SELECTING THE IDEAL INVESTMENT ACCOUNTING & REPORTING SOLUTION THE KEY QUESTIONS EVERY INSURER NEEDS TO ASK

Transcription

1 SELECTING THE IDEAL INVESTMENT ACCOUNTING & REPORTING SOLUTION THE KEY QUESTIONS EVERY INSURER NEEDS TO ASK

2 I nsurance companies have traditionally relied on legacy solutions for investment accounting, reporting, and analytics. Today, more than ever, insurers are looking to improve their current processes to reduce manual input, automate inefficient practices, or close their books faster. Whether it is because their current provider is not keeping up with regulatory changes, has made them reliant on manual workflows and workarounds, or they re being forced to upgrade to newer versions due to unsupported legacy software, many insurers are currently looking at alternatives. One of the toughest challenges is knowing what characteristics to look for and what questions to ask in order to find the optimal solution that meets the company s needs. The following framework is designed to help insurers know what to look for in an ideal investment accounting and reporting solution and what essential questions to ask. The goals are to make the evaluation process easier and help insurers select a solution that aligns with their organization s true objectives. What to Look for in an Investment Accounting and Reporting Solution COMPANY DIRECTION AND INNOVATION A solution that evolves with your changing business needs and a company that is committed to innovation and advancement STREAMLINED AND ACCURATE DATA A solution that delivers reconciled, audit-quality data through automated processes on a daily basis ACCOUNTING, COMPLIANCE MONITORING, AND ANALYTICS A solution that is based on a solid accounting foundation, and delivers integrated compliance monitoring and investment analytics THE USER EXPERIENCE A solution that evolves and improves over time, and is one that you actually want to use IMPLEMENTATION AND SERVICE A solution that is easy to implement, doesn t require extensive training, and is supported by responsive and knowledgeable client service

3 1 COMPANY DIRECTION AND INNOVATION As an insurer, you have constantly changing investment accounting and reporting needs. Financial climates aren t static and your ability to adapt to changes in the market can be constrained by legacy solutions that haven t evolved with your business. Your organization was built not just to endure, but to thrive. Wouldn t you want the investment accounting and reporting solution provider you rely on to have a similar commitment to innovation and advancement? Your current solution provider is not committed to the market Your current solution does not improve functionality or services on a regular basis Your current solution is not keeping up with industry and regulatory changes, or providing educational guidance Your current solution is outdated and/or forcing your organization to a newer version Your current provider s solution is not attracting new customers A solution that is always improving and evolving to match your organizational and technology needs A solution that can provide value for your organization for both the short-term and the long-term A SaaS-based solution that is updated with new functionality on a regular basis (and it is included with the service) A provider that is staying up-to-date on industry and regulatory changes, and provides proactive educational guidance A provider that seeks to continually improve and earn your business As you re evaluating solutions, you have a responsibility to understand the vendor and their future direction to ensure business continuity: 1 How would you describe your business? Please provide an overview. 2 How many insurance clients use this specific product? 3 What percentage of employees are dedicated to this specific product? 4 How many developers do you have devoted to the development of this specific product? 5 How many new insurance clients have you added in the past 24 months for this specific product, excluding renewals? 6 What were the primary reasons why these insurers selected your solution? 7 How many insurers have discontinued the use of this product (for schedule D, book of record, etc.) over the last 24 months? Why? Who did they select? 8 What are your company s objectives in the insurance market over the next five years? 9 What new functionality have you released in the past year that addresses the needs of insurers?

