The Cost of Doing

By Renee Boucher Ferguson  |  Posted 2007-02-23 Print this article Print

Business"> The Cost of Doing Business Thomas said that the key challenge Chubb faces is determining the cost of the companys main product. If Chubb were a manufacturing company, for example, it would be fairly simple to determine the costs of its products by adding factors such as staffing, raw materials and factory operations, Thomas said. With insurance companies—particularly one that operates as a specialty insurer, like Chubb—the equation is a little different.
"Our product is a promise, and our promise is that if you have an issue, well cover it," said Thomas. "We dont know the cost because its essentially in the future, so we have to rely heavily on what happened in the past and analyze that very heavily to get a sense of what happens in the future."
Chubb provides very broad coverage rather than selling a lot of attachments to its policies. "That leads to a strange philosophy of claims," said Thomas. "We undertake to pay in full and then sort it out. The reasoning is [our insurance] is a premium product, and customers will appreciate paying more because they know they have a cast-iron guarantee. But that puts another pressure on the company. If we want to pay claims, we need to have liquidity to pay, which means we try to run profitable on the core," which can be a difficult task in shifting years of profit and loss. In addition, Chubb has to take into account new and varying risks, including climate change and natural catastrophes—Hurricane Katrina, for example—and global and legal regulatory mandates such as the Sarbanes-Oxley Act. Chubb sells a corporate policy that covers a companys executives in the event of lawsuits from shareholders or others. The cyclical nature of the insurance business—a certain lag time of selling policies weighed against an uncertain time period of future costs—added to ever-shifting risks makes for complicated reporting, Thomas said. Prior to implementing EMIR, Chubbs European division relied on several different systems for reporting purposes. While the division had some good individual reporting applications, they were developed over a number of years. Some were fixed, with no capabilities to drill down. Others overlapped or provided static information. Along with the difficult-to-analyze information, the result of the myriad applications was that a user could ask the same question from two systems and get two different answers, Thomas said. While EMIR doesnt replace those legacy systems, Oracles Database provides an umbrella that consolidates information and provides a single source of truth, Thomas said. Click here to read more about working smarter with BI. The source systems for EMIR have associated databases ranging from Oracle and Microsofts SQL Server to IBMs DB2 and IMS flat files and include underwriting, claims, actuarial and financial systems. Data is migrated from these systems to Chubbs Operational Data Store by several different mechanisms—Informaticas PowerCenter, Oracles CDC (Change Data Capture) feature and FTP on a daily and monthly basis. Once in the Oracle-based EMIR ODS (operation data store), the data is consolidated and transformed first into a relational model and then into a multidimensional one using a combination of Informatica PowerCenter and native PL/SQL. Finally, the multidimensional data in the ODS is used to build Cognos PowerPlay cubes—drilling down from these takes the user back into the multidimensional part of EMIRs ODS. "Thats been the biggest task—securing data from all the different systems were working with and structuring that to make sure it meets business needs. Thats nine-tenths of the iceberg beneath the surface," Thomas said. "The activity that goes into that is enormous." The EMIR IT group broke the project into two main phases. The first phase, now completed, leveraged corporate systems—those used by all lines of business and territories in Europe but with some located in the United States. The three main systems from where data is sourced include a WINS (Worldwide Insurance Networked System) mainframe system in the United States that is used by the European and Latin American divisions; a second mainframe system called WIP (Work in Progress) that is in the United States and used worldwide to capture information about the front-end party of the sales cycle such as submissions, quotes, business won and lost, and renewals; and a U.S.-based corporate database called Profit that gathers and consolidates information from WINS and WIP. The data passed to Profit splits, with one stream feeding to PeopleSoft applications that support premiums and losses and the other feeding to an actuarial summary reporting system called MIS (Management Information System). "Weve very firmly touched on the actuary department; the chief actuary was my partner on this," Thomas said. "They are the people who try and grapple [with] those issues about how do we price, what are the trends, what should we do to respond. They make the business-looking-forward decisions and are really at the heart of the insurance-making business. Its the logical place to start with, if youre looking to build BI." Read more here about how business intelligence can automate the thought process and help businesspeople make critical decisions. For the second phase, currently under way, the IT group is looking at local systems that could change from country to country or from business unit to business unit. Fortunately for the group, the EMIR rollout coincided with two new system implementations—underwriting and new claims—for all business units. The benefit of implementing EMIR at the same time as the new systems was twofold, Thomas said: adding another data source that has more information for business users and having cleaner data going into the legacy systems. "We havent thrown away the legacy systems; weve hidden them with new technology," he said. Because of the new systems, the second phase also is starting to leverage more granular data to build report families—a group of reports that share the same type of beta source and characteristics, such as profitability or portfolio management. Next Page: We are family.


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