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By LEO SCHNEIDER, senior vice president, insurance, for SAP AG, headquartered in Walldorf, Germany

During this time of economic volatility, insurers face a daunting array of economic, market and industry hurdles. The financial crisis has severely shaken consumer and investor confidence--even in the most prominent firms. At the same time, industry consolidation and government regulation have accelerated in the insurance sector.

Insurers must have the ability to see, think and act clearly to build greater visibility, industry-specific transparency and accountability in the way they operate. They must foster a "clear enterprise" that has the ability to overcome complexity by understanding what's going on in every aspect of their business and their business networks so they can operate with increased speed, relevance and accuracy--and so they can also be prepared for risk and uncertainties.

But just how can insurers do all this? By:

Achieving financial excellence. Efficient processes for financial and risk controlling are key to any insurer's ability to address market and regulatory changes. Limited transparency of an insurer's risk portfolio due to inaccurate records can result in prolonged recovery time or nonrecovery of reinsured claims and an incomplete picture of overall risk exposure. When insurers cannot efficiently, consistently and directly bill their customers, they may miss out on marketing and cross-selling opportunities and incur high system costs.

The fifth largest domestic life insurance firm in China, New China Life, maintains its key market position with a standardized IT solution that simplifies the flow and control of information for improved better decision making, operations and various areas of corporate governance, such as controlling, reporting and risk management.

New China Life is more responsive to changing market conditions due to improved reporting for taxation, regulatory compliance, and company performance, The unified platform reduced the time involved in day-to-day operations, cut direct purchasing costs, and improved working capital efficiency by enhancing capital turnover and reducing cash balances that the company holds. These improvements have greatly enhanced operational efficiency, resulting in significant savings in employee-days and direct purchase costs.

Delivering operational excellence. Insurers can create a strategic advantage for themselves with solutions that can unify and enhance all operations--a distinct advantage in any market. By linking key operations, insurers can gain real-time visibility into the entire business and maximize efficiency across all units and geographies.

ICW Group Insurance Cos. relies on smarter use of technology to compete against much larger companies, in particular by moving away from legacy and isolated point tools to an all integrated enterprisewide software solution. This has resulted in lower cost of ownership and increased growth. Through a single integrated platform, ICW Group has reduced the number of general ledger accounts from 6,800 to 800. Not being constrained by batch software, the carrier, licensed in all 50 states, has gained real-time cash flow visibility, shorter closing times, and faster and more efficient financial analysis. It can view reports daily instead of monthly, drill down for insights and employ online, graphical interaction instead of antiquated mainframe methods.

ICW Group is well positioned to achieve its aggressive growth goals. By integrating its enterprisewide software solution with an existing business intelligence solution, a carrier that offers a broad range of insurance products including auto, workers' compensation, earthquake and surety is able to manage claims more effectively, while handling more customers in more states. As a result, ICW Group can further deliver upon its mission to power the success of its independent agent and broker network.

Creating superior customer value. A strong customer focus has become increasingly important for any insurer. In a 2009 Economist Intelligence Unit (EIU) survey, titled "Beyond transactions, creating value through customer partnerships in banking and insurance," more than 60 percent of the respondents agreed that, despite the recession, its organization has greatly strengthened customer relationships.

Insurers need to make every customer contact a positive experience to reinforce customer loyalty. When an insurer has a better understanding of its customers, they can target products to specific demographic segments and deliver those products in the manner most appropriate for each segment.

By doing all of this, insurers will have more measurable and manageable processes to reduce operational costs and allow improved scaling and process execution. By enhancing process flexibility, insurers can reduce the time and cost involved in future implementations. Standardizing and consolidating all workforce-related processes and data on a single platform will help ensure a stead supply of talent and trim recruiting and training costs.

In addition, insurers can optimize business and IT resources to enhance efficiency, flexibility and insight, and move beyond internal execution to optimize performance across their network of business partners. With a clear and centralized view of all policy holders, premium payers, claimants, brokers and partners, insurers will have the comprehensive support they need to handle complex processes, large volumes, multiple currencies and languages, and risks and regulations in the new global frontier.

Only those insurers that have the ability to act with such clear insight will emerge from the recession in a stronger competitive position and be better prepared to meet their customers' needs now and in the future.

November 1, 2009

Copyright 2009© LRP Publications