4 2 STREAMLINED AND ACCURATE DATA Many of today s solutions require manual data entry or storing data in multiple databases, which complicates reconciliation processes and opens the door to inaccurate information, delayed reporting, and unnecessary risk. Managing investment data shouldn t be this hard. There is a better way. Insurers can leverage technology to automate these processes and deliver accurate and timely investment accounting data. Manual entry of data and transactions Key investment data stored in multiple, disparate locations Cumbersome reconciliation from separate sources and databases Burdensome data discrepancy and exception resolution process Increased risk of inaccurate data in reports Minimal controls around data validation Stale data that is only available at the end of the period Security master data that only comes from a single source An automated system that can aggregate all of your investment data from disparate sources A solution that produces and maintains an accurate security master A solution that has robust validation and reconciliation capabilities to ensure up-to-date and accurate information Aggregation: 1 In general, who is responsible for aggregation and normalization of data? 2 Which and how many data providers come standard with the service? 3 How is security master and market data brought into the system? 4 Who is responsible for ensuring security master accuracy? 5 How is custodial data brought into the system? Who is responsible for resolving custodial exceptions, breaks, and errors? 6 How are transactions entered into the system? And who is responsible? 7 Are we required to pay additional fees for data, or contract directly with third-party data providers? If so, which ones? Reconciliation & Validation: Learn more about the processes involved with reconciling and validating the following items (this is a just a representative list). Cash Positions Price Aggregation Price Validation Accrued Interest Market Value Security Types, Market Sectors, and Asset Classes Coupon Rate & Maturity Date Issuer Concentration NAIC General and Specific Classifications NAIC Designations and Pricing Factors Credit Ratings Corporate Action Rates Who is Responsible for this Function? How Often is this Function Performed? A solution that is updated daily, giving you the power to see your account values every day Benchmark Indices Amortization Book Yield Market Yield

5 3 ACCOUNTING, COMPLIANCE MONITORING, AND ANALYTICS Accurate financial statements based on solid accounting data are essential to your organization. You need to have confidence in both the investment accounting values and the process for determining them. This data should serve as the foundation for monitoring investment policy compliance, measuring performance, and analyzing risk. However, many insurers struggle to produce timely reporting because their monitoring and analytics tools are not based on accurate accounting data. Inaccurate source data, which causes accounting errors Inaccurate book values, market values, and interest values Manually preparing journal entries offline due to system limitations General ledger entries that don t reflect your chart of accounts Manually reconciling the general ledger to core accounting reports, including NAIC reporting Cumbersome and time-consuming process for generating NAIC regulatory reporting Only getting reports on a monthly basis Disparate systems for investment policy compliance, performance, and risk analytics Unknowingly violating investment policy limits A solution that automatically delivers accurate and timely portfolio accounting data Accurate accounting data that is the foundation for integrated investment analytics Access to daily accounting and risk reports to ensure you know what you own at any point in time Ability to see your portfolio performance through different lenses and views on a daily basis Independent investment policy compliance monitoring Accounting: 1 How often are accounting values updated and reconciled in the system? 2 What accounting bases does the system support? 3 Who is responsible for maintaining the chart of accounts? 4 When should we expect to receive journal entries for our accounts? 5 What financial statements are included in the system? 6 What footnotes are included in the system? 7 What NAIC reports are included in the system? 8 What TAX reports are included in the system? Investment Policy Compliance: 1 Is investment policy compliance monitoring included in the service? 2 Is investment policy compliance monitored within the accounting system? 3 How often does the system check for investment policy compliance violations? 4 How are investment policy compliance violations communicated to the client? 5 Who is responsible for inputting investment compliance policies into the system? 6 Does the system maintain state compliance policies? 7 How often is investment policy compliance validated against accounting data? Risk and Performance: 1 Are risk analytics and performance included in the core service? 2 Are performance and risk reporting calculated within the accounting system? 3 How often are risk analytics and performance calculated? 4 What performance returns does the system calculate? 5 What trend analysis functionality is included? 6 Does the system track Value at Risk (VaR)? 7 What credit quality monitoring is included in the system?

