Draft - Q2, 2012 Gregg Barrett
This presentation contains proprietary and confidential information. Unlawful to copy or reproduce in any manner
without express written consent.
• The Problem
• P&C Insurance Landscape in South Africa
• Drivers and Additional Benefits
• System Foundation
• System Technology
• System Overview
o Structure in MS SQL Server
• Areas of Focus
• Development Strategy
• Example of a Middleware Framework
• Target Market
• Positioning in the Market
• Going Forward
• So Where is the Revenue
• It is all about Big Data
• Competitive Position
• Why Industry Development is Unlikely
• Competitive Advantage
• A Move to Standards
There is no straight-through-processing among participants in the P&C (short-term) insurance
industry. Rather islands of information locked-up in disparate systems.
Due to this lack of connectivity, the benefits derived from the creation of a value chain are
yet to be realised.
- Claims Service Providers
The extent of the problem from an insurers perspective:
40% - 60% of necessary data is off platform.
That is data sitting in external systems – beyond the sight and reporting of insurers.
P&C Insurance Landscape in South Africa
• Short-term insurers:
o 99 short-term insurance licenses (FSB, 2010)
o Annual premium for 2010:
R 72.479 billion, gross premium income (FSB, 2010)
o Annual claims for 2010:
R 31.110 billion, claims paid (FSB, 2010)
• Short-term insurance brokers:
o >1000 short term insurance brokers (FIA)
• Short-term insurance broker system providers:
o +- 30 broker system providers in South Africa
• Processing bureaux’s:
o +-5 processing bureaux’s. This relates to a party role to which insurers or brokers or UMA’s outsource the processing of
policies and claims. There is a sense that this may become illegal as the concept of a binder is now being introduced
by the FSB.
• Underwriting Management Agencies (UMA’s):
o +- 400 Underwriting Management Agencies in total
o +- 74 Underwriting Management Agencies of size (SAUMA)
• Claims service providers:
o In the thousands
• Short-term reinsurers:
o 9 licensed short-term reinsurers (FSB, 2010)
o Reinsurance premium for 2010:
R 6.730 billion, gross premium income (FSB, 2010)
o Reinsurance claims for 2010:
R 1.175 billion, claims paid (FSB, 2010)
- Insurers to implement processes and gain access to data required for Binder holder Regulations
and SAM (Solvency Assessment & Management) compliance
- Brokers to adhere to Binder holder agreement requirements
Insurance Laws Amendment Act (ILAA)
The ILAA (Insurance Laws Amendment Act) (Sec 48A) at the moment stipulates that an insurer may insist on receiving the data on
the risks for which it is on cover, from its appointed “Binder Holders”. It is envisaged that the regulations supporting the amendments
to (Sec 48A) will prescribe that insurers should at all times be in possession of information pertaining to risk and customer detail
committed under its licence.
- Improve the customers' experience through the common view of data
- Price premiums more accurately and profitably as a result of leveraging more accurate data
- Obtain more accurate coverage valuations through improved risk portfolio analysis
- Get to market faster through a consistent and common definition of data and information
- Enhance data governance and impact analysis of data changes on core insurance processes
and underlying business rules
- Increase profitability through reduced data integration time and costs
Depiction using test data captured in the
staging prototype system
The party structure specifies a person or
organization or both.
In this example, the Party role is defined as
per the following screenshot.
This particular party, an underwriting agent,
would be referenced from the Policy entity
within the policy as a producer as a
secondary producer, along with the broker,
as the main producer.
The detail party data of address, contact
information, banking, licensing data,
employment, or credit score is held within the
context of the primary party role.
Our staging design needs to provide for full flexibility
in acting as an interface for sourcing data from
different systems, which can also map to the
schema developed with Acord RSA AML.
A placement binds an insurer to coverage's.
At this policy level there is only one coverage and no
If we only have one insurer for all the sections we
only have one placement ... otherwise there is an
additional placement iteration for each insurer (or
insurers for a coinsurance placement) containing the
coverage's bound to that entity.
Section and item level as coverage's and
secondary coverage's within the Policy
This is the most misunderstood and complex
data area within insurance.
We have used the approach of iterating
coverage's within a Policy Placement (one
placement for one insurer, two placements for
two insurers, etc.). The first coverage iteration
applies to the policy level and then one iteration
covers each section level.
Clearly the section level does not reference any
The item level iteration requires a primary
coverage and references the applicable risk
(which in turn references a risk address). This
primary coverage nests all extensions or clauses
as secondary coverage's. We also provide for a
section item level coverage where the typical
example of claim preparation costs applies to all
items within one section.
A claim and a number of claim items and
The Claim Activity log would reflect all activities
within the life-cycle of the claim. The structure
allows more than one claim item to attach to a
claim as this is also planned as an
Each claim item reflects lists the information to
track financial movements to the income
statement and balance sheet of the insurer. The
movement of estimates is added to any payment
less any recovery to make up the claim incurred
amount. This is added to any deductible to make
up the “ground up” amount.
