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Utilizing the SAP Collections & Disbursements Module for

Insurance to resolve Billed (Statistical) versus Booked

(Financial) Premium Differences

Presenters: Guy Brown (ConVista) & Craig Zebold (Zurich North America)

SAP Americas Insurance Forum


Zurich’s 2007 FS-CD Implementation

Defining the Problem – Why build a ‘book to bill’

engine?

The Custom Solution, utilizing the SAP FS-CD module

Conclusion

2

Presentation Agenda


Zurich’s 2007 FS-CD

Implementation

3


Zurich’s major requirements:

Implementation – March 2007

Provide a single platform for all receivables management activities to occur – replace

many legacy systems with a single, comprehensive solution

Phase 1: Special Bill Accounts

Special Bill Accounts are those predominantly Large Loss Sensitive Accounts requiring Account level

premium billing to the Broker & non-premium billing to the Customer.

Support Account-Level (Premium and Non-Premium receivables) collections and

receivables management capabilities – enabling the collections personnel to provide

superior and efficient customer service

Provide the following capabilities:

User Interface to enter Premium and Non-premium receivable transactions

Centralized and Local Invoice Printing

Automated Dunning Procedures

Automated Clearing Rules

Automated Workflow, Work Queue & Diary

Automated Book to Bill (BtB) Reconciliation

Integrate with Zurich’s current financial system landscape which includes FI/CO, SL,

PCA, COPA, and BW

System Selected: SAP FS-CD Module

4


Zurich successfully implemented FS-CD on March 3 rd , 2007

Benefits Achieved:

Implementation – March 2007

Improved service to Broker/Customer

An Account's premium and non-premium (deductibles, losses, and service fees)

receivables are now worked by a single Collection Representative

A common invoice format for premium invoicing

Invoiced premium = Posted "statistical" premium receivables

Earlier recognition of a Billed (statistical) to Booked (financial) difference by

Collection Representative

Improved Collections Results & Efficiencies

Automated Clearing reduces the volume of transactions requiring manual

account maintenance activities

Automated workflows reduces manual tasks and the Work Queue improves the

collection representatives' focus on their daily activities

Automated detection of a Billed to Booked difference reduces the manual work

effort involved and provides for earlier recognition and action by the Collection

Representative

5


Defining the Problem

Why a Booked to Billed Engine?

6


Why do Billed versus Booked Premium differences exist?

In an effort to accelerate cash flow, invoicing of the billed (statistical)

premium transaction occurs in advance of the final rating and entry of the

corresponding booked (financial) premium transaction into our financial

recording system

Established Service Level Agreements (SLAs) within the Business Units (BUs)

for these Special Bill Accounts require that the Invoice be generated within 5

days of Binding

Final Rating, Policy Issuance, and entry of the Booked (financial) premium

often occurs after the Invoice has been distributed

Final Rating may result in a different Booked premium amount than the

corresponding Billed premium amount previously invoiced requiring

reconciliation by the Collection Representative

7

Defining the Problem


How are the Billed versus Booked differences Resolved?

8

Defining the Problem

Identification

Pre-Implementation: manually identified by comparing listings from a database of invoices against the Booked

(financial) premium that was entered into the receivable system

Post-Implementation: system identified subsequent to the time that the Billed (statistical) premium was

invoiced and the Booked (financial) premium was entered into the receivable system

Analysis

Collection Representatives and Underwriting discuss the case and reconcile the difference

Pre & Post-Implementation: No difference

Resolution

Revise the Invoice of the Billed (statistical) premium

Pre & Post-Implementation: No difference

Correct the coding entry of the Booked (financial) premium

Pre & Post-Implementation: No difference

Adjust the Billed (statistical ) premium amount to match the Booked (financial) premium in FS-CD

Pre-Implementation: not possible within our legacy systems

Post-Implementation: performed at a policy level within the system

Write-off the Booked (financial) premium difference

Pre-Implementation: performed at an installment level each time payment is received

Post-Implementation: performed at a policy level within the system


A Simple Example: Pre-Implementation

9

Defining the Problem

An Underwriter conducts a renewal on customer XYZ, for broker

123. The broker needs to get an invoice out to the customer, who

needs a 12-month payment plan. Utilizing initial costing models

based on preliminary information, the underwriter determines the

premium to be $1,200,000, taxes to be $2,500 and additional fees

to be $500. The underwriter generates an invoice for the first

installment; $100,000 in premium, $2,500 in taxes, and $500 in

fees; a total of $103,000.

The broker receives the invoice, and collects $103,000 for the

first installment from the customer.


A Simple Example: Pre-Implementation

10

Defining the Problem

Subsequent to the Invoicing, final rating is completed and the

booked (financial) premium is determined to be $1,260,000,

taxes to be $3,000, and fees to be $500. The first installment of

$108,500 (a difference of $5,500 from what was invoiced) and

the remaining 11 installments of $105,000 (a difference of $2,000

from what was presented on the installment schedule) are posted

to the legacy receivable system as the financial receivable.

The collection rep receives notice that $103,000 was received,

but notes that $108,500 is due, thus manually identifying that a

billed to booked difference exists at the installment level.

Analysis is required and often results in calls to the broker and

the underwriter to reconcile the difference. Resolution is

determined and may require activity by the collection rep to

occur on an installment basis, ie. Month after month.


