The ISM-NCD System and the future of it….

While it was recognised as a good attempt by ISM (or Insurance Services Malaysia in case you do not know) to introduce Information Technology innovation in shaping how the non-life insurance industry administer and managing the No Claims Discount (NCD) affairs, it is still not working to an efficient level as envisaged by the industry operators.  While the bosses are talking and congratulating ISM for a job well down (obviously based on ISM summarised reporting), the downlines (those poor folks who are working hard getting the whole processes running to an acceptable level) are very upset with how things are developing. Some of them resorted to ‘sweeping matters’ under the carpet and going back to the ‘old days’ of comfirming the NCD outside the system and certainly they are more happy to do that. But then doing this on a peer-to-peer basis outside the ISM-NCD system successfully is not the end of the story – you need to have the system updated otherwise it is still a breach of tariff. And the longer you keep those information outside the system the worst the ‘under carpet’ would be. But then where to get the resources to have them done?

Making matter worst, in the latest update on the ISM-NCD compliance report, ISM branded themselves as a shared service provider and promoting a platform that helps stem premium leakages and improve controls of NCD allotment but agreed that they are toothless tigers in making the system having a compliance level of 100%. Every now and then they provided the summary of compliance report of each and every insurers including the Takaful members but ironic, the  May 2009 data shown only 19 companies out of the 35 participating companies achievingmore than 95% compliance level. However, 25 companies actually reported to have achieved above 90% compliance which goes to show that most companies are actually improving but how come the whole affair is still “a pain in the neck”?

A high compliance rate in this respect is all about how often the member companies use the ISM-NCD for confirmation and is being formulated by ISM as follow:

Judging from this formula, it did not denote the true position of compliance. We cannot detach this compliance analytics from the data submission profile of all the member company. If the data submission to ISM is poor and the amount of data rejection is high, then a high compliance rate in NCD comfirmation usage just does not mean anything in as far as meansurement of ISM-NCD system’s effectiveness is concerned. From the year 2008′s average monthly data submission of about 75%, it means 25% of the submitted data would had been rejected thus rendering the ISM-NCD database as inadequate for the effective running of the framework. No machinery can ever run at an optimum level if the engine’s capacity can only perform at 75% the most…..

Most of handling IT staff of the member companies will not do anything on those rejected data unless there is a request by the operation personnel. In most cases the IT staff would not be uploading these batches of rejected data simply they are certain to be rejected again. In order for these data to be successfully uploaded, there must exist great resources within the Motor Underwriting and IT departments to make the necessary amendments or corrections before uploading can be successfully done, whicle bearing in mind amendments are always constrained by time. With such level of resources it is no longer cost effective to work things out on ISM-NCD platform, the industry might as well resolve to the old manual system which is not overly “time-sensitive”.

Having said what was said, I believed those reported compliance rate of 90% can only be less than 70% realistically if the formula is redefined with the data submission effectiveness factor….. Perhaps we can twitch the  formula abit by multiplying the data acceptance ratio to the current compliance rate.

With 70% and below on the average, there is just no way this platform can work efficiently. The recent proposals given by ISM is therefore not going to be effective – ISM has to acknowledge the issues raised in the last two  feedback made by the industry members. But then, from the feedback the and concept of the system, I doubted if these would be cost-effective to carry out any problem cleansing activities.

Having said what was said, I believed those reported compliance rate of 90% can only be less than 70% realistically if the formula is redefined with the data submission effectiveness factor….. Perhaps we can twitch the formula abit by multiplying the data acceptance ratio to the current compliance rate.

With 70% and below on the average, there is just no way this platform can work efficiently. The recent proposals given by ISM are therefore not going to be effective – ISM has to acknowledge the issues raised in the last two feedback given by the industry members. But then, analysing those feedback and the intended concept of the system, I doubted if the proposals could be anything cost-effective – member companies would still need to employ much more resources to have the proposals carried out.

However, I must admit that ISM and the industry can still realise those objectives of the NCD system if we all are committed in getting the front-end integration system working as an industry. With the front-end integration system, the industry must implement a ’single’ NCD confirmation system. We must believe the current system of providing two options (options of Outside-the-System and Within-System confirmation of NCD) in the confirmation of NCD is faulty and flawed. By taking away the Outside-System confirmation option, we would be able to take away 80% of our existing problems….. However, integration of any IT system can be costly to most members but it is perhaps the most cost effective method in stemming out the existing chronic problems besieging the industry. Read also: http://www.malaysianinsurance.com/ProductsJohnsonCST.html

If we can get this integration done and enforce the Within-System NCD confirmation strictly (similarity to how we obtain our daily share prices), then the industry should move forward both efficiently and effectively.

Let us cross our fingers and hope that the ISM management can cordially sit down with the “hands-on” personnel of this industry to bring the objectives to the fore-front and start making things happen for the good of our industry. Come July when the mandatory motor premium rebating starts, member companies are certain to have great problems with those walk-in customers – great problems that are currently absorbed by the agents by allowing NCD outside the system but doing it at their peril…. Do you expect the insurers to do likewise?

Related posts:

1. Thinking of reconceptualising ISM-NCD database submission? While reviewing my previous write-up: ISM_NCD system & the future of it….felt something might have crawled into my brain cells….Yep! I...

Tags: Insurance Services Malaysian (ISM) No Claims Discount (NCD), Motor Insurance Matters