Hurricanes in Florida. Floods in Louisiana. Fires in California. CEOs in hot water over regulatory concerns. Couple those issues with a cyclical profit-and-loss business model that tries to factor in the unknown, and theres a potential recipe for trouble for insurance companies.
Around 2000, Chubb, a global company that specializes in insuring individuals and companies through independent brokers, found itself in a tough spot. Its European division, Chubb Insurance Company of Europe, wasnt hitting its targets. And CICE—which operates in 13 countries and has more than 1,200 employees and annual revenues of more than $1.2 billion, a fraction of the companys overall worth of $14 billion in revenue and $48 billion in assets—had no insight into its business performance or what to expect in the future.
“Chubb was in a difficult phase. We had not-so-good results,” said Thierry Daucourt, regional manager of Central & Eastern Europe Region at Chubb Insurance. “Everyone had an explanation, but, somehow, no one trusted the numbers coming from our system. The fundamental question was, We passed poor results. Where the hell are we coming from? The conclusion: We didnt know what was going on. We didnt know what our business was doing.”
The issues stemmed from fragmented reporting systems that resulted in an inability to gather historical data, slice and dice it, and apply it to future trends. Chubbs management decided the company had to know more about its fundamental business and about the future.
“On a management level, we had to know better. We wanted an information system that was much more flexible,” said Daucourt, in Zurich, Switzerland. “We wanted to look at different dimensions [of data] and different angles—policies that we were writing and claims that those policies were producing. We wanted to look at things easier.”
From those basic business issues stemmed the IT initiative for EMIR, or European Management Information Repository, a business intelligence platform from Cognos. The platform is a multiyear project that began in 2003 and should be completed—in the European division—in 2008. Additionally, at the end of February, EMIR will go live in five countries in South America. Some work has started in Chubbs Asia-Pacific offices, and the group is in the early exploratory phases with its U.S. parent company, in Warren, N.J.
“EMIR is our first pure BI tool in Europe. There are some other activities with our U.S. parent, but that is a little more point solutions. What were doing differently is looking to address the full functionality of BI within all the business units of our organization—multiple different domains covering all management information reporting through one BI tool,” said Peter Thomas, vice president of Chubbs European Enterprise IT group, in London.
EMIR consists of Cognos 7.3 PowerPlay cubes for flexible analysis, Cognos 7.3 PowerPlay Web Reports for fixed format summary reports, an in-house drill-through and list reports tool, and Cognos 8 Report Studio for creating dashboards. For development tools, Chubb is using Informaticas PowerCenter and PL/SQL ETL (extraction, transformation and loading) capabilities on an Oracle database.
The Cost of Doing
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.
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.”
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.
We Are Family
We Are Family
The IT team at Chubb didnt design EMIR in a bubble. Thomas team, along with a hefty group of business users, did a basic study of what type of functionality was needed for the initiative. They determined the software they implemented needed to be Web-based and multidimensional, with the ability to look at numbers intuitively and to enable users to drill down to the underlying data. Over a three-month evaluation, they looked at four vendors, finally choosing Cognos.
“Cognos answered most of the questions we had,” said Thomas. “We were also looking for a long-term partner with financial stability in the market. We felt Cognos would be there not only in the next year but in the years to come.”
The European group received approval for EMIR in the middle of 2001. The IT groups first release came two years later, with an inaugural Profitability report family, which takes in calendar year and underwriting year results and triangulations, reconciled with Chubbs MIS system, but with more detail and flexibility of analysis around revenue, profit and trending. Other report families followed.
Most recently, Thomas group released a Dashboard report family in 2006 that brings together key performance indicators from different report families into a simple overview for senior management.
An Operations Management report family will follow at the end of 2007 that will review performance against internal and external service levels and identify bottlenecks. An Exposure Management report family is targeted for 2007 and 2008 that will provide a detailed investigation of Chubbs European divisions insurance programs, limits, deductibles, locations and the like.
But the real challenge in implementing EMIR isnt around systems or data mining, Thomas said.
“Change management is one of the main headaches,” he said. “Any one of those data sources could change at any time. If [there is a change] in even one underwriting system, it can cause cascading changes in all the other systems. When you have that level of integration, something that could be a small change can have lots of effects. Thats something weve worked very hard at.”
In the first two years of the project, Thomas and Daucourt involved a team of about 30 people from different departments across Europe. People from claims, underwriting, administration and management each had input into the process of developing the basic requirements of EMIR.
For the report families, Thomas developed a “straw man” for a particular area and then pulled in a group of 10 to 15 business users to work with IT. The group defined requirements and prototypes and then deliverables, Thomas said.
“We asked [business users], What do you need to run an insurance business?” said Thomas. “Then we organized that into chunks we could bite off. Thats one of the things we really got right, so business is aligned with what were really trying to do.”
For Daucourt—who is responsible for Chubb policies in Germany, Switzerland, Austria and Eastern Europe—and others who use EMIR, the platform has been a life saver of sorts. Where there was little to no visibility, Daucourt and his team can now find specific information.
“At the highest possible level, I can drill down the numbers and look at different areas,” he said. “Instead of having just a gut feeling of why numbers are coming in, there is a better informed decision. Its not so much guessing; there is true information.”
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