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What should we provide as support for BI development and customized reports in the insurance industry?

  • Sid Adelman, Adrienne Tannenbaum, Tom Haughey
  • May 11 2006, 1:00am EDT

Q: We are in the process of identifying new opportunities for business intelligence (BI) use in insurance, mainly in life and property and casualty in the area of policy administration, claims handling and underwriting. Can you consultants suggest what should be the next level as we provide support for BI development, and customized reports? Our group is also looking for trends and what a software vendor's expertise in BI/DW can do for an insurance company. We work on ETL as well as reporting.

Sid Adelman's Answer:

Property and casualty fraud runs about 30 billion dollars each year. Analysis and data mining could uncover much of this expense. The amount that's paid compared to what should be paid ("claims leakage") lends itself very well to BI analysis. Every dollar saved from a fraudulent claim or an overpaid claim goes directly to the bottom line. In both life and property and casualty the agent network is critical to sales. A BI application would help your organization understand your agents, both employees and independents, analyze compensation, bonuses and the affect of perks.

Adrienne Tannenbaum's Answer:

BI opportunities should be determined based upon the following assessments:

  1. What analysis is currently being done, specifically analysis that has the biggest impact on major decision-making. For P&C insurance, much of this is risk assessment. This assessment is often used to determine potential rate changes based upon a history of claim types, costs, and surrounding circumstances (geography, age, etc.). Providing data to support this major effort as well as the ability to create quick results would be a gold mine.
  2. The quality of your data - don't start advertising BI goodies if your data cannot be validated. Anyone who comes up with the wrong conclusions using your data will never come back
  3. How much value the data will actually provide in the grand scheme of things. If the true analysis is now being done via spreadsheet with data coming from "other places," maybe your next efforts should focus on information requirements gathering.

Tom Haughey's Answer:

Here are some areas that can significantly affect the bottom line of an insurance company. Each of these would require data beyond what you describe above and would also require the purchase of some external data, such as demographic and geocode data:

  • Marketing. Include general marketing, market segmentation and campaign management.
  • Profitability. How profitable are your customers and how can you improve their profitability? It is more cost effective to retain customers than to acquire new ones. Should you pay unprofitable customers to leave? Should you do a price reduction?
  • Reduction in attrition. What are the characteristics of customers that lapse? Among these, what are their main and common characteristics? Go find customer that have not lapsed but have these characteristics, contact them, and retain them.
  • Increased cross-sell. One way to improve profitability is to ensure that your customers have several of your products. How can you achieve this? Should you bundle products?
  • Opening new markets, leveraging existing markets. There could be whole markets that you are not addressing, such as pre-retirement or pre-wealthy. Pre-wealthy are people who have a high net worth but currently a low liquid net worth, such as those sitting on a bunch of stock options. Pre-retirement are those near or likely to retire soon.

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