Why Stat Reporting Shouldn’t Be an Afterthought

Authors: Jason Hudson, Principal Director, Statistical Reporting Services, and Mark Nawrath, Principal Director, Account Management
When insurance companies prepare to implement new software for policy and claims administration, regulatory reporting of the data captured is an afterthought. What appear to be turnkey systems often turn out to require more retrofitting and configuration than initially expected to meet statistical reporting requirements, resulting in an increase in investment and a longer timeline to launch.
Here’s why it’s necessary to consider statistical reporting needs throughout the entire development and implementation process.

Powerful and flexible modern systems…they require more configuration

Legacy technology (early mainframe systems) demanded a ton of programming to account for every possible scenario required for policy and claims administration. Building the complex logic required to encode, transform and format data into compliant statistical plan formats was an assumed part of the implementation process.
However, when client server technology started to take off in the 1990s and 2000s, new client-server-based technology vendors decided not to invest in complex logic to comply with statistical reporting mandates. These new products were like warm Jell-O waiting to be molded: they had the ingredients to  perform policy and claims administration processing, but required heavy configuration and customization, not just to write insurance business (that is, all the transaction sets in a business life cycle—endorsement transactions, change renewals, cancellations, etc.), but to conform to the regulatory  mandates for statistical reporting. It was up to insurance companies to make sure they were covered.
In plain terms: many of today’s systems are set up for collecting information, but how they store data on the back end is not designed to meet statistical reporting requirements.

Set yourself up for stat reporting success

In the rush to get new products to market, insurance companies often get caught up in launching their new system (or product or policy) as quickly as possible. Today’s client-server-based systems are not less capable than previous systems, they’re just more malleable. In providing insurance companies with more flexibility, the vendors put the onus on the insurance companies to configure their systems to perform and ensure compliance. Unfortunately, companies tend to focus on business functions (product rating, forms, coverages, claims handling, etc.) and overlook the importance of collecting and formatting specific transaction sets and data points needed to meet regulatory standards. This is why it’s so crucial to consider statistical reporting requirements from the very outset of your new technology implementation. Here are some strategies that work:

  • Involve the right people from the start

Bringing statistical reporting compliance stakeholders to the table late in the game increases the odds of revealing functionality and data needs previously unaccounted in defining implementation specifications. Therefore, it’s important to have statistical reporting subject matter experts work together with experts in rating, underwriting and claims, early in the process to understand what products, coverages and claim events are contemplated and to define the transaction sets and data elements required. 

  • Account for configuration in your budget

Because of the heavy amount of programming required for legacy systems, it was very difficult to ascertain exactly how much was invested in programming for statistical reporting. These days, it’s easier to identify and quantify. Avoid sticker shock on the final project by earmarking a section of the budget for statistical reporting requirements definition, configuration and testing.

  • Clarify your specifications

Identify the statistical file generation processes you’re currently using to inform your needs for your new system. From there, generate a comprehensive list of specifications and make sure they are reviewed by the teams who will be responsible for statistical reporting. Statistical reporting subject matter experts and third-party reporting consultants can come in handy here, as they can make you aware of current industry best practices and other information “you don’t know that you don’t know.”

  • Produce usable test policy data

One part of the transition that is often overlooked is the availability of “production like test data”, essential to ensure completeness in the encoding/transformation process and often required in bureau electronic testing certifications. A number of statistical agents and rating bureaus require you to compare the captured and encoded statistical data (for risks, coverages, policy and claims transactions) to what is being produced on front-end for the insured. That means classifications of business, coverages being offered, rates and premium amounts must be a direct replica on the back end for statistical reporting process. Account for this in your roll-out plan and dedicate appropriate resources for it.

  • Don’t rely on your data warehouse for stat reporting

Data warehouse solutions are typically not architected to satisfy statistical reporting mandates (including rating, premium and claims detail at the line/subline/coverage/transaction level, policy and endorsement form data and onset/offset entries for regular and out of sequence endorsements). Rather than making your data warehouse too complex and robust, let your statistical reporting experts and programmers work with native data that comes from policy and claims administration systems.

Create a comprehensive game plan

Develop a proactive strategy to test how your system will issue policies and transactions once policies become enforced. Don’t make the mistake of testing front-end functionality without an end-to-end review of how those policies and claims get formulated in comparison to the statistical data that you will also be collecting on the back end.
Involving an outside insurance reporting and development consultant to guide you through the process can be especially valuable here. At Perr&Knight, we offer workshops as a part of our Statistical Reporting Solution service offering. These workshops involve all relevant stakeholders and cover key topics that will inform the game plan that guides you forward.
In these multi-day workshops, we discuss with your teams the interlacing of statistical reporting file creation and testing processes into your information technology objectives, the risks associated with delivering an improved statistical reporting capability, and the coordination of your team and third-party participants to schedule projects related to the implementation of an enhanced statistical reporting solution. The final deliverable to you is an evaluation of strengths, potential vulnerabilities, and a plan for moving ahead that includes clear roles and responsibilities, cost projections and duration estimates. Whether you decide to partner with us or not, you end up with impartial strategy for implementation that you can use as a roadmap.
Because statistical reporting is not seen as revenue-generating aspect of the business, it’s often overlooked during technology development. However, doing so only short-changes you on the back end of your project implementation, as teams scramble to retrofit new systems to meet statistical reporting mandates. Instead, keep statistical reporting requirements in mind straight from the start and save yourself the headache of having to go back and make costly corrections – or being fined for non-compliance.

