In the final instalment of our five-part article series on opportunities for reserving transformation, we briefly look at how we worked with a reinsurer to transform their reserving process. With support from WTW, they were able to achieve the elements covered in the previous articles.
By its own admission, the reserving process hadn’t really kept up with the growth of this business and was not scalable to accommodate their changing needs.
Primary among the issues it was facing was the inflexibility of reserving processes and technology to keep pace with the growth in business and its accompanying regulatory and reporting demands. This had materialised into an overworked reserving team who were struggling to manage their workload and workflows.
The starting point for addressing the issues was an eight-week pilot project, involving the introduction of ResQ and WTW’s automation technology, Unify, to showcase potential areas of longer-term improvement and enable the company’s reserving actuaries to see and assess the impact on their roles and pressure points - and to become comfortable with these.
This phase provided the platform for a set of reserving transformation objectives – with input from the reserving team – and, importantly in light of the time constraints faced by all reserving teams, a realisation that, with support, it would be possible to make improvements without compromising regular reserving work.
Electing to go down the ‘shift and fix’ route of first introducing new technology to achieve efficiencies before considering broad process updates, the company’s initial objectives were:
Accordingly, core components of achieving its objectives were selective end-to-end automation of reserving processes using ResQ with Unify and ensuring reserving team members received the training and support to enable them to be self-sufficient in using WTW’s software so they can make updates and changes where necessary.
Accompanying the core reserving improvements, another key building block in the company’s transformation plans has been the implementation of a new data warehouse. By layering this on top of the reserving systems, with connectivity between them, the reserving team has increased flexibility and control over how it uses the company’s own and complementary data.
As successful as this organisation’s reserving changes are proving for its own circumstances and needs, each insurer’s specific reserving transformation opportunities and goals will naturally differ. Having successfully completed the project, there were some lessons from the client team which should benefit any company embarking on a reserve transformation.
The first revolves around data and really understanding your data requirements up front. Given the data you have available and the legacy systems you’re working with, it will pay to think about what reserving outputs you’re looking for, what your priorities are based on perceived value, and then work backwards through the data that will be needed at each stage in the process.
Second is the importance of involving all stakeholders, especially within the actuarial team. For example, this client had an actuarial champion for the various changes they were making. This has also acted as a segue into teaching and upskilling other members of the team. Allied to that is having a realistic understanding of the skills available within the team.
Third, don’t pigeonhole reserving transformation as being a way to only get things done more quickly and efficiently. Sure, that will be important for most insurers but, in terms of positioning the value for attracting internal investment, a big plus can be increasing analytical capability, such as targeted reserving reviews - things like highlighting changes in reporting trends for a particular class that might justify a review and help head off future problems.
The wider point is that, as we said in our introduction to this article series, reserving is a function that has been relatively less targeted for innovation and the value it can deliver to an insurance business.
Like this reinsurer, there is an opportunity to change that, and a rising opportunity cost associated with not doing so.
