You can be ‘business agile’ or you can use legacy systems for outwards reinsurance (ORI) – Why you cannot do both?

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The recent release of the Airmic Survey on the Future of the London Market makes for provocative if predictable reading. The conclusions in respect of the London Market follow a familiar path. “... it’s not great, but it could be worse; there are some good bits, but there is still much to do”. Perhaps the most positive aspect is that the conference assembly were prepared to invest their time and effort in underlining that there remain key challenges ahead and were desirous of the need to offer both diagnosis and prescriptions for the cure.

“… insufficient understanding of technology by insurance decision-makers are seen as the biggest obstacles to improving the market’s infrastructure”.

Equally familiar, there was some finger pointing along the way; “…insufficient understanding of technology by insurance decision-makers are seen as the biggest obstacles to improving the market’s infrastructure”. There was also the traditional call to arms; “… the insurance industry, risk professionals and government need to collaborate and move forward together”.

Many of the survey’s other finding could be grouped under; “the market is cyclical, and we are trying to understand where we are in the cycle” and “we need new talent with the desire to drive innovation,” and you have the survey and conclusions in a risk/reward nutshell.

There are, however, some real nuggets for those insurers who see a competitive edge in grasping the early initiative. Those who made it to the concluding paragraphs were offered arguably the most telling insight.  

“… the (use of) legacy systems of the London Market, risk the loss of business to more modern competitors”

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Whilst insurance decision makers may not understand the full meaning or impact of ‘legacy’ as a technology, or even a business term, they will absolutely understand the need and benefit for their businesses to be agile and proactive in decision making. Whilst bigger has traditionally been better, faster invariably wins the race. Pick up reports from any leading consultants and pronouncements point to larger, older businesses becoming more inflexible. It is not so much age, but outdated technology incapable of dynamic process and reporting that defines legacy systems, that inflicts this arthritic inflexibility. 

How has legacy become the millstone? Traditionally insurers have looked to their business process as the start point and priority for digitisation. In the absence of better advice, the assumption is to start with the inwards customer policy and claims data as held on the policy and claims administration systems. Wrong! A key element in the movement of data throughout any organisation is ‘coding’ that ensures data can be cross referenced between systems (and departments) that otherwise do not talk to each other. If you start with your inwards processing in isolation, it is almost impossible to build the necessary cross reference structure to meet the needs of those downstream data users. It is easy to spot if this has happened in your company; are your administration staff using spreadsheets to knit data together?

The challenge facing the decision makers is that all business processes when paraded under the best practise corporate microscope are found wanting. So where to start? Is there a process where the data produced touches every other part of the business? There is, outwards reinsurance.

Traditionally the outwards reinsurance process is seen as nothing more than the capture of the monthly movement of premiums and claims and a best effort calculation to identify the available recoveries.

Looked at in a different way, outwards reinsurance manages arguably the single biggest asset of the (re)insurer, the reinsurance contracts, frequently up to 33% or more of the total turnover of the business. As the conversion process of ‘gross to net’, its data sits at the heart of the reporting processes up and downstream.

"any single data component or aggregation of data that implies a threatening trend, must be notified to you (whether underwriting, finance, actuarial, placing, management) automatically and immediately"

At Cenata we spend a lot of time during our requirements discovery phase reviewing the quality of the inwards data to be imported into Cenata SURE. Typically, this is a mix of system and spreadsheet data.  It is not just a technical discussion to ensure that we can capture the data in the right format for the necessary month, quarterly, annual, and regulatory reporting processes, it is to understand who is dependent on which parts of the resulting data. The days when all that could be hoped for of an outwards reinsurance solution was that the calculations were broadly correct are long gone. What you should expect is real-time processing, not batch. This is not just an efficiency gain. For it to become an agility gain in your decision making you need to be made aware on a 24/7 basis via all mobile devices that you have potential exposure threats, significant claims activity or leakage (as defined by you) and that overall, your reinsurance contracts are responding as you expect. In effect any single data component or aggregation of data that implies a threatening trend, must be notified to you (whether underwriting, finance, actuarial, placing, management) automatically and immediately such that your response is effective, whether tactically or strategically.

Cenata SURE is designed to make available all the data involved in the gross to net process and through its Business Intelligence analysis tools, create the required 24/7 notifications and supporting data at a granular and aggregate level. (Our commercial model supports this by encouraging access to Cenata SURE for every user who requires access for analysis and reporting).

If you need to go outside of your business for further supporting data, Cenata SURE has all the API integration capability to integrate externally with your internal data for even better proactive decision making. 

"if you are consistently optimising your decision making for your business then the ‘the threat of competition’ issue is minimised."

At Cenata we refer to agility as the ability to proactively analyse the right data for optimised decision making. We do not wish to oversimplify matters, but if you are consistently optimising your decision making for your business then the ‘threat of competition’ issue goes away. You are back in control.