Disability Insurance Company: Reinsurance – Business Process Analysis & Improvement

Summary

Doreen Evans Associates helped identify risks and controls within the reinsurance area and undertook a study that recommended consolidation of processing within the Actuarial Department.

Client Company Profile

A mid-size life and disability income insurance company that specializes in products that are excellent for highly skilled professionals, executives and business owners.

Business Challenge

The Auditing Department at the company conducted an eight-month audit of the reinsurance business, which resulted in discovering that there were large dollar discrepancies when it came to paying premiums to reinsurers and to collecting reinsurance reimbursements. The company decided that something needed to be done and wanted to ensure that the approach was systematic and took into account any processing that, in any way, impacted the reinsurance area. A Business Process Analysis & Improvement project was conducted by DEA with a goal to validate the risk areas identified in the audit, identify any new ones, mitigate the risks with process changes, automation solutions or controls, and investigate the viability of a centralized/consolidated reinsurance environment.

Solution

Processes were identified throughout the enterprise that impacted reinsurance. Years earlier this processing had been decentralized in an effort to improve productivity. As a result, reinsurance processing was conducted in the client services, claims, accounting, and actuarial organizations. A Process Decomposition Diagram clearly identified all of the processing. Early on, an idea was floated that reinsurance processes should be consolidated within the Actuarial Department in an effort to ensure specialized, efficient processing by true subject matter experts of reinsurance. A detailed Process Flow Map was developed for each business process and areas of opportunity were integrated along with volume and timing metrics. These opportunities and corresponding recommendations were mapped back to the Audit findings to close the loop and presented to management for review, prioritization and approval.

The findings supported the recommendation to consolidate the reinsurance processes within the Actuarial area and confirmed that the work could be carried out by two staff members. Additionally, many opportunities were identified for enhancements to the existing systems. These targeted improved automated support for a predominantly manual, paper-driven, error-prone environment. The complexity of the processing was apparent and the need to rely on human interpretation of the more than a dozen reinsurance treaties was time-consuming and subjective. It was clear that this kind of processing would lend itself to automation. In some cases, it was apparent that the closed book of diminishing business did not warrant any improvement expenditure. In all cases, management perceived benefit in documenting the current processing, since only a few employees understood how they actually worked and could do the job.