Monitoring a virtual insurance business in real-time

An XBRL case-study about:

• Monitoring insurance processes across companies
• Assuring scalability in automated processes
• Meeting reporting requirements

The virtual insurance company: clear, simple and fast

Basic-life NV, a subsidiary of ASR, the Dutch insurance division of the large Fortis financial conglomerate, started its activities in November 1999. Virtually. Ansfried Snijders, CEO, explains: "Our Company was built around the possibilities of IT. It is a virtual company in that it outsources all activities that do not belong to the core of a life insurer; product development and sales support. The rest is done by third parties, providing services under the basic-life label. Such as admin, medical acceptance, fund management etc. Basic-life vision is to be clear, simple and fast." Snijders chose for a modern architecture where all third parties communicate through the Internet. The web-site is a crucial communication medium to intermediaries as well as customers, who can for example manage their investment portfolio through the web. The proposition is to be fast, error-free and transparent. Now Basic-life sells 120 policies per month through intermediaries only and has a premium volume of about Euro 33 million. ASR has a premium volume of about Euro 2.5 billion.

If it's your label, it's your problem

Since Basic-life is in an expansion phase and has it's differentiators in quality, managing third party performance is a serious concern. In order to construct a solid yet flexible and virtual organization, Basic-life has welded the different parties together through well elaborated Service Level Agreements. This is crucial since they all operate under the Basic-life label, and third party performance has a direct effect on Basic-life success. The company was not afraid to accept the consequences and went as far as to introduce a variety of performance related of financial incentives, and penalties. If, for example, a policy does not make it to the intermediary within 3 days without mistakes, the third party receives a penalty. The company and he third party exchange their performance reports every month and settle he bill. Clearly all this puts exceptional demands on the reporting system, across the process.

Besides the self-imposed quality standards, the local regulators did their part in assuring that Basic-life is doing a good job. Not too long ago The Netherlands experienced the sudden collapse of a life insurance company. In the aftermath of this event, the regulators still have a special interest in on the one hand consistency between original applications, policies issued and the companies' administration and on the other to sustain this consistency in any circumstance. Since Basic-life chose to guarantee speed and automate the process, the scalability of these need to be assured.

To make things even more challenging, Snijders has been confronted with growing demands from the ever growing corporation which they are a part of. Reporting requirements have been increased with regard to volumes as well as to timeliness. Internal reporting is required within 3 days from the close of the quarter, down from 10 days, and is expected to become monthly.

Snijders: "It has been our accountant E&Y who introduced XBRL and Semansys to us. XBRL was in its first stages, but Semansys' early implementation showed us the benefits of XBRL for allowing us to completely automate the production and reporting process." Based on a true belief in the virtues of XBRL, Basic-life decided to use this standard for solving the challenges around performance measurement across all parties in the virtual company.

"Each transaction, as it has been handled by the central administration system Life-Fit, is stored in a so called 'Operational Data Warehouse' (ODW). All players in the process have access to this Data Warehouse for customer service purposes. XBRL is used - so to say - to 'tap' the input and output of Life-Fit and the ODW into a Control and Management Data Warehouse. This allows us to have full control of the process and allows us to do daily monitoring, management reporting as well as continuous auditing. A manager's dream comes true."

Snijders can now for example judge - by pushing a button - the timeliness of a commission payment to an intermediary. This is a measure based on data from separate systems which can now be combined and evaluated instantly.

A small, equilateral triangle

In close cooperation between Basic-life, Semansys and E&Y a XBRL pilot project has been performed. As a start the production process has been charted and analyzed for bottle necks and vulnerabilities. Semantic modeling has been used to do the requirement analysis. A one day interactive session proved to be more than sufficient to come to a complete model including all the required reporting functionality. Than the data has been analysed, the optimal data model has been defined and the available data has been transformed into this model. The actual transition took not more than 4 consultancy days. Meanwhile consultants of E&Y built two so called taxonomies, which define the meaning of the reported figures. One for external, and one for internal reporting. After a short introduction to the user community the system has been taken into production. Snijders illustrates the effort invested: "All parties in the triangle spent about 10 days on this project. The whole implementation process has consumed not more than 30 days in a time period of about two months."

Serious money

As Snijders illustrates, the benefits of using XBRL by Semansys are various: "Measuring the performance of the policy administration is now a single click effort. The process is under control and can easily be managed. The regulator, as well as corporate management is satisfied, which is an immeasurable benefit." But there is more: "Basic-life spends less money on bonuses and penalties. Collections and payments are done in time all the time. When in full operation across the ASR Corporation, this effect only could easily save us Euro 3M per year."

Basic-Life has invested serious marketing money in the image of being 'fast, error-free and transparent'. Non performance on these accounts will have serious consequences. "It is impossible to put a price tag on this benefit, but let me assure you, it touches the roots of our enterprise. We are new and sensitive to the public opinion. There is a high pressure to perform. The new system helped us reduce stress levels during month closing. Our company became an even nicer place to work, and that translates in customer satisfaction and loyalty. Intermediaries, who are still testing this new kid on the block, will stick. We know."

While Basic-Life as a virtual insurance company has specific requirements, the benefits of Semansys XBRL solutions can be consumed by the whole of ASR and Fortis. And they will. Plans are being developed to use XBRL throughout the ASR organization. The application areas are the same as those within Basic-Life, the priorities will be somewhat different. Primary application area will be internal reporting following the further integration of ASR in Fortis. XBRL will allow ASR to report more quickly and more frequently on key figures, anticipating the expected requirements on external reporting by regulators. To support this near real-time information flow, XBRL will be the standard for internal reporting by the19 subsidiaries to ASR. ASR will use Semansys XBRL to continuously monitor the company's performance. Maybe not on transaction level as is done by Basic-life, but surely for the benefit of a daily balance sheet. This application area will include reporting on the value of current accounts with the thousands of intermediaries ASR uses as distribution channels. No doubt Semansys and XBRL will manage to radically change the speed and accuracy of ASR corporate reporting, in accordance with Basic-life's adage: clear, simple and fast.