Want to discuss how to make statistical reporting more manageable for your in-house staff? Our insurance technology experts can help.

Compliance Reporting: Complex, Costly and Crucial

Authors: Jason Hudson, Principal & Director, Statistical Reporting & Data Services and Mark Nawrath, PMP, MBA, Principal & Director, Account Management
Statistical reporting requirements are always evolving. This fact won’t change anytime soon. Insurance companies still grumble about regulatory compliance but it’s best to just accept it: compliance reporting is an unavoidable cost of doing business.
Admitted insurance companies in the U.S. are required to send their premium, policy and claims data to a designated statistical agent. If you send incorrect data or your data is not delivered in a timely manner, your company can be fined–or shut down. Yes, it negatively impacts your bottom line. No, it’s not optional. Try to dodge reporting or cut corners and you’ll end up paying for it later in lost time, penalties or costs associated with bringing your reporting system up to date.
Here’s what you need to know about compliance reporting–and how to do it the right way.

Compare apples to apples

When working with legacy systems and forms requirements that vary by state and line of business, it’s a challenge to generate quality data in a usable format. Though it sounds like a simple mapping exercise to match data points and formats, it can actually become a time- and labor-intensive process that still results in data omissions. Since ratings agencies and other regulatory bodies require data that is derived based on their respective reporting requirements, it’s smart to work with an insurance operations consulting firm who can ensure that you’re capturing and reporting the correct information, no matter from which system you are drawing your data.

Begin with the end in mind

Remember: compliance reporting is not optional. You need to establish data capture and reporting processes that meet agent and state requirements and every line of admitted business your company writes. Implement a statistical reporting best practice that addresses the whole picture, even if it means capturing data that you might not appear to “need” right now. The more quality data you capture, the more easily you will be able to meet the conditions of the statistical agents, Departments of Insurance and/or the NAIC, even if they change over time.

Get ahead of the curve

Stay on the front end of developing your stat reporting best practices. Don’t be reactive. Take into account the lead time required to incorporate new codes and new and updated insurance products, while staying on top of the constant influx of data from the products you currently offer. Putting a comprehensive compliance reporting strategy in place frees you from attachment to individual staff members who might retire or otherwise move on, taking your company’s compliance processes with them.

Process experts aren’t necessarily insurance experts

In an industry as heavily regulated as insurance, no error or oversight is ever insignificant. When working with an outside consultant to develop and implement a compliance reporting plan, partner with a consulting firm with specific expertise in insurance. General operations and technology consultants may offer assurances that they can manage insurance compliance, but they lack the in-depth knowledge required to develop a plan that addresses the increasingly complex insurance bureau requirements. Speak candidly with your insurance operations consulting firm before buying a new software system or implementing a new process so they can ascertain the extent of your needs and help you develop a system that addresses all aspects of your reporting. 

Software designed by insurance experts

Managing so many forms of disparate data can quickly overwhelm an insurance company’s internal compliance department. One option is to use statistical reporting software tailored specifically to the needs of insurance companies. We developed the Perr&Knight data model solution for precisely this reason. The software’s powerful insurance-specific algorithms process your company’s data and formats for appropriate reporting to various regulatory bodies.
However, keep in mind that software is no substitute for insurance expertise. We’ve seen insurance companies purchase expensive data management systems that were billed as having the ability to do stat reporting but ultimately can’t deliver. These systems can capture data, but because they were not designed with complex requirements for compliance reporting in mind, they don’t have logic in place that can normalize the data, apply the appropriate rules and ultimately meet bureau specifications.

Stay on top of reporting by going “over the fence”

At Perr&Knight, another option is available: we can handle statistical reporting for you, using what we call the “over the fence method.” We ask our clients to simply toss all their data, in its various formats, “over the fence” to us. We then create and execute a series of processes to combine data sets, resulting in a clean format that matches the requirements of various regulatory bodies.
For a mandatory practice, regulatory compliance is remarkably complicated to manage. Mistakes are costly and most in-house compliance departments have a hard time keeping up. Implement a well-thought-out process and you’ll put your company in the best position to maintain compliance, no matter the requirements, and to be best prepared when changes arise.

For questions about how to streamline or update your company’s statistical reporting, contact Perr&Knight at (888) 201-5123 x3.