STAGING SYSTEM STRUCTURE IN MS SQL SERVER
1 - Case or Order to process Party Policy
new or changed or cancelled CaseOrder_SK CaseOrder_SK
Party and/or Policy and/or Party_SK Policy_SK
Claim sPartyId sPolicyId
sProcessMessageCode Claim sCurrencyCode
sTransactionMessageCode CaseOrder_SK fVatRate
sOriginatorCode Claim_SK sPaymentMethodCo de
sUserName sClaimId sBillingMethodCode
sFileAttachmentId sPolicyIdRef sContractFrequency Code
sFileAttachmentName sAddressIdRef sPaymentFrequency Code
sFileAttachmentCode sInsurerClaimNumbe r dOriginalStartDate
2 - Insurer, Reinsurer and Producer referencing Party
sFileAttachmentURI sProducerClaimNumber dInsurancePeriodSt artDate CaseOrder_SK PolicyPlacement_SK
sCurrencyCode dInsurancePeriodEx piryDate
dReviewDate sFileAs sPartyIdRef
sLossCauseClassCo de dSignedOn Policy_SK
dDiscoveredDate sSignedBy sPolicyVersion
cClaimIncurredAmount sTransactionMessageCode sInsurerAgencyNumber
Areas of Focus
- Complete definition of broker, insurer and uma roles
- Smart form performance
- Accommodating the rules
- Data warehouse
- Reporting and analytics:
Business intelligence solution based on dimensional structures to
facilitate predictive analysis and price determination as a
- Business services platform for financial services
Our major clients to target:
• +- 30 broker systems
• +- 5 processing bureaux’s
(where insurers or brokers or UMA’s outsource the processing of policies and
claims. Total premium income in this domain is +- 20 billion rand.)
Positioning in the Market
- Position the forms as industry forms used by all role players to front-
end their systems and as the major connectivity tool.
This would reduce complexity, minimise training, cut-out major
duplication in the market.
- Enrichment of data is also a major thrust.
- A multi-channel web services oriented architecture based on cloud
- Be the first to market. South African legislation will be a driver for a
risk-based capital business model.
Step 1: Complete the middleware solution
Step 2: On-board industry participants
Step 3: Revenue generation from
Why industry will come on board:
- Industry participants need connectivity
- Industry participants currently have little options for
- We are providing them with connectivity
- We are providing the platform at no cost
- We are on-boarding them onto the platform at no cost
- No on-going cost to utilise the platform
Thus very little risk to industry participants, only
So Where is the Revenue?
For industry participants there is NO competitive advantage from
o Only potential competitive disadvantage
o A properly functioning backend is the baseline
For industry participants competitive advantage lies in data and
o ALM (Asset/Liability Management
o What you choose to underwrite
o At what price
o Service provision
• Including claims procurement
Revenue lies in “Big Data”
o Provide products and services around Reporting/Analytics/Business Intelligence
It is all about Big Data
- A free middleware platform for the industry attracts a large user
- A large user base provides big data
- Big data provides the opportunity to provide products and
services around this data
Note: we are not claiming ownership of the data nor disclosing it to
3rd parties. We are simply best positioned to assist users of the
middleware platform in turning their data into valuable information
Think along the lines of a Bloomberg terminal for the P&C insurance
- Insurers cannot send and receive (bi-directional) ACORD messages
- Brokers cannot send and receive (bi-directional) ACORD messages
- UMA’s cannot send and receive (bi-directional) ACORD messages
- No insurance system provider with a full middleware platform
- No broker system provider with a full middleware platform
- No UMA system provider with a full middleware platform
- No third party provider with a full middleware platform
- Industry platform (Stride) is a messaging platform
Competition anytime soon?
- Straight-through-processing has been spoken about in the industry since the 90's, yet
nothing exists to provide it.
- This solution has been development for the better part of 10 years and is the nearest to
being a fully operational middleware platform that obviates the need for the industry to
rewrite their applications.
- The ACORD standard for claims was based on this solutions’ claims framework.
- +- 20 000 drop down data fields
Why Industry Development is Unlikely
Using Stride as an example:
Stride state that much development work from all industry participants is required
for participants to attain the required connectivity.
In todays environment it is unrealistic that the numerous industry participants are
going to start establishing risky, costly and lengthy development projects to
rewrite their applications.
Further there is the question of resources who will be able to undertake the work,
let alone the cost?
On the ACORD front:
ACORD is NOT a panacea. (ACORD does not equal connectivity.)
There is also NO ACORD schema that deals with the claims service providers
Ultimately the business will go to those who can provide a solution - a
solution that works and at low cost.
- Need to have a middleware platform
- Need to have a large user base
First to market and no cost barrier drives a large user base.
Enduring competitive advantage:
- Barrier: Cost and skill to develop middleware platform
- Barrier: Cost and skill to on-board users
- Barrier: Once established existing users have no incentive to switch
- Barrier: Need critical user base to generate revenue
- Potential competitors would face problems:
- Sufficient capital to cover period to critical user base
- Risk of not reaching critical user base - due to little incentive for industry
participants to switch
A Move to Standards
• OASIS - Universal Business Language (UBL)
• OASIS - Reference Architecture Foundation for SOA
• OASIS - Web Services Business Process Execution Language (WS-BPEL)
• OASIS - Unstructured Information Management Architecture (UIMA)
• OASIS - Customer Information Quality (CIQ)
• OASIS - Business-Centric Methodology (BCM)
• OASIS - Content Assembly Mechanism (CAM)
• XBRL - Extensible Business Reporting Language
• ACORD - Message Library (AML)
• The business problem is well understood
• The technology exists
• The standards exist
What remains is to deploy the solution.
• P&C - Property and Casualty. P&C is international terminology for short-term
• FSB - Financial Services Board
• SAIA - South African Insurance Association
• FIA - Financial Intermediaries Association of Southern Africa
• ACORD - Association for Cooperative Operations Research and Development
• SAUMA - South African Underwriting Managers Association
• IISA - The Insurance Institute of South Africa
• IBM IAA - IBM Insurance Application Architecture
• SOA - Service Orientated Architecture
• UMA - Underwriting Management Agency
• OASIS - Organization for the Advancement of Structured Information
• XBRL - Extensible Business Reporting Language
• XML - Extensible Markup Language