Insurer saves £4m a month with SAP

No-customisation rule delivers fast return on investment

Co-operative Insurance (CIS) is on course to achieve operational savings of £4m a month following the introduction of SAP enterprise software.

CIS, which is part of the Co-operative Group, has five million customers and manages £26bn in assets. It began rolling out SAP’s insurance suite in April 2006 to replace its ­paper-based claims handling process for motor insurance.

By July, 350 users were live on the system, and last month’s management report showed the system was saving the business £3.9m a month.

A key factor in achieving the savings so rapidly was the decision to implement the SAP software without modification, said Jon Taylor, claims transformation programme leader at CIS.

“I was Draconian about not making customisations. We didn’t fall into the classic trap of selecting a system and then customising it to death,” he said.

Whenever anyone suggested customising the off-the-shelf SAP insurance processes, Taylor said he reminded them that their goal was to reduce the £500m annual bill for the customer claims business by £50m.

Taylor said the previous claims handling process at CIS was not fit for purpose, and he carried out a major business process change before implementing the software. This involved abandoning existing processes and bringing in the industry standard workflows developed by SAP in partnership with other insurers.

To allow the business to get the benefits of the new way of working as quickly as possible, Taylor implemented the work processes needed for the SAP system well before the IT package was installed.

Even during this period, while staff worked exclusively on paper, the insurer began to register efficiency savings.

CIS’s SAP software runs on IBM pSeries hardware. Business users access it via SAP client software running on Windows-based PCs.

Philip Carnelly, senior research advisor at strategic advisory firm Hackett Group, said customising enterprise resource planning systems was costly and made them difficult to maintain. “If you customise an ERP system, it is difficult to keep track of the application,” he said.

Analyst group Forrester Research said users should fully explore the rich configuration options that packaged enterprise applications offer, which can be flexibly deployed on installation, modified during production and supported on upgrade.

 

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