Spreadsheets versus automated system. When it comes to reinsurance programmes, this is a popular debate since spreadsheets have traditionally been used to store reinsurance data. However, when considering the disadvantages of spreadsheets, it appears to be a much riskier option. As Denizon pointed out, spreadsheets can cause major issues in any business enterprise and the reinsurance industry is no exception. Below I’ll share various ways spreadsheet disadvantages apply to the reinsurance world and why an automated system is a safer, more efficient and cost effective for your business. Download the full list of reasons why spreadsheets aren't the answer for reinsurance programmes here.
1. Collaboration is Limited
Working with spreadsheets in reinsurance means only one person can access and edit the data at a time, without taking or being sent a copy of it. In some instances, recipients even end up being sent the wrong version which can lead to errors in data. With a system, multiple people can look at and work on the most up-to-date data simultaneously and have confidence the data quality.
2. Lack of controls, vulnerable to fraud
Spreadsheets do not possess any built-in, automatic audit tracking function. For example, who accessed the data last, who did what and when to the spreadsheet? How do you know if the calculations are correct? How do we know results remain accurate after months, quarters, and years of use? There is always new data entering spreadsheets and new users managing them. What controls are established to ensure the spreadsheet remains bug free?
3. No log of change
Along the same lines of my previous point, the spreadsheet has no log of change. As values/calculations/source data changes, the spreadsheet does not maintain the prior value for auditing/control. Having this function in a system allows you to review accuracy of data over time and return to previous values if errors are detected.
4. Not prepared for disaster
If there are no best practices put in place for proper spreadsheet storage or back up, your reinsurance programme is at major risk when disaster strikes. If something happens, full data recovery can be very difficult if not impossible, and will have a major impact on your business.
5. Susceptible to costly human errors
Spreadsheets are extremely susceptible to trivial human errors. Its estimated that 9 out of 10 spreadsheets contain human errors. Missed negative signs and misaligned rows may sound harmless, however they can cause a considerable loss to the bottom line. Furthermore, costly mistakes can damage the confidence of investors or other stakeholders involved in your business.
6. Difficult to troubleshoot or test
Spreadsheets are notoriously difficult to trouble shoot or test, simply because they aren’t built for that. However, testing should be an integral component of the quality controls you put in place to maintain accuracy across reinsurance programmes. When spreadsheets are saved in different folders, departments or even geographical locations, it becomes that much harder to implement and conduct quality control processes.
7. Regulatory compliance challenges
Ensuring regulatory compliance for your reinsurance programmes becomes difficult when using spreadsheets given that data can be susceptible to fraud and errors.
Which regulations affect spreadsheet-based reinsurance systems? Over the last two decades, we’ve seen a surge in global regulation including:
- Serbanes-Oxley (SOX)
- Dodd-Frank, Basel III
- Solvency II
- FAS 157
Looking ahead to the future, the world will only become more regulated. Which means finding ways to reduce operational risk and increase compliance standards should be a huge priority.
8. Hard to manage data security
For any regulated ceding insurer or assuming reinsurer, there is a need to keep some data restricted, and some data shareable. Controlling data access and restrictions on spreadsheets can be difficult over time when there are hundreds of spreadsheets to manage and scores of users requiring access.
With a dedicated system, data security can be easily controlled by giving users specific access rights. This gives you control over who has access to authorised information and who does not.
9. Potential for errors and untimeliness in reporting
Management needs timely and accurate information to make robust decisions about their reinsurance programme. Today we are living in an ‘on-demand’ society which increases expectations on getting data ‘right now. This can be a difficult expectation to meet when using spreadsheets because the data is often coming from multiple sources. It takes time to coordinate and assemble and unfortunately can also be prone to errors with multiple people managing the process.
A dedicated system makes on-demand reporting more achievable as report production can be automated. Not to mention the amount of time it saves from producing these reports manually. Having the process automated also ensures more accuracy in data as human involvement is limited.
10. Keeping up with the changing business world
Today’s world is full of major changes shaping and reshaping the business landscape. We know first hand the insurance industry is part of this change. Examples of this being large scale business transformation programmes, M&A activity and Management Buyouts. In reinsurance programmes, spreadsheets often become highly personalised per the user.
When it’s time for a new person to take over as part of a large-scale business change, spreadsheets could be so personalised that the new person must start from scratch. Unlike a system, there is no manual from the spreadsheet user on how the spreadsheet functions. This causes major productivity inefficiencies and once again the data susceptible to errors, if a new person is left guessing what to do.
11. Scales Poorly
As an organisation’s reinsurance programme grows, data in spreadsheet-based systems get more distributed; subsequently compounding all the risks and issues outlined above.
How can you reduce the risks associated with using spreadsheets?
By investing in a dedicated system that automates the process of administration.
TAI .NET, our life reinsurance software system automates the majority of tasks related to managing your reinsurance programme. Ultimately allowing you to standardize the process for you and the reinsurers you are working with.
Request a demo to discover how you get rid of spreadsheets and automate your administration.
About the author: Andy Hazell
Andy Hazell, Head of Strategy and Business Development, is based out of LOGiQ3 Group's UK Office. Andy is tasked with growing the current service offering of TAI (part of the LOGiQ3 Group) to global markets with focus on UK and Europe.