Financial Insights Asia/Pacific Explores the Business Renovation Project at Tokio Marine & Nichido Fire

Singapore and Hong Kong - 8 April 2008

A recent publication by leading independent research and advisory firm Financial Insights, an IDC company, shares details of the comprehensive business renovation project at Tokio Marine & Nichido Fire Insurance Company Limited ("TMNF"), the largest property and casualty (P&C) insurance group in Japan.

The report, entitled ‘Business Renovation Project at Tokio Marine & Nichido Fire: Overhauling Core Processes’ (Doc#FIN211421, April 2008), identifies how TMNF’s massive US$574million investment focuses on redesigning its insurance offerings, renovating business processes, modernizing the core systems, and revamping the agency portal. This ambitious undertaking is aimed at enhancing business quality, boosting productivity and improving client servicing.

"The trigger of this project was TMNF’s sense of urgency that the business will get choked by the burden of convoluted processes and complicated computer systems,” comments Li-May Chew, CFA, senior research manager for Financial Insights' Asia/Pacific Insurance Advisory Service. “These were the result of complex insurance products that TMNF drastically pilled on in an ad-hoc basis after industry deregulation in 1996 to provide more diverse coverage and discount schemes to beat the competition.”

Highlights of the implementation include:
• Revolutionizing product offerings by redesigning all products as a combination of the small insurance components, somewhat akin to pieces of interlocking Lego bricks (See Figure 1). This involved the simplification of policy clauses and riders, implementing a drastic reduction of product lines by half, and building these revamped products on common standardized rules for premium payments, cancellation, or notification. These changes reduced cross-product inconsistencies and complexities, and would have a cascading effect of simplifying business processes and computer systems.
• Reengineering business processes via complete Straight Through Processing (STP) to reduce cycle times from a week to same-day approval and dispatch. Other initiatives include renovating its archaic "spaghetti" (i.e. ultra convoluted and disjointed) core systems and redesigning them from the viewpoint of agencies, and revamping its agency portal to enhanced online access for the 100,000 agents. The project is overhauling TMNF by a 180 degrees paradigm shift.

The report also recommends that insurers pay attention to learning points from TMNF. On this, Li-May comments that insurers “make sure that any such IT renovation projects are aligned with operational goals and have regular evaluation periods to ascertain milestone achievements. They further need to constantly reinventing themselves – be it with innovative implementations or simply just reengineering core processes to enhance customer centricity or reduce turnover time."

Meanwhile, to assist insurers to keep pace with revolutionary changes and market challenges, and be considered as viable solutions providers, they need to begin by collaborating with the technologically receptive insurers, regardless of whether these are innovative market leaders or archetypal insurers simply seeking to restructure their business processes.

Li-May also suggested that vendors enhance marketing and promotion to educate potential clients, be elastic in offering solutions customizable to the insurers' unique business needs, but then again – rather than operate within the entire insurance space, only gravitate from their current niche position in the value chain when the risk-reward proposition for doing so is clear.

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