Insurance companies are great examples of the intersection of legacy and modern analytical technology. Those with retail-facing businesses must support a hybrid business model, like that of High Street banks.
With an existing reporting system based on spreadsheets, Equity Insurance Group had every challenge you could name. The company was faced with the realisation that it needed to generate accurate management reports instantly to remain competitive.
“The consolidation, control and consistency of a spreadsheet-based system is all right when you’ve got only one business but we have several,” says Richard Smith, head of systems at Equity Insurance Group’s finance department. “With five shops, it’s not so bad but we have 100 and a website.”
Equity Insurance Group, previously Cox Insurance, has grown both by acquisition and organically to become one of the UK’s leading companies in the retail insurance market.
"The near real-time analysis has proven invaluable to a company like ours, especially at month end. What used to take days, now takes hours"
Richard Smith, head of systems, Equity Insurance Group
It specialises in the provision of personal products – including vehicles, premises/household and accident – and services to corporate businesses and consumers. Equity Insurance Group also operates a Lloyd’s of London syndicate. Smith says that the combination of an integrated business model, focused underwriting and consistent growth have been the key strategies driving the business to deliver shareholder value.
The spreadsheet-based reliance for reporting had grown to the point where the company needed to find a way to better control its budgeting and planning activities across its branch network.
Equity Insurance Group wanted to find a tool that could generate reports at the touch of a button and at any given time within the financial month.
All this added up to a familiar set of problems but instead of buying new accounting software it tackled the issue at database and server level, installing budgeting, forecasting and planning controls through an online analytical processing (OLAP) server. “Strategically speaking, it was the best approach for us in terms of performance, scalability and value,” Smith says. “We knew we would be able to take a much bigger approach to budgeting and forecasting if we used an OLAP server plugged into the general ledger system to produce the reports instead.” He says that before the new system was installed, it took several hours to produce a report.
A series of extracts were taken from the general ledger and put into spreadsheets in a time-consuming consolidation operation. But in three years, Equity Insurance Group has transformed itself from that spreadsheet-hell. With the help of consultancy Coheris Infocat, the installation, design, building and testing of a server-based planning product, TM1 from Applix, was completed within an aggressive, six-month deployment schedule. As a result, a project to centralise all of Equity’s financial data has supported the establishment of a uniform reporting format that enables senior financial staff to view the performance of the business at any time.
Streamlining financial reporting across the company was the first benefit Equity Insurance Group experienced with its multidimensional analytical tool.
Prior to using the new system, its transactions were processed by financial ledgers software, Sun Accounts, and the data was extracted into Excel for financial reporting. Aided by the fact that TM1 has a user interface based on Excel, Smith says its powerful analytical engine was key to retaining flexibility.
“The reports produced are more standard and consistent, allowing quicker production times. On top of that, the users can modify and create their own reports and views,” he says. Time spent compiling individual reports from disparate spreadsheets was also reduced, which in turn improved individual productivity. Equity Insurance Group can now update transactional data into the TM1 system every five minutes, making it near real-time. “The big thing for us was to have a history of the actual accounts data as a starting point for compiling and analysing financial data and key performance indicators (KPIs).
“On the calculation side, the new system has enabled us to allocate some fairly complex calculations away from the accounts system itself,” says Smith.
In the real-time world
“The near real-time analysis has proven invaluable to a company like ours, especially at month end. What used to take days, now takes hours. We finally have a single view of the true financial performance of our business and some operational performance as well.” Equity Insurance Group’s year-end processes and subsequent month-end reporting cycles have been shortened by half as a direct result of the use of the system. Following the initial purchase of a TM1 planning server, it has since bought an additional analytics server from Applix.
“The system is able to perform a variety of tasks across the organisation, all of which can be delivered from one single platform,” Smith says. For example, the group auditors use it to assist with their interrogation of financial information and business analysts are able to run ad-hoc projections quickly.
The reporting system gave Equity Insurance Group the ability to carry out complex business modelling on all areas of the business, identify KPIs, project cash flow and plan for budgetary purposes. The OLAP engine enables users to analyse different aspects of the company’s multidimensional data.
Since it is stored in a central place, the data can be updated and refreshed giving every user the most recent information, regardless of where they are accessing it. These planning capabilities now enable the company to achieve more transparency, improve agility and create uniform processes across the organisation. “As a big player in the retail insurance market, we manage large call centres which generate a lot of sales and data,” Smith adds. “The business analysts from the broking business now drive their board reporting packs entirely from TM1 which combine financial reporting with call centre and branch network KPIs. We now have the capability to carry out statutory and group consolidations instantly. This has not only saved us time and money but has enabled a simplified and unified reporting method to be rolled out to all members of the Equity Insurance Group.
“The system allows us to analyse key statistics. For example, within our broking business we can look at which types of policies are being taken out, the number of policies we are selling, where they are being sold and the penetration of products in certain markets,” says Smith. “With all this data at the touch of a button, we can better plan for our customer needs.”
Business performance management (BPM) applications have provided Equity Insurance Group with tools for planning and forecasting that cater for the demands of diverse users without compromising the integrity of the source data.
“There is very little IT work involved,” says Smith. “It’s seen very much as an end-user tool. Just refining it down over time has enabled less IT intervention and a more process-centric view of requirements.” He says the OLAP systems pick up on the balance data and various other sub-levels of data needed in a more efficient way. “We’re not rebuilding the whole database all the time. Overnight we run batch processes to ensure the absolute integrity of the data but during the middle of the day the TM1 system just looks for transactional differences.”
The new TM1 system enables business analysts and auditors to view data from a strategic or transactional perspective, giving them a three dimensional view of business performance.
“On the PC, networks and database side, instead of loading that with lots of processing, the system takes the strain off accounts,” he says. “The system is uniquely capable of meeting our needs. It requires less hardware, minimal IT involvement and reduced consulting, training and maintenance.
"The one really big challenge was to do with the quality of data going into the system, rather than the system itself. New systems can expose the quality of your data"
Richard Smith, head of systems, Equity Insurance Group
“We used consultants initially because we wanted the experience of someone who had been there and done it before, to help steer the design and building phase but now we pretty much manage it ourselves.” However, as with every project, Smith admits the introduction of the new reporting system was not without its challenges. “The one really big challenge was to do with the quality of data going into the system, rather than the system itself,” he says. “New systems can expose the quality of your data.”
Equity Insurance Group had to combine the deployment phase of the system with a data cleansing and control exercise that helped establish new, more robust business-led processes going forward.
“We really had to roll up our sleeves and ensure the data quality,” he adds. “It was a painful exercise but it gives us absolute confidence in the systems going forward. Since the implementation, we try to keep ourselves on the current version. With finance managing the system and IT managing the servers we run it with very little third-party help.”
Smith says the reporting system has become a central part of improving business performance. “TM1 has allowed us to increase our reporting capability, streamline group reporting, implement a simple and easy-to-use management reporting method and ultimately improve our overall accountability. We can now perform complex business modelling and identify KPIs.”
He adds that the Equity Insurance Group is planning to extend the complex modelling application across additional finance functions, including its branch network of High Street stores and, potentially, to its underwriting syndicate.