CS Stars outlines the role that risk management data can play in informing key management decisions for today’s captive entities.
There are many benefits to implementing a claims management technology platform to support a captive insurance programme. Captive programmes that use claims management systems are able to rely on consolidated data for strategic risk management and mitigation across all of their members. A centralised claim repository provides real-time access to member risk data, as well as to detailed and summary level reporting. With the ability to review and react to changes that impact its risk and claims profile, a captive will be able to implement effective risk management strategies more quickly, and with greater precision.
Getting risk and claims data into a single, centralised location
A group captive, by definition, is owned by a number of companies, for which it writes insurance coverage. Captive managers must manage and track claims against these policies, and also report the data back to the captive board and to its members on a regular basis. Because each member can partner with one or more third-party administrator for claims handling, captive managers are often challenged by the complexity of data consolidation.
Imagine a group captive with 25 members that collectively partner with 15 different third-party administrators. Manually requesting claims data from each member and from each third-party administrator, and then consolidating all the data into one centralised format for analysis, would probably be extremely time-consuming, burdensome, and prone to errors and inaccuracies.
The most sophisticated technology platforms can convert and consolidate data originating from any source in order to achieve a single, accurate risk and claims database. To facilitate this process, a technology vendor will allow captive members to grant their third-party administrators secure access for sending claim data electronically. The vendor’s system uses a data integration engine automatically to mapall of the data into a single, centralised database. Automating this process expedites data receipt and also standardises data handling and mapping to preserve long-term accuracy.
“Having a technology platform that is capable of converting and consolidating loss data from various sources for all our participants into one database is vital for operating the Green Island Reinsurance Treaty, facilitating loss transactions and the reporting of Treaty reserves on a timely basis,” said Donna Weber, senior vice president for Marsh and manager of the Green Island Reinsurance Treaty. “Having this database also allows us to run reports as needed to provide insight into loss trends and the performance of the Treaty participants.”
Automated data routines also help captives ensure the soundness of data by validating incoming data prior to accepting it. For example, a captive’s financial information can be balanced against carrier/third-party administrator control totals or trend reports to screen for outliers. If a file doesn’t balance, or trends look strange, data analysts can monitor the claim count and financials and follow up with the source.
A captive can also increase the utility and efficacy of its centralised claims repository by using filters. Filters are applied to a data processing routine automatically to select and refine which claims are added to a database. Perhaps the captive programme requires only claims with total incurred losses less than $150,000; when receiving a file from the captive’s third-party administrator, the system will apply this filter to the claims loaded for each member. These filters can be as detailed as required, limiting losses by a specific dollar amount, coverage, member, or other factors.
Automating data routines should eliminate most of the manual manipulation of claims data, thereby increasing efficiency and also improving data quality. Data that is consistently processed and validated will typically be the most timely, accurate and trustworthy.
Balancing data protection and data availability
Once data has been consolidated, a captive manager’s next challenge is making it available to the people who need it. Determining the right method for data storage and accessibility is essential for ensuring the long-term protection of sensitive claims data. Data privacy, regulatory and legal issues, and access rights are all factors that require consideration.
Depending on where a captive is domiciled, it may be necessary to ensure that the captive’s vendor is certified to comply with the Safe Harbor Act or, in the case of US vendors, the safe harbour framework. These regulations ensure that vendors provide adequate privacy protection, as defined by the directive. With the recent popularity of cloud-based infrastructure, captive managers need to be especially concerned about where data is hosted and how this can impact the captive from a security and legal standpoint.
“Much time and effort is spent researching and analysing where to place a captive—physical storage of data is equally important and should be considered just as thoughtfully,” said Wesley Foster, head of international sales for CS Stars. “Public cloud environments in particular should be carefully scrutinised, because in this environment an organisation’s data may be co-mingled with other data and it’s not always clear where the data resides.”
No matter where risk and claims information is stored, technology plays the starring role when it comes to making it accessible to captive members. A centralised claims database becomes ever more powerful as it gains visibility. Extending access to stakeholders at the captive member level provides direct access to information that can have a field-level impact on assessing exposure and improving the effectiveness of risk management efforts. To accomplish this type of broad access, many captives optfor web-based platforms. Making data available on the Internet can give a captive’s manager and his team real-time access to claims and risk information regardless of geography, time-zone or other environmental factors.
With easy access to consolidated data, captive managers and other risk management stakeholders are better able to identify and analyse safety issues and cost drivers within their purview. To ensure data privacy within the captive, most systems can accommodate role-based security to dictate access and permissions. A captive manager may grant its members access to detailed reports such as triangle loss analysis, claim abstract summaries, or banded loss analysis reports. Offering even ‘read only’ access to claim data along with a basic set of reports gives members a distinct advantage in risk analysis without sacrificing data integrity or privacy.
Beyond claims data, a good technology platform can store other information that is essential to programmed operations such as income and expense data. For instance, a captive may store values and exposures for each of its members to facilitate underwriting and renewals. Captives that have levels of individual member risk retention, group risk sharing, or transfer of risk to the reinsurer may also want to store related operational data. Using this data, the captive’s costs (administrative, claims handling, reinsurance, audit and legal) can be allocated proportionately against each member. A system sophisticated enough to integrate this type of data can simplify what might otherwise be complex accounting processes.
Making data work for members and executives
To support successful oversight and informed decision-making, a captive’s board should have regular access to accurate, timely data for the entire enterprise. Executive-level reports may include tactical reports that help with operational processes such as calculating member allocations or more strategic reports that provide insight into the overall performance of the captive programmed.
Brad Case, a consultant with Marsh’s Captive Solutions unit, runs loss history analysis and member-specific reports for a large captive he works with on a weekly basis. “We have reports scheduled in our system to be distributed on a weekly basis, in advance of executive board meetings,” said Case. “Having this data provides insight into how our captive is performing overall, how each member is contributing, and ensures that risk management continues to be an enterprise-wide priority.”
Some systems offer business intelligence reporting that can be used to design and produce executive-grade business reports for the captive board. Unlike canned report templates, business intelligence reports generally provide flexible, comprehensive data access through an intuitive set of tools, thus delivering powerful, sophisticated analytics to even the least technical users. These reports can be built to provide analysis tailored to the captive’s stated key performance metrics and to the indicators that most impact the captive’s bottom line. This helps managers easily to identify losses as they relate to established retention levels and to recognise areas that are having the broadest and most important impact on insurance costs.
For quick, on-the-fly access to metrics that are referenced most often, dashboards are also a great option. Dashboards are visual and targeted, making it easy to find and digest important information by pulling those critical data points to the surface. Illustrating captive performance visually via charts and graphs can also make financial data and complex analysis easier to comprehend.
Whether a captive’s management approach includes all of these options or just a few key features, using technology to support a captive strategically or operationally is sure to yield positive results. Secure access to consolidated risk and claims data delivers immediate benefits that translate into efficiency, cost savings, and overall value for all captive members.
Jennifer Nelson is an account executive for CS Stars LLC. She can be contacted at: firstname.lastname@example.org
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