As the financial advice space becomes increasingly complex with the introduction of regulation and other contributing factors, insurers and other advisors have little choice but to simplify their systems.
Businesses have never had as much access to data, but to consolidate this mammoth trove of information can be costly, especially if trying to wrestle it into submission using antiquated methods. Moreover, insurers often have multiple solutions across various lines and subsidiary companies in different countries. This amplifies the streams of information they need to keep track of and to comply with regulators. It is especially true in the African insurance space, in which each country has its own set of regulations.
“These companies are having to adopt solutions and architecture to cater to other regulations, and not just in south Africa,” explains Nea Mathe, industry value engineer at SAP. In th epast, companies kept physical records; as you can imagine, today this would be almost unthinkable for a big insurer with multiple lines of business in various countries.
The total cost of ownership (TCO) of this system is forcing the hand of many insurers to consider digital alternatives. “There is a lot of data which needs to be taken into account, even more so with the introduction of new regulation,” he says.
Complying with regulation is a thorny issue, but proving compliance and feeding your data to a regulator in the format they wish to receive it is quite another. “The regulatory bodies each have their own format,” notes Mathe. “It’s not simply a case of presenting them with a spreadsheet. Companies have to find the relevant data at reporting level,” he explains. Increasingly, regulators prefer to receive granular data, as they feel it is at this level that many insurers are failing their customers.
So what does this mean for the insurer? Lost manpower, hours and money. The company has to source the relevant data from various solutions and spend more time shaping it into the right format. A company has to simplify the “architecture”, Mathe stresses.
When the Solvency II directive and other regulations were released in the EU and the UK, SAP set out to understand the various challenges it would spell for insureres and intermediaries. “We developed a finance and risk data platform for companies, which serves as a data repository,” explains Mathe. This platform has subsequently been released to clients globally.
All data from every transaction is calculated and fed into this repository in real time, which can be accessed and conveyed to outside parties at any stage.
“Aggregated and granular data sits in one platform and, within this platform, built templates that cater to the different regulatory bodies,” says Mathe. “It is an intuitive reporting layer,” he adds. Users can literally drag and drop the data that they want to share.
For insurers already operating on other platforms, the SAP Finance and Risk Data platform allows for integration. “It captures and aggregates all information that enters the platform,” adds Mathe. “The whole aim is to provide a company ease of access to its data, in one place, in real time.” It opens up other opportunities aside from those of compliance. The data is now open to research for potential new products analysis, segmentation, reporting or future predictions.
“Costs, revenues and margins can be analysed in real-time models to reduce redundancy and duplication, but the crucial saving is in time,” says Darrel Orsmond, industry head of financial services at SAP Africa. “So much inefficiency creeps into an organisation when there are multiple levels of validation in the various steps of calculating data. When you move to one common data model, where all your data is in real time, you can deliver answers instantaneously. This data is entirely accurate and doesn’t require any rework,” he explains. “Simple things like customer profitability can be done on the fly, which is not possible in the current world.”
Access to data at the push of a button also enables companies to put their case to the regulator when a client makes a claim against them. “Data that describes your customer in full is very important, especially in terms of defence,” says Orsmond. “The company can explain and prove the particular processes or actions they followed.”
Companies have inherited complex architecture throughout the years, to their own detriment, says Mathe. “They have the data, but they can put it to better use,” he concludes.