Actuarial cash flow systems sometimes seem complicated and cumbersome to use. When evaluating them against one another, what criterial should you choose? The following case study illustrates the decision process one client recently completed during their selection of a new system.
A history of solving problems and a changing world
OneMain Solutions (OneMain) provides insurance products across the United States and Canada. They offer credit insurance (policy benefits pay for credit obligations), term life insurance, and disability income products.
They have been in business for over 75 years and distribute through agents in more than 1,500 locations.
As with many insurance companies, OneMain needs to forecast cash flows of their insurance obligations. Accurate and easy-to-use forecasts of their liabilities enable better decisions around pricing, sales strategy, asset adequacy analysis, capital management, and so forth.
OneMain had an existing forecast software to project those cash flows. This software handled the basic functionality that OneMain needed. However, with new accounting regulations around insurance on the horizon, new functionality requirements began to increase in importance.
Adapt or face increasing struggles
Recently, new insurance reporting standards have emerged. And with this new advance comes new responsibilities for OneMain’s actuaries and finance professionals.
Beginning in 2023, ASU 2018-12Targeted Improvements to the Accounting for Long-Duration Contracts (LDTI), issued by the Financial Accounting Standards Board, will require new calculations and additional disclosures around many existing insurance contracts. As some of OneMain’s products fall under the requirements of LDTI, their actuaries will soon be required to perform additional modeling tasks. In addition, they will need to enhance their disclosures around assumptions.
All of these would have been difficult under their prior setup. As Mike Koppen, Senior Vice President and Chief Actuary at OneMain, said, “The functionality didn’t match up that well for our particular needs, and the cost was greater.” Those costs included extra fees to access cloud computing and storage services. That dual realization prompted OneMain to initiate a search for a solution provider that could support the necessary functionality, improve usability, and reasonably manage expenses.
To see more about how to build effective models for LDTI, IFRS-17, and more, check out our free eBook: Non-Technical Principles of Successful Actuarial Model Design.
How to choose?
OneMain conducted a search across all the familiar names within the landscape of actuarial cash flow software. They had to prioritize multiple aspects for the decision. One was ensuring that cash flows were the focus and accurately projected from first principles, as opposed to being retro-fit to the existing valuation architecture. With this in mind, the field was narrowed to three main options, SLOPE included. SLOPE made the final cut by being a cash flow projection system from the start, as well as being easy to use and easy to work with.
Next, OneMain evaluated those systems in a structured process for a fair comparison. They initiated similar pilot projects with all three finalists.
To make the best use of their time during the pilot project, Slope actuaries consulted with OneMain’s actuaries on how to learn the system, how best to arrange the model components, and how to incorporate unique features of their products which may not be covered by other systems.
From the start, OneMain’s evaluators commented on the ease of use and “intuitive” feel of the SLOPE system. This allowed them to quickly understand what SLOPE could do, and imagine how they would apply the system to their future processes.
Throughout, OneMain users found themselves saying, “Wow, this feels very intuitive.” When focused on ease of use, SLOPE stood out in allowing OneMain’s actuaries to get results they wanted without a lot of headache.
Koppen pointed out that they really wanted to answer two main questions during the trial. “Could we confirm for ourselves that everything ran the way we wanted it to?” And “Do we have enough intermediate information to prove to our audiences that it’s right?”
When those answers came back Yes and Yes, OneMain knew they were on the right path.
In addition, as price is always a dimension of consideration, SLOPE came in on the “less expensive” side. The all-in-one cloud-based platform (covering computation, data storage, uptime, and backups) eliminates OneMain’s need to purchase and maintain separate cloud services for their own use.
An additional benefit of the fully hosted platform is that OneMain’s actuaries are now able to concentrate on actuarial model building and results evaluation, rather than dealing with distractions from IT-related issues.
Finally, OneMain appreciated the flexibility of the SLOPE system. Now, OneMain’s actuaries can model the products that have unique features without doing a lot of work. As Koppen said, they can perform their actuarial functions “without standing on our heads” to find a way around system limitations.
OneMain’s actuaries can model the products that have unique features without doing a lot of work. They can perform their actuarial functions “without standing on our heads” to find a way around system limitations.
The final indicator
Ultimately, the decision to switch to SLOPE became very clear. SLOPE won out over the alternatives due to ease of use and functionality. Koppen says the team found themselves saying, “Do we even need to keep looking at the others?”
And with that, the deal was done.
Now, OneMain’s actuaries are concentrating on ensuring their models will be able to support the technical requirements of LDTI as well as all their existing actuarial responsibilities. They are focused on developing the reporting structures they need without all the extra requirements sometimes encountered when dealing with actuarial software. That’s good business decision-making, without the unnecessary gymnastics.
If you’re interested in seeing how modern actuarial software can give you flexibility without requiring unnecessary work-arounds, sign up for your own private demonstration of the SLOPE platform.