.2 sap help: http://help.sap.com/saphelp_pm52/helpdata/en/4c/48d6de47fc6f84e10000000a42189e/frameset.htm

 

Interesting Video from SAP on Insurance: SAP for Insurance in 7 minutes - YouTube

 

Author – Purajeet Panda from Serole Technologies

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.

 

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 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. 

 

Transparency.jpg

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:

   

    

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