Data as the Lynchpin
Companies increasingly rely upon actuaries to provide insight into a wide variety of corporate initiatives. Actuarial departments are evolving to meet this demand by modernizing their tools and expanding their skills. The key lynchpin to this endeavor is the development of an "actuarial book of record", a trusted source of information usable both inside and outside the actuarial function.
Companies today find themselves at various stages of modernizing their business. Actuarial Resources Corporation (ARC) has worked closely with a number of its customers to help them achieve their goals. One such company, Western & Southern Financial Group (Western & Southern), has generously agreed to share its experience by participating in an in-depth case study. This data sheet provides some of the highlights of that collaboration. The full case study is available here.
Taking the Long View
Western & Southern began its modernization initiative several years before the 2007-2008 financial crisis. At that time, the thinking associated with taking the "long view" centered around the idea that success requires establishing a culture and operating environment that are highly adaptive to "continuous streams of improvement and change supported by robust data to allow surfacing new ideas." Like most companies, Western & Southern was looking to increase its operational efficiency by refining and consolidating various activities across the company’s actuarial group.
The continuous improvement approach has become part of its regular operations and the investments made have provided meaningful dividends by balancing short term gains with longer term considerations. For Western & Southern, actuarial modernization is best described – not as an event – but as a journey.
Finance, accounting, enterprise risk management, claims, distribution, underwriting and other business units benefitted greatly from the modernization initiatives at Western & Southern. Central to gaining the desired operational efficiencies and effectiveness has been the establishment of an actuarial book of record representing high quality data supporting these business units. This core database was developed using the ARCVAL system, which includes an embedded data management facility, ARCBase.
Actuarial Book of Record
Western & Southern selected ARCBase during the transformation process to facilitate the desire for robust experience study capabilities. Expansion of the core database, both by Western & Southern and ARC personnel, produced a rich data repository. In addition to supporting ARCVAL’s financial reporting data, ARCBase manages data from external administrative, financial, and surrounding application systems. Rigid controls and processes were essential to ensure the highest degree of data integrity. ARCBase has become a widely used resource throughout the Western & Southern enterprise.
The scope and depth of the data available within ARCBase has continued to develop year after year as the transformation has advanced. The data content has been extended and incorporates elements well beyond the traditional actuarial types of data. Rigorous data standardization created a common description of elements for the general ledger and other associated finance and accounting systems. With this robust and cohesive data, along with state-of-the-art business intelligence tools, Western & Southern is well positioned to tackle the challenges of advanced predictive analytical activities.
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In addition to the core benefits listed above, Western & Southern reaped many ancillary benefits, including the ability to assimilate acquisitions in a timely and cost-effective manner and an improved dynamic between the actuarial and IT areas. The interdepartmental collaboration required by the modernization journey injected domain knowledge into each department. The actuaries gained an understanding of the IT procedures required to develop and maintain a successful and critical business process. The IT professionals gained a similar appreciation for the pressures of monthly and quarterly close mechanics. The relationships built and the stores of knowledge transferred between these two groups have greatly enhanced both their individual and combined efficiency.
Organizations adapt and evolve to achieve success. Continuous improvement and modernization is now a standard of operation for Western & Southern.