To operate in the general insurance market in Sri Lanka, Asian Alliance Insurance typically had to extend more than 60 days’ credit to policyholders—rising to 90 days for clients that paid in installments.

“The Sybase system did not have a module that could monitor and control debt collection,” said Saliya Wickramasinghe, general manager finance, Asian Alliance Insurance. “We had absolutely no automated credit control system.

“To support our insurance clients and their policies, we had more than 25 employees undertaking data processing, analysis, reporting, collection, and banking control, all using a range of spreadsheets.”

With the steady rise in customer numbers, by 2011, Asian Alliance Insurance had about 30,000 life insurance policyholders and 15,000 nonlife insurance policyholders, and this created a major strain on the manual system’s ability to properly support company growth.

As the company offered a number of payment channels to policyholders to settle premiums, receipting premiums and performing bank reconciliation was a challenge. “Using our legacy system there were delays of up to two or three days in processing claims, which affected our business,” said Wickramasinghe. These delays threatened customer retention, particularly in lines of business, such as auto insurance, where claims needed to be settled quickly. It also affected the life insurance business because many Asian Alliance Insurance customers held both general and life insurance policies.

Difficulties caused by the manual system were not limited to customer service, satisfaction, and retention. Asian Alliance Insurance provided monthly reporting to its senior management and board of directors by the 15th day of the following month. This was several days later than the company required to identify and act on problems or opportunities.

The content of the board’s reports was also limited, as it could only view the performance of the two main segments. By not being able to properly analyze its underwriting performance by branch, line of business, insurance class and subclass, and individual sales executives, Asian Alliance Insurance was unable to identify strengths and weaknesses and make timely decisions about how to improve its performance.

The business needed to increase collection targets by decreasing the debtor period for improved investment income. By moving to Oracle E-Business Suite Release 12, it was able to bring down the debtor period to around 60 days.

Manual reporting also impeded the organization’s ability to fulfill reporting requirements to the industry regulator, the Insurance Board of Sri Lanka (IBS). All insurance companies must provide quarterly returns to the IBS, including statements of solvency, investment details, and reserves, for examples. Asian Alliance Insurance typically completed this report just inside the allowed 30-day timeline.

Asian Alliance Insurance also needed to improve its financial reporting systems to comply with Sri Lankan accounting regulations, which are based on the International Financial Reporting Standards (IFRS). Introduced in 2012, these regulations require Sri Lankan organizations to align how they treat assets and liabilities with IFRS global accounting rules.

“We monitored our investments through spreadsheets, and with IFRS rules starting, we needed an investment model to support our investment base,” said Wickramasinghe. “Our investment base had grown to almost US$40 million, so we needed an automated system to manage the investments efficiently and optimize returns.”

To do this, the company reviewed the functionality of Oracle’s investment products and their integration with Oracle Financials Release 12.

Deploying Oracle Financials Release 12 has enabled Asian Alliance Insurance to improve the integration between the legacy life insurance and general insurance application and its back-end data processing and management systems. It also consolidated information from its life and nonlife insurance business units.

The company can now complete comprehensive monthly reports across the life and general insurance businesses, including reports by insurance class, such as fire, marine, motor vehicles and miscellaneous, five days after month-end. These reports also detail breakdowns of branch performance, expenses, and detailed analyses of audits extended beyond 60 days. In addition, they encompass cost management measures, such as analyzing budgeted versus actual costs, and the performance of individual salespeople.

These improvements have prompted the organization to reduce its data processing and analyst team numbers from 25 to 18 within a year of the project signoff in late 2010. It does not plan to stop there.

“I believe we can bring the number of people down further as we are continuing to improve productivity and efficiencies,” said Wickramasinghe.

Thanks to Oracle Financials Release 12, Asian Alliance Insurance can now settle most insurance claims in less than five hours, down from two to three days, and it can call up real-time reports as required.

“With the implementation of the Oracle ERP system, we complete receipting and bank reconciliation on a daily basis, which also provides a control mechanism for the collection and banking system,” said Wickramasinghe. “We can review the performance of each branch, line of business, and salesperson and take corrective action with regard to our product mix, distribution network, and customer base.”

These faster, more informed decisions and faster claims settlements are paying off; Asian Alliance Insurance is boosting its customer retention. Insurance customers now renew their policies at a rate of 75% after the first year, up from 72%, while 54% now renew for the second year—up from 51%. For the third year, 50% renew their policies, up from 46%.

In general insurance, the improvement is even better—first-year renewal has risen from about 55% to about 70%.

The ability to obtain real-time insight into the status of the customers to whom the company has extended credit has also paid off: the company has improved its cash flows by reducing the average debtor period from 90 days to less than 60 days.

Implementing Release 12 for Oracle Purchasing Release and Oracle Inventory Management improved Asian Alliance Insurance’s standing with its suppliers. “Our manual purchase order and settlement processes were making procurement processes complex,” said Wickramasinghe. “We are now settling creditors within the agreed credit period, which improves the credibility and image of the company.”

Asian Alliance Insurance can now complete its quarterly and annual compliance reporting accurately by the due dates. The ERP modules have helped the company provide solvency computation and other quarterly reports to the IBS in around 20 days, rather than 30 days.

Complementing the cost reduction measures, the introduction of Oracle Financials Release 12 has helped drive a cost-conscious culture throughout the organization.

“We monitor our costs more closely now,” said Wickramasinghe. “If there are any cost escalations, we drill down to the ‘each cost’ element to find out why. Our employees are more aware that they have to manage the costs within their division or their department budget, as a monitoring mechanism is in place. This is particularly important as we continue to expand our business.”

Cost control has also proven to be a feature of Asian Alliance Insurance’s investment in Oracle: the company expects to achieve a full return on its outlay in just three years’ time. This calculation incorporates efficiencies derived from higher rates of customer satisfaction and retention; the planned headcount reduction; and the ability to access management information in timely manner.

To derive further value from its Oracle investment, Asian Alliance Insurance plans to send three of its trained staff to Oracle University in late 2012. The team members will receive training in Oracle Financials Release 12 and associated technical areas.