Insurance Market is constantly evolving and companies are focussing on complete end-to-end IT solution. SAP provides complete solution to both primary and reinsurance companies with far wide scope of implementing all systems like claims, collections, disbursements, financial accounting, commissions and etc. integrated in one suite. The report focuses on Insurance Market, SAP Policy Management and integration aspects of Policy Management. Finally, the report discusses that FS-PM efficiently deals with today‘s insurance market challenges by its fully integrated, strong but highly flexible product and process platform.
1. Insurance Market
Insurance market has grown and adapted with and around the industry as it has progressed and it is still evolving. The companies are now looking more on complete solution which provides an end-to-end solution rather than relying on multiple vendors to manage products across modules so as to get more transparency on entire business process and to have better control on processes across horizons, which give insurers a perfect platform for making key business decisions that today’s challenging environment demands. SAP provides a complete solution to both primary and reinsurance companies with a far wide scope of implementing all systems like claims, collections, disbursements, financial accounting, commissions and etc. integrated into one suite.
2. Introduction to SAP Policy Management
Policy management is a comprehensive policy management system from SAP. For primary insurers, it remains the key Module so as to provide better control over the Policy Administration of Insurance Policies with wide scope ranging from simple Life Insurance Products for Individuals to very complex group Insurance product for bigger companies.
SAP Policy Management system is capable of delivering in diverse Line of business areas which includes Life, P&C (Properties and Casualties), Automobile and Health Insurance and it also allows full customer-specific customizing and configuration in all Line of Business.
3. Overview of SAP Policy Management:
SAP Policy Management system being an integral part of any Insurance Product does the job of Policy Administration which includes Quotation Management, Underwriting, and Endorsements.
Policy Management system is tightly integrated with Product Engine (msg.PM/Camilion) and also integrated with other SAP systems like:
1.Claim Management (FS-CM)
2.Incentives and Commission Management(FS-ICM)
3.Collections and Disbursement Management(FS-CD)
This provides better agility and a more detailed understanding of the environment and what’s going on for both customers and the insurer and also one can get a 360-degree overview of all neighboring system in SAP FS-PM itself per policy.
FS-PM is based on contract model architecture (Policy, Contract, and Coverage) and it takes care of the contract management. The contract management encompasses all Lob independent information and processes in service-oriented components such as:
- The business objects are managed efficiently and centrally (e.g. application, contract, change option …)
- Changes to objects are documented in the Journal( Two-Dimensional Versioning )
Correspondence is created to document results or to request information to customers
- Insurable objects are managed centrally
Fund management is the basis for fund related products (example: Unit Linked Products)
- Accounting component provides dialogs, business functions and background processing for sub ledger relevant and GL relevant transactions
- Different business transactions are available to be executed both in background and foreground
- Update and better controlling of all business functions with Time Model Functions
4. Integration Aspects of Policy Management
FS-PM sets benchmarks in Insurance because it allows an integration of all insurance components and acquires a complete and flexible product-driven in-force business management which also meets future requirements with the cross-LoB approach.
1.4.1. Product Management
- Through a combination with Product Manager (msg.PM/Camilion):
- Quicker introduction of new products (“Time to market“)
- High flexibility in the development of new products
Communication from the product manager (msg.PM) and in-force business management is clearly structured and packaged. Data exchange takes place in two directions:
- Reference model describes the properties of contract management and is imported to the product manager. The SAP data categories are mapped to the msg.PM data categories, such as ACCP Integer, Char string (max. 255 chars)
- Data is imported to msg.PM from contract management, to allow calculations to be performed there and to enable the reconciliation process with the reference model. The reference model cannot be edited in the product manager
- Data is exported from the product manager to the contract manager – static product data and calculation results. In contract management, the system administrator uses extension services for enhancements
1.4.2. Integration to other Insurance systems from FS-PM:
- Business Partner (FS-BP): Policy reads data from the business partner to get e.g. the valid address of the business partner. The business partner is used across the FS-PM main axis hierarchy in form of policyholder, premium payer, insured person, etc.
- Financial Accounting (FI): Non-CF accounting documents are transmitted to FI for the creation of a balance sheet.
- Collection and Disbursement (FS-CD): Cash-Flows are exported to FS-CD. These are documents or payments (collections/disbursements) that Policy expects to be paid physically by the customer or insurance company. FS-CD may itself aggregate its documents and send it to FI.
