Enterprise Resource Planning System for Insurance Sector

The Indian Insurance industry is a flourishing one which has several national and international players who compete for excellence. With several reforms and policy regulations, the Indian insurance sector has witnessed tremendous growth in the recent past.

India having around 17% of the world’s population is a largely untapped market. Nearly 80% of the Indian population being without a life, health and non – life insurance, a growing number of insurance companies are now emerging in the Indian insurance sector. With the opening up of the economy, several international leaders in the insurance sector are trying to venture into the India insurance industry.

The growth in the insurance industry directly impacts the reinsurance industry. Reinsurance providers are basically companies that provide insurance cover to insurance companies so as to cover their risk. With the growth in the amount of insurance products sold by the insurance companies their risk component goes on increasing. So as to cover this risk, companies resort to reinsurance. Thus the reinsurance market is all growing at a rapid pace.

The growth of the Reinsurance industry in India is coupled with a number of challenges. Challenges faced by the reinsurance industry include shrinking margins, increasing competition etc. In order to meet the challenges, reinsurance companies across the globe have begun leveraging heavily on their information and communication technologies.

Reinsurance firms are using enterprise management solutions to increase productivity, save on expenses, to obtain higher customer satisfaction, thereby resulting into customer retention and to improve sales performance.

General Insurance Corporation of India (GIC Re) is the sole reinsurance company in the domestic reinsurance market in India with more than three decades of experience in the Re-Insurance business. GIC is headquartered in Mumbai.

In India, GIC provide reinsurance to the direct insurance company as it is the sole reinsurer in the market of domestic reinsurance. It is one of the leaders in the facultative placements and domestic companies’ treaty programmes.

OBJECTIVES FOR ENTERPRISE RESOURCE PLANNING SYSTEM

The key objectives for initiating ERP implementation were as follows:

So as to retain leadership position in the national (Indian) reinsurance market.

The intention of emerging as the leader of reinsurance in the Afro – Asian markets.

To obtain an integrated view of all business transactions.

MAJOR BUSINESS CHALLENGES FACED BY GIC RE

Customer-Centricity

The change in focus of the organization to being customer-centricity created a number of issues for the company.

It became important to have optimal knowledge of all the customer segments.

Customized products and services were required to designed to meet the needs of each of the identified customer segments.

It became important to adopt cross selling of products and services as an important growth strategy.

It also became important to provide any time and any place reachability to the customers.

Competition

The growing number of players in the market created an environment of intense competition

In order to sustain such levels of competition it became imperative for the company to adopt new strategies and identify means of securing a competitive advantage over its competitors.

Globalization

Expansion of company operations across multiple geographical locations also made it necessary for GIC Re to identify means of effective monitoring and control.

Expansion also increased the level of competition by adding new competitors from the new geographical locations.

Product Commoditization

The increase in competition was impacting the company’s profit margins.

It became absolutely necessary for the company to distinguish its brand from competitors.

Lower customer loyalty and increasing price sensitivity were also measure threats to GIC Re.

Consolidation

It was important to bring about a consolidation across the organization so as to deliver a clear value to its customers.

Compliance

Expansion of operations across multiple geographical locations made its imperative to comply with multi-national regulations.

MAJOR IT CHALLENGES FACED BY GIC RE

Data Quality

Data maintained by the organization was fragmented by the line of business, the branches, the different geographical locations etc.

It was important to consolidate this data and provide high quality of product and operations related data.

Process Integration

It was important to standardize and streamline cross functional processes and develop and integrated workflow.

The company was suffering from value leakage due to non integration of systems.

Legacy IT Systems

The legacy system used by the company did not reflect the change in focus from being a contract centric to customer centric insurance provider.

Reduction of Operation Complexity

The company used a number of applications to manage the daily activities.

As a result, a number of interfaces had to be monitored and managed which proved to be very difficult.

It thus became important to reduce the number of interfaces and bring about standardization across the interfaces.

EXPECTATIONS FROM ERP

Reduction in overall cost through improved efficiency and increased productivity

Drive business innovation

To a give a competitive advantage to the company over its competitors

Driver for business growth

Improve overall customer experience and satisfaction

Ensure regulatory compliance

Support global operations

Create new revenue streams for the company

Ensure growth of existing revenue streams

CHOICE OF SAP

The major factors contributing to the choice of SAP are as follows:

Integrated Enterprise platform for transacting GIC’s business

The company required a platform that would integrate all the processes and procedures across the enterprise.

