For years, insurance executives have been striving to introduce more streamlined procedures and technologies to improve their financial management and analysis capabilities. One of the primary end goals of these efforts has been to deliver more accurate and timely reporting.From an enterprise resource planning (ERP) perspective, this goal has eluded carriers due to the massive amounts of widely dispersed source data, which often is housed in stand-alone legacy systems that lack flexibility, consistency and transparency.
The same experts who encourage companies to avoid the pitfalls of ERP deployments now recommend portal strategies and solutions as enablers of efficient and effective reporting and analysis. Within this context, a "portal solution" can be defined as a Web-based information center that enables users to access and produce reports for decision-making purposes.
IDC, a Framingham, Mass-based technology research firm, estimates the portal market will grow to $3.1 billion by 2006, with the primary interest in portals stemming from the need to create a more "active" workforce.
Specifically, portals promise to deliver better content management, better application integration and better communication internally and externally.
The ultimate step
For Dale Gawley, project manager, of financial systems, at AXIS Capital, an insurance financial portal is a timely concept that is definitely worth exploring. "We feel an insurance financial portal makes a great deal of sense," Gawley says.
"But the critical issue every insurer needs to address is how specialized is the portal to our industry. My sense is that generic solutions either won't work or will fall short of expectations."
The introduction of a specialized insurance portal represents the ultimate step in the evolution of the concept because it provides financial executives with the tools needed to address the unique and increasing "pains" of the insurance business environment.
Some of the key prerequisites for an effective insurance financial portal include:
* Merging reporting and analysis. A financial portal should be designed for both analytics and reporting so that while the existing reporting systems, controls and procedures remain the same, the portal enables executives and other authorized corporate users to perform multiple queries against the same data sources. A financial portal should also give users the ability to drill down and produce reports to determine what might be causing anomalous results, such as an unexpected spike in the loss ratio for a line of business.
* Expanded reach. A well-constructed financial portal enables an organization to expand its data reach by providing a gateway to numerous Internet data sources and content-specific Web sites. With this gateway in place, a portal can help to integrate internal and external metrics within a single Web interface.
* Customization. The financial portal should not be a static solution. Instead, the user's interface should be completely customizable for each organization and each user-a key advantage over classical reporting tools. Accountants and actuaries should be able to review and analyze expenses and losses, drilling down to the lowest level of detail. At the same time, and using the same portal source, the CFO and other senior executives could be reviewing cash flow and operating returns, and segment profitability and competitor stock prices.
* Pre-configured metrics. Perhaps most important of all, an insurance financial portal needs to combine pre-configured metrics, with flexible reporting options, all updated on a real-time basis.
An ideal "cafeteria plan" of insurance metrics, financial reports and graphs include a set of pre-configured, standardized key performance indicators (KPIs) used throughout the industry. Financial executives would also be able to configure the KPIs to ensure they are available throughout the accounting cycle.
Examples of pre-configured KPIs include: net premiums to surplus; change in net writings; unpaid loses to losses incurred; unpaid loss adjustment expense (LAE) to LAE incurred; and net premiums to receivable to net premiums written.
The "cafeteria plan" should also include a set of standardized reports unique to the industry, such as statutory income statement, statutory balance sheet, GAAP income statement, GAAP balance sheet, cash flow statement, monthly production report and an accident year experience report.
The critical challenge facing vertical markets, especially complex verticals such as insurance is to find a provider of portal technology that is committed to producing a solution that addresses carriers' specific needs, rather than working with a vendor that offers a "blanket" solution across all markets.
The combination of insurance sector pre-configuration and a complementary business and financial management software solution will help insurance companies to fast track their adaptation of an insurance financial portal and reap considerable rewards in the process.
Alan Hall is the director of sales and marketing for the insurance sector at SunSystems, Farnborough, U.K.