- Correspondence: The customers need to be informed about the change which happened to their policies; FS-PM sets a trigger in the correspondence tool that information has to be sent. At the point when the correspondence takes place (internal SAP system or customer system) the correspondence tool calls back to FS-PM to get the data of the contract.
- Claim Management (FS-CM): In most cases, the claims management system needs data from the policy management in order to process a damage or loss which was claimed by the customer. An update of the policy may happen in case of a damage or loss Example: When the policy changes from a receiving retirement plan (the customer paid premiums all the time) to a paying retirement plan (the customer retired => expects that the insurance company pays him back the money with interest during his retirement time until death)
- Re-insurance (FS-RI): The FS-PM provides a BADI with can use all contract information of FS-PM to allow accumulation which is used for Reinsurance.
- Incentive and commission management (FS-ICM): Communication happens via the PFO (position assignment). Distribution plans have to be exported finally to FS-ICM to regulate the amounts that an agent or manager gets.
5. Key features in the Policy Management System
FS-PM allows full customer-specific customization and configuration on the FS-PM basis module. It can map process chains in real-time and provides suitable sample content with cross-line of business basis processes. Standard templates and classes are available for different processes, products and insurance mathematics in line with business Life and P&C.
As FS-PM is built on framework driven architecture, it makes it more flexible and accessible from customer’s perspective. The framework that’s used in policy management is Policy-based Technology (PBT) which is 4-layers architecture and makes it possible to create/change/delete entities, fields, and screens across FS-PM system providing better controllability and extensibility.
Policy Management system also makes it really flexible for Product configuration and maintenance with In-force business Configurator (IFBC) available within the package.
Policy management provides a wide range of business processes to be executed within like:
- New Business
- Change Business
5.1. Components within Policy Management
FS-PM itself comprises of many components integrated within for better control and performance on policy products which also encompasses check and derivation rules, Business rule validations and important
- Accounting Component (Non-Cashflow)
- Cashflow Component
- Fund Management
- Object Administration
5.2. Policy Based Technology Framework
SAP Policy Management system is built upon the Policy-Based technology (PBT) framework which enables a very swift and efficient development environment for FS-PM components and most of the solutions within FS-PM. The PBT framework has four layered client-server architecture completely based on SAP technology. It offers a workplace with own design environment, generator and template classes and has a flexible process control.
The Different Layers within PBT workplace are:
- Channel Layer: Transfers the data which are entered by the user in subordinate layers
Process Layer: Handles business Activities and processes, helps to define UI and Monitors the channel layer.
- Business Object Layer: Maintains the entity-relationship and groups them in a business object
- Data Access Layer: Manages all entities of data dictionary tables and generates classes to access the database tables.
The data exchange between different layers takes place in both directions. Each layer within the PBT workplace has its own layer manager and the layer managers are responsible for communication between Layers.
Application Programming Interface (API) in PBT:
It represents the developed application logic and is capable of replacing or completing different layers in PBT except for Channel layer. Because of the exchangeability of the single layers within the architecture, the API can replace each functionality (except the functionality of the channel layer) across PBT Layers.
5.3. Time Model and Business Transaction
Policy management system uses Time Models Functions (TMF) and Business Transactions scheduler (BTS) to perform various date-related processing both scheduled and unscheduled. The dates can be date specific or period-specific (Example: Premium Collection run can be scheduled to run monthly). In most of the update processing activities to keep the system up-to-date both TMF and BTX (along with BTS) are used within FS-PM.
Time model is a component that takes care of updating the insurance policies or contracts without the intervention of user. It consists of granular classes called time model functions which perform well-defined business tasks based on the external trigger like scheduled or unscheduled changes.
The Business Transactions (BTX) executes any changes to policy/application in different business processes available within FS-PM with no or very limited user intervention. For each of the business and technical processes a business transaction is available Example: Change of premium Payer, Create Policy loan, etc.
With these features of FS-PM which makes it integrate with other SAP Insurance modules and at same time has its own components for management of data including great extendibility and customizable framework and a independent product definition module tightly integrated making it a efficient policy processing solution which helps to reduce redundancies and errors and therefore improve revenue and competitive strength. Efficient handling of renewal and mid-term adjustments, automation of mass processes, and identification of relevant risks help to reduce costs and improve transparency.
FS-PM deals with today‘s insurance market challenges by its fully integrated, strong but highly flexible product and process platform. The integrated yet modular SAP platform gives insurers the opportunity to pace implementation of new solution components and take an evolutionary approach to legacy replacement.