The system was required to standardize all processes and streamline set of processes across the organization rather than streamlining large number of procedures.

The company expected the have an enterprise wide visibility of business operations.

SAP Reinsurance solution being used by Global Industry leaders – Munich Re and Hannover Re

One of the major contributing factors to choosing SAP was the company’s biggest competitor and the global industry leader Munich Re and Hannover Re had implement SAP Reinsurance system.

Adoption of the global best practices

By 2005, SAP Insurance had almost all insurance service providers running it.

SAP had in the past implemented both the insurance and reinsurance packages for multiple clients.

This enabled SAP to gain an understanding of the global best practices in the prevalent in the industry.

GIC Re hoped to reap the benefits of this knowledge in their own implement of SAP Reinsurance.

Most companies who had previously implemented ERP had strong positive experience with SAP for their insurance portfolio

ERP IMPLEMENTATION START DATE Early 2005

ERP GO LIVE DATE February 2006

SAP VERSION SAP R/3 Version 4.7

GEOGRAPHICAL SCOPE Offices in India, London and Dubai

SAP MODULES IMPLEMENTED

SAP FS-RI – Reinsurance

SAP FS-RI is an insurance solution that enables reinsurance firms, direct insurers and brokers to achieve a reinsurance process that is completely integrated and streamlined.

SAP FS-CD – Collections / Disbursements

SAP FS-CD is a solution designed for insurance service providers to standardize and streamline their billing and disbursement activities for their policyholders and agency holders.

SAP IM-IC (CFM) – Investment Management

SAP IM-IC (CFM) module provides useful tools for reporting of WBS which are in progress, PO commitments and assets that have been capitalized.

SAP FI-CO – Finance

The SAP FI-CO module can be viewed as the core of the integrated SAP system as it deals with the monetary impacts on business and other modules of SAP.

SAP HR – Human Resources

SAP HR is the largest module implemented

It deals with the management of human resources and human capital

SAP BIW – Business Intelligence

SAP BIW is the business intelligence module that provides analytical, reporting and data warehousing solution

IMPLEMENTATION CHALLENGES

First SAP Reinsurance (FS-RI) implementation outside Europe.

First SAP FS-CD Implementation in India.

First SAP IM-IC implementation in India in an Insurance/Reinsurance environment.

One of the few Active Reinsurers in the world using SAP FS-RI

Legacy data Migration

Customisation of Reinsurance Module (FS-RI)

Risk Manager in FS-RI (Facultative Business) had not yet been implemented even in Europe

IMPLEMENTATION HIGHLIGHTS

Opportunity to critically re-look the company’s business processes and practices and incorporate changes wherever required.

Elimination of data inconsistency by correcting, validating and cleansing legacy data.

Opportunity to streamline the organisation by adopting the global best practices in the industry

BUSINESS BENEFITS

Tight integration between underwriting and technical Accounting processes thereby providing better business focus.

Integrated processes eliminating almost all redundancies and inter-departmental reconciliations.

Increased automation reduced manual intervention and improved data quality.

Improved reserving process (tracking the development of outstanding loss reserves).

FINANCIAL & STRATEGIC BENEFITS

SAP allowed visibility of all assets

Standardized evaluation of all assets were achieved

Daily updates to the investment portfolio enable the company to achieve integrated investment management

Effective real time risk analysis

TOTAL COST OF OWNERSHIP

95 % of the company’s requirements were met by th standard solution offered by SAP and minimal customization was required

OPERATIONAL BENEFITS

The operation benefits as evaluated by the company after two years of implementation are as follows:

KEY PERFORMANCE INDICATORS (KPI)

IMPACT

Time to measure performance

-70%

Time to plan for new projects and activities

-30%

Time to performance market risk analysis

-80%

Efforts to map sources of risk

-80%

Reporting Flexibility

+90%

Quality of Reports

+80%

Quality of Portfolio evaluation

+90%

Quality of transaction mapping

+90%

FUTURE PLANS

Up gradation from SAP R/3 Version 4.7 to SAP ECC 6.0 platform

Connecting offices in Moscow, Malaysia and South Africa to the upgraded ERP network

General Insurance Corporation of India has derived significant benefits from implementation of SAP Reinsurance. From this case it is evident that SAP has the potential of being a measure source of improved efficiency and competitive advantage for insurance service providers.

APPENDIX

[1] Monitor Performance: Executive Dashboard

[2] CEO Dashboard

[3] Sales Dashboard