Impact on Collections

Broker involvement in the identification and analysis of Book to Bill differences as they

are often identified as a result of the payment application process

Studies conducted prior to implementation determined that Zurich Collection

Representatives were spending upwards of 30% of their time on working these Book to

Bill differences

Identification activities

Analysis activities

Resolution activities

Cash Flow Impact caused by Collection Reps' time spent on BtB resolution vs.

collection activities

To minimize these impacts, Zurich worked with ConVista Consulting to develop the

"Booked to Billed" extension within FS-CD that supports;

Automated identification of the book to bill difference based upon the booked and billed

transactions and not on the payment received

Billed adjustment or Booked write-off capability applying at the policy level and not the

installment level

Metrics reporting capability to manage process performance

11

Defining the Problem


The Custom Solution

Utilizing the SAP FS-CD Module

12


13

The Custom Solution

To Resolve the Problem, the following conceptual architecture, utilizing SAP

FS-CD, was proposed:

Legacy System

For Financial

Bookings

SAP

FS-CD

The underwriter (team) would continue to initiate booked premium (financial) transactions

entry in the legacy system, which would then feed FS-CD via an automated interface

SAP

FS-CD

Instead of creating manual invoices, the underwriter would now enter the "billed"

transactions into FS-CD. FS-CD would:

Create an invoice automatically

Create a statistical "billed" transaction for the invoiced amounts


14

The Custom Solution

A Tool would then be required, within FS-CD, to support the booked to bill

reconciliation process:

"Billed"

Statistical

SAP FS-CD

Booked to Billed Tool

Automated Comparison

"Booked"

Financial


Billed (statistical) & Booked (financial) transactions are grouped by policy systematically each

night. At a policy level, the system determines if there is a booked to bill difference. Groups with

no difference are closed by the system and groups with differences are identified, remain open in

the Book to Bill transaction display and are aged

Reconciliation activities do not occur at an installment level even if a payment plan exists for the

transactions

To assist in the analysis, links were built between the Booked to Billed system transaction and

several FS-CD display transactions such as; Partner, Partner Balance and Policy Displays. A link to

the custom Zurich Diary solution within FS-CD is also provided

Resolution activities requiring bill adjustment and or partial write-off of booked premium is

supported from within the Book to Bill transaction

Resolution activities requiring a revised invoice or correction to the booked premium entry are

performed outside of the Book to Bill transaction however, the revised invoice (billed) amount or

the corrected booked transaction is received in FS-CD, the nightly grouping logic considers these

transactions along with the prior transactions for the policy and will automatically close the group

15

The Custom Solution

The solution addresses automated identification, as well as, functionality to

support analysis and resolution activities


The Solution – A Scenario within our SAP FS-CD Solution

Suppose that an underwriter generated a one-time bill for:

16

The Custom Solution

Premium: 10,000 Gross, 1,000 Commission, 9,000 Net Due

Taxes: 750 Net Due

Total Due: $9,750

Here is our net due of $9,750, which was billed to the

customer, within the SAP system


The Solution – A Scenario within our SAP FS-CD Solution

17

The Custom Solution

Suppose that an underwriter now initiated the entry of the financial

bookings and the bookings represent a different amount than what was

billed:

Premium: 9,500 Gross, 950 Commission, 8,550 Net Due

Taxes: 650 Net Due

Total Due: $9,200, a difference of $550 from the billed amount

(invoice)

Here is our net booked transaction (financial) due of

$9,200.


The Solution – A Scenario within our SAP FS-CD Solution

18

The Custom Solution

Our collections representative enters the custom ‘Booked to Billed’

solution within FS-CD to work the Booked to Billed open groups:

The system calculates the booked net, billed net, and the net difference

automatically


The Solution – A Scenario within our SAP FS-CD Solution

19

The Custom Solution

So what can the collections representative do about the problem?

Through a quick discussion with the underwriter, it is determined that the

booking is in fact correct, and the billing is wrong. The Broker is already aware

that they need only to pay the $9,200 net and does not want to receive a revised

invoice. In this scenario, the collection rep will utilize the ‘adjust bill’ function.


The Solution – A Scenario within our SAP FS-CD Solution

20

The Custom Solution

When the ‘adjust bill’ button is pressed, the user is presented with a

summary of what will occur:

The system determines the amounts to be posted – the user can now simply

press ‘continue’, the billed adjustment (statistical) transactions will post and the

booked to billed issue is fixed! This group is then placed into a closed status by

the system


The Solution – A Scenario within our SAP FS-CD Solution

21

The Custom Solution

All billed adjustments and booked write-offs processed out of the Book to Bill

transaction follow the custom Zurich write-off approval workflow

A Link to the custom Zurich Diary solution within FS-CD exists, so the collection

rep can enter comments as relates the reconciliation activities

Since the functionality works on a total dollar amount transacted basis and not on

an installment basis, the correction activity occurs at one time and if the resolution

involves a billed adjustment or booked write-off, the amount posted out of the Book

to Bill functionality is open and available for manual clearing in the future when the

installment transactions have posted

Revised Invoices and Booked premium correction entries flow into FS-CD and the

Book to Bill functionality considers those newly received entries in its grouping

logic and subsequently closing a previously open group. The collection rep is not

required to perform any activity in this scenario.


To Conclude:

Booked to Bill reconciliation presented a significant problem and challenge

for Zurich North America prior to the SAP FS-CD solution

The ConVista/Zurich North America solution addressed all of the business

requirements presented as relates the Identification, Analysis and

Resolution of Booked to Bill differences

Since going live, Zurich North America has experienced improved

identification and resolution of the book to bill differences, significantly

limited involvement by the Brokers and an increase in the amount of time

collection representatives can now devote to collection activity

22

Conclusion


Thank You!

Any Questions?

23

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