Using Technology to Escape Spreadsheet Hell
Insurance Networking News, June 2008
Even in the regulation-and process-bound insurance industry, the acts of budgeting, planning and reporting are not synonymous with ease of use.
For managing their budgeting, forecasting and reporting, many companies are still using spreadsheets — essentially the same tools used two decades ago. However, many insurers now employ new technologies and strategies that are enabling them to accomplish these vital functions with as little tedium as possible. What’s more, these solutions are permitting insurers to execute these tasks with greater speed, transparency and accuracy than in times past.
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NEW EFFICIENCIES
As VP of Finance for direct-to-consumer auto insurer Unitrin Direct, Bryan Rogers was looking to simplify the company’s planning, reporting and forecasting. The Vista, Calif.-based insurer has grown steadily since its inception in 2000, and now writes policies in 47 states. As the company grew, the need to update its planning system from the speadsheet-based approach the company was using became apparent. “We had considered several vendors for planning software, but all of them seemed to be cost-prohibitive for our needs,” he says.
Compounding his plight was the July 2007 acquisition of Merastar Insurance Co., which was tying up all available IT resources. Ultimately, Rogers opted for a hosted solution from Mountain View, Calif.-based Adaptive Planning Inc. that gave him the functionality he needed without a large upfront capital outlay. Rogers says the migration from Excel to Adaptive Planning was straight forward but, while the user interface was familiar to Excel, it had much greater functionality.
“Before we decided on Adaptive Planning, we primarily used Excel with some modeling done in Hyperion Essbase,” Rogers says, noting that as their business grew, they needed a more flexible planning solution. “Excel was good to a point, but we’ve certainly outlived the usefulness of it.”
Bill Soward, CEO of Adaptive Planning, says his company specifically targets companies such as Unitrin Direct that have outgrown Excel, but lack the budget for enterprise level planning. “Mid-market companies were stuck in Excel,” he says, noting Adaptive’s offering enables the consolidation of spreadsheets from many different business units and divisions within the company. “Although Excel is a good desktop productivity tool, it does not scale well when you to bring in stakeholders from around the company, when you want a collaborative process for budgeting and planning.”
Indeed, the collaborative ability of Adaptive’s solution appeals to Rogers. “Now we have a fully integrated planning environment where more than 40 users can collaborate on the budget,” he says. “We’re realizing many efficiencies from having this tool. At the end of the day, we didn’t spend that much, and it provides a great platform for future needs.”
Soward says another benefit of the hosted model is that it enables companies to have multiple versions of their plans, such as ones for best-case and worst-case scenarios. “As we look at the rapidly changing economic conditions in 2008, we see a lot of our customers having multiple versions because they’re not quite sure how this is going to turn out,” he says.
ONE TRUTH
Insurers looking to for a more comprehensive approach to budgeting, forecasting and planning can opt for a performance management system, which can assemble all financial and operational data within an organization into one environment. Performance management systems sit on top of, and pull from, core systems such as policy administration and general ledger modules, and assemble the information into a database.
This ability to reach across multiple data sources to compile “one version of the truth” is vital, says Christina McKeon, director of product marketing, performance management for Alpharetta, Ga.-based Infor Global Solutions. “Insurers need to get out of that spreadsheet mentality where somebody will do a data dump from a database and one person takes it and does some analysis, and another takes it and does another set of analysis,” she says. “You end up with analysis that’s disjointed.”
McKeon contends that when implemented, performance management allows a company’s strategy to drive the budget, not other way around, as is too often the case. “You should assign the budget to make sure you’re meeting strategic goals,” she says. Moreover, although companies in all industries use performance management solutions, insurance companies incorporate them easier than most, she says.
STANDARDS
As technologies emerge to help companies perform planning and reporting functions more efficiently, new technological standards are needed to ensure uniformity and interoperability. Foremost among these efforts is XBRL (Extensible Business Reporting Language) an XML-based open standard developed to enable reporting to a variety of stakeholders including regulatory authorities, analysts and investors. Many see XBRL becoming the lingua franca for the exchange of business information and financial reporting. The Securities and Exchange Commission (SEC) is currently accepting XBRL filings after starting a voluntary filing program in 2005.
While XBRL serves as a standard for business financial reporting for companies of every stripe, there are insurance-specific variations of XBRL under development.
New York-based XBRL International, the not-for-profit consortium tasked with building out the XBRL language is collaborating with ACORD, the Pearl River, N.Y.-based insurance standards body to refine data standards for the insurance industry.
Yet, if the emergence of technologies and standards to aid in planning and reporting represent a carrot, an array of stringent statutory and regulatory requirements represents a large stick. While it is widely held that a new era in compliance began in earnest in 2002 with the passage of the Sarbanes-Oxley Act (SOX), even companies that are not publicly traded face greater scrutiny from regulators at both state and federal levels. Moreover, just as technology may be making audits less cumbersome for the audited, it also is imbuing auditors with greater abilities to scour regulatory reports and financial statements for aberrations.
John Bauer
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