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BI Can Enhance Performance in Insurance

  • August 01 2007, 1:00am EDT

Shari would like to thank Omer Sohail, Financial Services Global Architecture Strategy Lead, and Gail McGiffin, Global Underwriting Solutions Lead, for their contributions to this month's column.

While information is the primary currency of the business of insurance, many insurers lack adequate insight to operate as high performers. Why? Insurers face several issues, such as complex legacy system environments and issues due to M&A activity, poor data quality, timely access and inconsistent reporting standards that limited the success of business intelligence (BI).

Secondly, organizations face operational issues that impact the quality and timeliness of BI due to relatively low adoption of operational technologies. Not adopting technologies to enable the organizational activities limits insurance companies' insights into service metrics, sales and submission outcomes, compliance of service level agreements and individual service performance.

Lastly, third-party data, such as peer benchmarking and customer demographics, is not readily integrated into the product development and actuarial processes, which are prerequisites for planning for profitable alignment and growth expectations.

While BI in insurance faces many limitations, the demands placed on it are increasingly complex and urgent. Many industry assessors include a category for exposure accumulation practices. Similarly, Sarbanes-Oxley also brings implications for decision accountability and risk management.

Market developments are also intensifying the pressure to have BI help drive profitability of an organization. Insurers are experiencing the increased pressure to grow market share without sacrificing profitability regained during the hard market cycle. At the same time, events such as the Spitzer allegations and landmark industry events such as 9/11, Katrina and Enron have sparked demand for greater precision in location intelligence, loss trending and transparency between broker and underwriter interaction.

On top of this, increasing customer expectations of ease of doing business and product availability have the insurers looking for an information management solution to gain insight into their customer base and increase their market share.

As this whistle-stop analysis shows, the convergence of the three key factors of consumers, competition and capabilities means insurance businesses have no choice but to break down their traditional rigid information silos and use BI to create four core business drivers for highly effective management of information in insurance.

  1. Increasing customer insight/satisfaction. To build competitive advantage and win the race for the assets of retiring baby boomers, an insurer must have an integrated and holistic view of the customer/product.
  2. Improved operational performance. Achieved by implementing self-service access to operational systems such as HR, performance management and procurement; removing inefficient manual/paper processes through automation; and creating operational insight around the enterprise-wide BI platform.
  3. Improved risk and compliance insight. Shifting from point solutions for document imaging and management to enterprise content management packages and more holistic solutions around metrics management and reporting using portal dashboards and reporting solutions.
  4. Improved financial performance. Cutting through complexity and spreadsheet mania to gain financial transparency on all levels and a right-time global financial view based on up-to-date, trustworthy data. This, in turn, supports true cashflow-based planning and detailed what-if modeling.

To reach the higher levels of performance, leading organizations need to adopt a BI framework that describes the process by which an insurance company can turn data into true BI with the power to drive ROI.
A good BI framework will help insurers visualize potential business analysis capabilities they could implement via analytical functions and data representation. The framework should consist of reusable data retrieval and cleansing processes, industry-standard key performance indicators (KPIs) and calculations to expedite requirements and designs of analytical reports and dashboards to baseline for further tuning within an organization. This helps bring consistency to data analysis across the organization to provide a one-world view.

This approach promises the potential of increased market share by providing improved product and geographic analytics, enabling more focused growth strategies and real-time insight. Finally, adopting a BI framework as described can help improve customer experience by monitoring timely operational metrics to address service turnaround, service level agreements and customer retention to optimize profitable customer segment growth.

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