Critical Compliance Technologies for the Insurance Industry: Part II - Master Data Management to the Rescue

By Ravi Shankar

Editor's Note: In Part I of Critical Compliance Technologies for the Insurance Industry, the author discussed the general compliance challenges facing insurance companies, including decentralized data and the issues associated with compliance reporting facing insurers. Here, he addresses the importance of selecting the right MDM technology and shares his ten key requirements that will ensure you chose the most effective MDM solution.

Smart insurance company leaders are now seeking technology investments to help establish good governance models that will in turn make it easier to document and maintain regulatory compliance, and lower operational risk. Master data management (MDM) is exactly this kind of investment. It ensures that critical enterprise data is validated as correct, consistent and complete when it is circulated for consumption by internal or external business processes, applications or users. MDM is an effective solution for compliance challenges because it can provide insurers with consistent, complete and accurate data on customers, products, operations and financials-even when it is captured and stored in different systems. In effect, MDM makes it possible for insurance firms to overcome error-laden, redundant or siloed data to create a single correct version of the "truth."But not all MDM technologies can address the various compliance requirements facing today's businesses. Only an integrated, model-driven, and flexible MDM platform that is easily configurable can provide the functionality needed to meet compliance requirements and lower risk. If the MDM system is rigid in its functionality, (i.e., if it has a fixed data model), then you may end up compromising your compliance initiatives in order to adapt to the limitations of the technology. Further, such systems may inhibit the expansion of your compliance efforts to other lines of business or geographies.

Taking a point approach to the compliance challenge undoubtedly will require costly and extensive custom coding down the road. In order to prevent these expensive pitfalls, and to reduce the risk of choosing the wrong solution, it is important that you consider key business data requirements across several critical business functions including sales, marketing, customer support and, of course, compliance. By ensuring your MDM technology supports the following ten requirements, you will be well on your way to laying the foundation for a complete compliance program. Further, you will have the ability to evolve your MDM implementation to address unforeseen future requirements across the organization.

Requirements of an Effective MDM Solution

1. Manages multiple business data entities within a single MDM platform. Using an MDM platform that can handle multiple data types, an organization can begin to ensure compliance within a single business division in order to demonstrate a rapid return on investment and later extend the solution to accommodate other business divisions for even greater enterprise value.

2. Permits data governance at both the project and/or enterprise-level. It is critical that the underlying MDM platform is able to support the compliance-related data governance policies and processes defined by your organization.

3. Works with your standard workflow tool. Workflow is an important component of both MDM and data governance, as it can be used to monitor compliance in real-time and automatically alert the appropriate personnel of any potential violations.

4. Handles complex relationships and hierarchies. Certain compliance initiatives require the ability to manage complex hierarchies. Make sure your MDM request for proposal (RFP) calls for a solution that is capable of modeling complex business-to-business (B2B) and business-to-consumer (B2C) hierarchies within the same MDM platform.

5. Provides support for Service Oriented Architecture (SOA). Since MDM is the foundation technology that provides reliable data, any changes made to the MDM environment will ultimately result in changes to the dependent SOA services, and consequently to the SOA applications. You need to ensure the MDM platform can automatically generate changes to the SOA services whenever its data model is updated with new attributes, entities, or sources. This key requirement will protect the higher-level compliance applications from any changes made to the underlying MDM system.

6. Allows for data to be cleansed inside of the MDM platform. Data cleansing needs to be centralized within the MDM system in order to provide clean data for compliance reporting. If your company has already standardized on a cleansing tool, then it is important to ensure the MDM solution provides out-of-the-box integration with it in order to leverage your existing investments.

7. Enables both deterministic and probabilistic matching. In order to achieve the most reliable and consolidated view of master data for compliance purposes, the MDM platform should support a combination of these matching techniques, with each being able to address a particular class of data matching. A single technique, such as probabilistic, will not likely be able to find all valid match candidates, or worse may generate false matches.

8. Creates a "golden master" record containing the best field-level information and stores it centrally. It is important that the MDM system is able to automatically create a golden record for any master data type (i.e., customer, product, asset, etc.) to enable compliance monitoring and reporting. In addition, the MDM system should provide a robust unmerge functionality in order to rollback any manual errors or exceptions.

9. Stores history and lineage. The ability to store history of all changes and the lineage of how the duplicate has merged is a very important requirement to support compliance. Any successful compliance initiative will depend on the ability to audit such data changes over several years.

10. Supports both analytical and operational usage. Compliance monitoring is performed within an operational system while compliance reporting is performed using a business intelligence tool or data warehouse.

Successful Regulatory Compliance Begins with an Integrated and Flexible MDM Platform Taking the time to build the foundation for a sound master data management program is critical to the success of any compliance effort. Following the ten requirements presented above will enable you to identify and evaluate a suitable technology platform - a prerequisite when managing your organization's master data assets and establishing a consistent master data foundation. Once your organization starts to make its departmental compliance projects operational, you are likely to find that your larger compliance requirements will expand to include other lines of business or geographies. Planning for future requirements is a must especially in the insurance industry, where regulations constantly evolve and state-by-state mandates continue to pose an enormous administrative challenge - whatever federally based regulatory changes may be in the industry's future. Be diligent in your choice - it is important to carefully evaluate all MDM options, and choose a solution that will include all ten critical requirements.

Also, make sure to assess the MDM platform's ability to support the ten core capabilities right out-of-the-box, as they should be integrated components of a complete enterprise-wide MDM platform. In this way software deployment is much faster and easier to migrate over time. Additionally, with an enterprise-wide MDM platform you will be able to mitigate technology risk and improve your return on investment because additional integration and customization will not be necessary in order to make the system operational. Finally, it is wise to check vendor references to evaluate the enterprise-wide deployments of their customers and to ensure that the vendor's MDM solution is both proven and includes all ten enterprise MDM platform capabilities.

About the Author: Ravi Shankar is Senior Director of Product Marketing at Siperian, Inc., a provider of a flexible master data management platform. For more information, contact him at [email protected] or visit www.siperian.com.Not all MDM technologies can address the various compliance requirements facing today's businesses. Only an integrated, model-driven, and flexible MDM platform that is easily configurable can provide the functionality needed to meet compliance requirements and lower risk.