Logistics is generally associated with the optimization of industrial or military processes. We’re thinking of lorries or trains carrying parts, ammunition and fuel.
However, logistics is a concept that can be applied to services in general and insurance in particular. This is one of the specialties of Smalltox, which helps its customers and partners, distributors, managers and insurers to implement it using its eponymous software.
First of all, what is the definition of the logistics function ? « Logistics is the activity whose purpose is to manage physical flows, and the data relating to them, with the aim of making available the resources corresponding to (more or less) specific needs, in compliance with the economic and legal conditions laid down, the degree of service quality expected and the security and safety conditions deemed satisfactory. »
Data logistics
Let’s look at data logistics, which concerns the core business of insurance.
While the classic insurance functions are actuarial and technical services, sales and marketing, accounting and finance, administration and claims management, the key link is logistics. It should not be confused with IT, which is the tool used to implement logistics. The information system is the plan that integrates these functions.
Logistics is the art of ensuring that information is available in the right place, at the right time and with the required quality.
The aims of logistics in insurance
Logistics has 3 purposes.
Short term : The process
The first is short-term and covers the 3 points mentioned above. For the insurance business, this means that information must be routed from its origin (marketing, prospecting, sales) to its destination (actuarial, technical services) via the reprocessing intermediaries (management and financial services). What’s special is that information flows in both directions. It goes down from the sales department to the technical department when the policyholder requests insurance, and goes back up from the technical department to the sales department to pass on a rate, for example.
The 3 points that logistics must ensure here are :
- That the information goes to the right place (and not somewhere else, beware of data leakage);
- That the information is available within a limited time-frame ;
- That the information is of the expected quality, that-is to say :
- That it is never lost, therefore requires the management of deterministic anomaly circuits (meaning anticipating all unforeseen events) ;
- That it is coherent (that we don’t lose bits of it) ;
- It must have integrity (conform to the original).
The difficulty with these points is integrity control, meaning making sure that there are enough layers of « protection of protection » that the loss rate is acceptable to the insured, the insurer and the regulations.
In the medium term : Steering
The second objective is a medium-term one: it is the steering of activity and in particular indicators of time, income, resources and costs.
The same applies to insurance, where the process must produce a certain number of key indicators. The key is to respect the principle that process measurement should not weigh down or disrupt the process itself. For example, you should avoid having operators fill in forms for each management action, with the sole aim of obtaining an indicator. As well as wasting time, the tedious nature of the operation will make filling in the form unreliable and the indicator will not be properly measured. We need to make sure we have measures « non invasives » that measures operations without disrupting them.
In the insurance business, the underwriting result is a key indicator. It is the most important and is difficult to obtain precisely because of :
- Basic financial reporting issues (format, data itself, etc.) ;
- Problems of temporality. An underwriting result is linked to an insurance coverage period which may be very different from the accounting dates of the events associated with the financial flows linked to this coverage period. It is therefore important to link not only the accounting dates of the event but also the hedging dates (or actuarial dates) to each of these flows.
Long-term : The strategy
The third and final purpose of logistics is long-term : Strategic planning support. From this perspective, logistics planning helps the organization to manage the complexity, uncertainty, lead times and costs associated with changes in the environment.
These changes in the environment are linked, among other things, to :
- The multiplication of product-market combinations ;
- Technological developments.
Strategic logistics will therefore enable the insurer to anticipate the necessary changes by deciding on its investment plan using its own resources for what it considers to be its core business and its outsourcing plan for the rest.