6 4 THE USER EXPERIENCE As insurers investment portfolios have grown in size and complexity, so too have their processes for investment accounting and reporting. However, many legacy solutions haven t kept pace with advances in technology, and these solutions are often ill-equipped to tackle today s reporting challenges. They re hard to customize, difficult to integrate, and require more and more of your precious time. These solutions simply aren t intuitive. The optimal solution provides an excellent user experience. Unsatisfactory reporting that doesn t meet your needs System often requires manual data entry Clunky interface difficulty navigating the system Data is not easily accessible or relevant Reporting is not timely Limited report writing capabilities System is not intuitive or customizable Installation and maintenance headaches As your business grows, so does the workload The system is not keeping pace with technology advances A SaaS-based solution that is updated daily A solution that is automated and requires no manual entry A solution that is intuitive and easy to use A solution that does not require excessive resources to operate A solution that efficiently delivers information to constituents A solution that can automatically deliver flexible and timely reporting A system that you actually want to use During discussions and demonstrations, it is imperative that you understand if the product solves your organization s core accounting and reporting needs from an ease-of-use perspective. Processes and Workflows Data Processing: 1 How much time do we anticipate spending on the following: a. Entering market data, transactions, and activity? b. Reconciling data? c. Managing system processes? d. Maintaining and updating the system? e. Running reports? Processes and Workflows Producing Reports: 1 Will we need a separate report writer to access data in the system? If so, will a separate license be required? 2 What type of training will we need in order to become familiar with the data architecture? 3 How quickly will the monthly, quarterly, and annual reports be available? Workflow Considerations After the Demo: 1 How many different products will we have to purchase? 2 During the demo, did the presenter access different products to show the solution? 3 If the presenter used multiple products during the demo, was the integration seamless? 4 Did the provider promise future product development during the demo? Your Opinion Matters: THE USER EXPERIENCE Rate on a scale of How will our job functions improve as a result of using this system? 2 How will job satisfaction improve as a result of this system? 3 How intuitive was the system? 4 How excited are we to use this system? 5 How will our investment operations change and improve as a result of this system? 6 How well did the vendor execute their demonstration of the system (often a reflection of your future user experience)?

7 5 IMPLEMENTATION, TRAINING, AND SERVICE Endless and exhausting implementation processes; botched or delayed hardware and software installations; cumbersome and complicated training programs...it s enough to make anyone cringe at the prospect of changing systems. It doesn t have to be that way. The optimal implementation process should not break the bank or your back. It should be streamlined, efficient, and quick. And once implemented, the investment accounting and reporting solution should provide you with the support and service you need to stay up-to-date Lengthy, expensive implementation process Business needs evolve before implementation can be completed Costly and inadequate training programs Flawed system setup creates downstream problems Inconsistent or non-responsive client service Hidden client service, training, or maintenance costs Lack of proactive industry and regulatory guidance An easy-to-implement solution that does not add unnecessary demands on your team s time Unlimited, free training that promotes use of the system A solution that is supported by a responsive and knowledgeable client service team A service that focuses on making customers happy Implementation: 1 What sets your implementation process apart? 2 How long will the entire process take? 3 What will our company s responsibilities be during the implementation process? 4 What costs are associated with implementation? Are they fixed or variable? 5 Is there a separate charge for custom reports? Client Service: 1 Are there different levels of client service available to us? 2 What are the annual costs for each level of service? 3 Are there annual price increases associated with each level of support? If so, please provide the escalation rate. 4 How do we contact your client service team for assistance and what are expected response times? 5 How do you measure client satisfaction for your insurance clients? What is your current client satisfaction metric? Training: 1 How many different systems will we need to be trained on? 2 What are the costs associated with each level of training? 3 If we hire a new employee after the solution is implemented, what are the additional costs for training him or her? 4 How long does it take for new users to become proficient using the system? 5 Do you offer non-system (i.e., industry) training? 6 If so, what is the charge? on industry trends and regulatory changes.

8 F INAL TIPS It s OK to ask tough questions Seeing is believing: ask for a product demonstration before you decide Select a solution that you re excited about You should be investing in an appreciating (not depreciating) asset Pick a partner and people you trust and want to work with Don t settle for an inferior solution Contact Us to Learn More About Clearwater s Approach to Investment Accounting and Reporting info@clearwateranalytics.com

9 CLEARWATERANALYTICS.COM INQUIRIES WORLDWIDE OFFICES Boise, Idaho New York, New York Edinburgh, U.K Clearwater Analytics LLC. All rights reserved. This material is for informational purposes only. Clearwater makes no warranties, express or implied, in this summary. All technologies described herein are either registered trademarks or trademarks of their respective owners in the United States and/or other countries. 0614/INS