Even in the regulation-and process-bound insurance industry, the acts of budgeting, planning and reporting are not synonymous with ease of use.

For managing their budgeting, forecasting and reporting, many companies are still using spreadsheets — essentially the same tools used two decades ago. However, many insurers now employ new technologies and strategies that are enabling them to accomplish these vital functions with as little tedium as possible. What’s more, these solutions are permitting insurers to execute these tasks with greater speed, transparency and accuracy than in times past.


As VP of Finance for direct-to-consumer auto insurer Unitrin Direct, Bryan Rogers was looking to simplify the company’s planning, reporting and forecasting. The Vista, Calif.-based insurer has grown steadily since its inception in 2000, and now writes policies in 47 states. As the company grew, the need to update its planning system from the speadsheet-based approach the company was using became apparent. “We had considered several vendors for planning software, but all of them seemed to be cost-prohibitive for our needs,” he says.

Compounding his plight was the July 2007 acquisition of Merastar Insurance Co., which was tying up all available IT resources. Ultimately, Rogers opted for a hosted solution from Mountain View, Calif.-based Adaptive Planning Inc. that gave him the functionality he needed without a large upfront capital outlay. Rogers says the migration from Excel to Adaptive Planning was straight forward but, while the user interface was familiar to Excel, it had much greater functionality.

“Before we decided on Adaptive Planning, we primarily used Excel with some modeling done in Hyperion Essbase,” Rogers says, noting that as their business grew, they needed a more flexible planning solution. “Excel was good to a point, but we’ve certainly outlived the usefulness of it.”

Bill Soward, CEO of Adaptive Planning, says his company specifically targets companies such as Unitrin Direct that have outgrown Excel, but lack the budget for enterprise level planning. “Mid-market companies were stuck in Excel,” he says, noting Adaptive’s offering enables the consolidation of spreadsheets from many different business units and divisions within the company. “Although Excel is a good desktop productivity tool, it does not scale well when you to bring in stakeholders from around the company, when you want a collaborative process for budgeting and planning.”

Indeed, the collaborative ability of Adaptive’s solution appeals to Rogers. “Now we have a fully integrated planning environment where more than 40 users can collaborate on the budget,” he says. “We’re realizing many efficiencies from having this tool. At the end of the day, we didn’t spend that much, and it provides a great platform for future needs.”

Soward says another benefit of the hosted model is that it enables companies to have multiple versions of their plans, such as ones for best-case and worst-case scenarios. “As we look at the rapidly changing economic conditions in 2008, we see a lot of our customers having multiple versions because they’re not quite sure how this is going to turn out,” he says.


Insurers looking to for a more comprehensive approach to budgeting, forecasting and planning can opt for a performance management system, which can assemble all financial and operational data within an organization into one environment. Performance management systems sit on top of, and pull from, core systems such as policy administration and general ledger modules, and assemble the information into a database.

This ability to reach across multiple data sources to compile “one version of the truth” is vital, says Christina McKeon, director of product marketing, performance management for Alpharetta, Ga.-based Infor Global Solutions. “Insurers need to get out of that spreadsheet mentality where somebody will do a data dump from a database and one person takes it and does some analysis, and another takes it and does another set of analysis,” she says. “You end up with analysis that’s disjointed.”

McKeon contends that when implemented, performance management allows a company’s strategy to drive the budget, not other way around, as is too often the case. “You should assign the budget to make sure you’re meeting strategic goals,” she says. Moreover, although companies in all industries use performance management solutions, insurance companies incorporate them easier than most, she says.


As technologies emerge to help companies perform planning and reporting functions more efficiently, new technological standards are needed to ensure uniformity and interoperability. Foremost among these efforts is XBRL (Extensible Business Reporting Language) an XML-based open standard developed to enable reporting to a variety of stakeholders including regulatory authorities, analysts and investors. Many see XBRL becoming the lingua franca for the exchange of business information and financial reporting. The Securities and Exchange Commission (SEC) is currently accepting XBRL filings after starting a voluntary filing program in 2005.

While XBRL serves as a standard for business financial reporting for companies of every stripe, there are insurance-specific variations of XBRL under development.

New York-based XBRL International, the not-for-profit consortium tasked with building out the XBRL language is collaborating with ACORD, the Pearl River, N.Y.-based insurance standards body to refine data standards for the insurance industry.

Yet, if the emergence of technologies and standards to aid in planning and reporting represent a carrot, an array of stringent statutory and regulatory requirements represents a large stick. While it is widely held that a new era in compliance began in earnest in 2002 with the passage of the Sarbanes-Oxley Act (SOX), even companies that are not publicly traded face greater scrutiny from regulators at both state and federal levels. Moreover, just as technology may be making audits less cumbersome for the audited, it also is imbuing auditors with greater abilities to scour regulatory reports and financial statements for aberrations.

“I think the biggest change in the approach to regulatory reporting over the last few years has been the additional tools that you employ to provide confidence that the numbers you are reporting are accurate,” says John Bauer, director of financial reporting for Newark, N.J.-based Prudential Financial Inc. and current president of the Insurance Accounting & Systems Association, Durham, N.C. Post SOX, companies have to be able to prove when a number changed, why a number changed and who changed it. “The risk-focused approach to operations and statutory examination has and will continue to impact regulatory reporting,” he says.

While it’s hard to overstate the importance of the passage of the SOX in spurring the modernization of planning and reporting, the move toward the automation of these functions had already begun. The National Association of Insurance Commissioners has worked for years to establish a risk-focused examination process, Bauer notes. “Electronic filings of financial data has increased significantly over the last decade.”


The move toward automated, risk-focused compliance is not limited to one side of the Atlantic. Regulatory initiatives emanating from Europe will impact U.S.-based insurers as well.

Bauer says U.S. carriers would be wise to apprise themselves of the International Financial Reporting Standards (IFRS) adopted by the London-based International Accounting Standards Board. While U.S. insurers operate using the Norwalk, Conn.-based Financial Accounting Standards Board’s generally accepted accounting principles, the two standards are beginning to converge, as evidenced by the SEC accepting IFRS filings.

If IFRS is a shot across an insurers bow, Solvency II, a set of regulatory requirements for insurers operating with the European Union, is a well-aimed broadside. Solvency II is a rigid, top-down approach that will force companies to prove the efficacy of their models anywhere they deviate from the standard risk model, experts say. The most onerous part of regulation, many predict, will be the fair valuing of insurance liabilities.

“Solvency II and IFRS are huge for U.S. companies,” Bauer says. “To stay competitive U.S. companies will have to migrate to the Solvency II standard.”

(c) 2008 Insurance Networking News and SourceMedia, Inc. All Rights Reserved.

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