How the Insurance Companies can leverage FSCD module?
By Shweta Tiwari and Ranjit Kumar Dhand
SAP has provided a comprehensive solution for collection and disbursement system of Insurance Industry. Processes like policy management, claim handling commissions are all calculating systems and they do not directly interact with the user. Collection and Disbursement is a settling system which has interaction with the end user. It is a kind of invoicing system.
If we try to see how CD makes the Insurance processes easier to manage, we can take a look at the data flow of the system. With CD present, all the calculating systems (Policy, Claims, Commissions, Reinsurance) interact with CD system and which is a sub ledger. From this sub ledger data is reconciled in to the main ledger with a single interface and less maintenance. In absence of the CD system, all the calculating system will have their separate sub ledgers and they all will send data to main ledger through different interfaces making the system complex.
The basic processes of CD system include
1- Posting and Documents - This process is used to post the transactions to G/L accounts and identifying correct G/L accounts for the combination of transactions. For example, in case of premium payment, premium can be initial premium, renewal premium or one time premium. For premium payment transaction, there are 3 sub transactions which 3 G/L accounts mapped to the combination of main and sub transaction. When G/L determination is accurate, it eases the process of reconciling the data with Financial Accounting and effective reporting.
2- Clearing and Payment lots- When a customer pays a due premium to a company, the company assigns it against an open item receivable. This receivable is balanced against the customer premium account which is credited. So the receivable is cleared and closed. This was a the scenario for a normal clearing, but FSCD provides us a flexibility in setting up the clearing norms for any account and customer, whether we want the partial clearing to be done or we want to prevent clearing all the documents or clearing should be done for documents for a specific currency. A payment lot contain the data about payments that have the same origin, or that are to be processed together.
3- Payment Program- For the payments initiated by the insurance company, CD uses payment program to clear off the open items for business partners and contract accounts. For example, for an insurance company, commissions are paid weekly and monthly depending upon the engagement level of brokers. The payment program can be scheduled to run weekly for one kind of brokers and another program can be scheduled monthly for another kind of brokers. The payment program gives the flexibility to make payments with different payment methods. If a customer wants to settle payment by a certain payment method or with a certain bank account, payment program provides the functionality to make these specifications in Automatic Payment Program.
4- Installment Plans- Sometime it happens that customer is not able to pay the premium in one go and hence in agreement with the customer an installment plan is prepared to pay the payable. FSCD provides the facility to prepare the installment plan and as the due date of the item reaches, executing the installment plan posts the open item.
5- Broker Collections- FSCD has a special functionality to process collections and manages commissions for brokers. Also as brokers can also be the policy holders themselves, so for the broker relationship, one commission contract is created and as a policy holder, insurance contract is created for the broker.
These are some major processes of FSCD. There are a lot smaller processes also which can help in better customer satisfaction providing companies an edge over the rest of the industry.
About the Authors:
Shweta is an Associate Consultant working with FSCD. She has a total work experience of 3 years in IT industry. Ranjit is a FSCD Consultant and he has 3 .5 years of work experience with SAP.