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
 Presentation Agenda

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

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Zurich’s 2007 FS-CD
Implementation

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 Implementation – March 2007
Zurich’s major requirements:

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

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

Benefits Achieved:
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

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 Defining the Problem

Why a Booked to Billed Engine?

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 Defining the Problem

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

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 Defining the Problem
How are the Billed versus Booked differences Resolved?

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

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 Defining the Problem
A Simple Example: Pre-Implementation

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.

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 Defining the Problem
A Simple Example: Pre-Implementation

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.

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 Defining the Problem
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

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 The Custom Solution

Utilizing the SAP FS-CD Module

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 The Custom Solution

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

FS-CD, was proposed:

Legacy System
Legacy System SAP
For Financial
For Financial FS-CD
Bookings
Bookings

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
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 The Custom Solution

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

Booked to Billed Tool

Automated Comparison

"Billed"
"Billed" "Booked"
"Booked"
Statistical
Statistical Financial
Financial

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 The Custom Solution
The solution addresses automated identification, as well as, functionality to
support analysis and resolution activities
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

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 The Custom Solution

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

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

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
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 The Custom Solution

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

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 The Custom Solution

The Solution – A Scenario within our SAP FS-CD 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

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

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

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 Conclusion

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

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Thank You!

Any Questions?

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