Description
The Benefits of Business Intelligence for Insurance Companies
1
The Benefits of Business Intelligence for Insurance
Companies
Author: Máire Ryan McSherry, BA, FCII, LCOI, Chartered Insurance Practitioner
Executive Summary
Insurance companies are failing to capitalise on the customer data they hold, a survey by IBM of
UK insurance companies has found.
1
Insurers grapple with a sometimes overwhelming deluge of data from a myriad of sources including
information via call centres, agents, portals and social media. The explosion in data is possibly the
biggest challenge Insurers have to face. Over half of companies in the IBM survey claiming to use
basic databases and spreadsheets to collect, manage and analyse customer data felt that they were
performing poorly at winning or retaining customers. Insurers who successfully meet the challenge
of data integration whilst harnessing the power of the data available to them will gain a significant
competitive edge in the market place.
Running alongside the need to exceed the requirements of a demanding and widely divergent
customer base is the requirement to adapt quickly to the increased regulatory framework directed
by the Central Bank, meeting local market requirements including the Consumer Protection Code,
but also European Directives. Of particular importance will be the implementation of Solvency II
which has a transposition date of 31
st
January 2015 and an implementation date of 1
st
January 2016.
Preparation for Solvency II, disclosure (Pillar 3) has tended to take a lesser focus than capital
determination (Pillar 1) and risk management (Pillar 2).
2
Even insurers with well-developed
reporting capabilities will find that the timings and detail of Pillar 3 will stretch resources. The
technology decisions for Solvency II must now be made. There is a need to build reporting
mechanisms and systems which can guarantee data quality and accurate monitoring. The systems
need to flexibly adapt to the changing regulatory environment.
It’s true that Business Intelligence projects present certain challenges. Working with a business
intelligence professional who speaks the language of the insurance business while instilling an
organisational culture of accountability for data management and co-operation across product silos
will help eliminate the all too common, ‘lost in translation’ issue.
1
http://www-03.ibm.com/press/uk/en/pressrelease/41587.wss
2
http://www.centralbank.ie/regulatio...urance-companies/solvency2/Pages/default.aspx
2
Table of Content
1. Introduction
2. The World of Finance
3. The Customer Experience
4. Corporate Management
5. Conclusion
6. About the Author
3
Introduction:
The insurance industry is completely dependent on its ability to convert raw data into intelligence on
its customer base, their buying habits, claims profiles, potential fraudulent claims activity, general
markets, competitor activity and the business environment. Tools like data warehousing, dashboards
and data mining facilitate the development of statistical models to examine past performance. The
real value in the use of business intelligence lies in its ability to extend past the examination of
historical analysis towards the prediction of future events.
Placing business intelligence controls at the core of an organisation facilitates a cross team and
product line co-operation, pooling information to enable strategic development, based on accurate
data.
Positioning BI in the organisation structure
Business
Intelligence
Control
Underwriting
IT
Claims
Finance
Actuarial
Management
Compliance
4
The world of finance:
In the past, individual IT systems or packages which enabled reporting, planning, forecasting,
budgeting and analysis were regarded as stand-alone applications. Packaged reporting systems
operated well within the departments for which they were designed but rarely linked up completely
to allow the alignment of strategic objectives with operational forecasting.
Bespoke business intelligence enables real time reporting across various sectors based on pre-
defined organisational strategy. From actuarial and risk through underwriting, claims and customer
relationship management, accurate reporting is a key requirement. Regardless of the above
benefits, insurers are now increasingly obliged to provide quality and accurate data reports as part
of their regulatory requirements including working towards Solvency II.
Financial benefits of reliable BI include:
? Providing business performance management measurement
? Monitoring sales related KPIs e.g. sales targets, agents’ books of business, conversions,
attritions and analysis of business via the varying customer channels.
? Identifying errors and areas where time and cost efficiencies can be made
? Calculating and adapting pricing and underwriting strategies based on accurate forecasts
and trends
? Delivering relevant, concise information to regulators and customers.
? Determining adherence to administrative and operational rules set out by the Consumer
Protection Code 2012.
? Monitoring claims results and determine patterns to gauge fraudulent activity.
? Actuarial and risk management analysis
? Analysis of reinsurance requirements
? Facilitating analysis of budgeted versus actual expenditure for various cost heads and
analysis of financial ratio and profitability figures.
5
The Customer Experience:
Insurance was once a product driven business but has evolved into a customer centric relationship
business. Empowered customers see and say more about the organisations that serve them than
ever before. Customer’s expectations are rising.
3
As a result, insurers need to understand their current and prospective customers to ensure they can
attract and possibly more efficiently retain them for the long haul. Insurers gain competitive
advantage and differentiate themselves from competitors by tailoring an approach specific to each
market channel. The world of social media has added both challenges and opportunities for insurers.
Social media gives insight into customer behaviours, brand impact, retention of long tail business. It
provides a customer service outlet whilst simultaneously building an insurer’s brand. Overload of
data and developing strategies to incorporate social media activity into traditional reporting routes
is a challenge. Insurers utilising business intelligence in a savvy manner are better able to improve
the customer experience and via customer profiling to offer relevant products to their target
audience.
Benefits of the use of business intelligence in CRM:
? Creating competitive advantage through differentiation
? Analysing buying behaviours
? Assessing the impact of new product
? Better targeting of buyers leading to improved conversion rates
? Combating customer churn
Corporate Management
Corporate Governance for Insurance Undertakings is heavily regulated by the Central Bank of
Ireland. Rules include the need for ensuring that risk and compliance are properly managed in the
institution.
4
The board of management therefore has its own business intelligence needs to assist
them meet their requirements.
Of relevance from a BI perspective are reports on analytics tracking performance against pre-
determined strategic targets, tracking regulatory compliance across sectors, including complaints
management and resolution and error handling, statutory reporting on demand, monitoring
adherence to legislative demands whilst promoting cost effective operational activity. Information
on return on investment, product line profitability and overall underwriting costs can be presented
in a dashboard scenario at board level.
System alerts can be triggered if any performance measure reaches a pre-defined threshold. This
real time business intelligence forms the cornerstone of relevant, board specific information.
3
http://public.dhe.ibm.com/common/ssi/ecm/en/gbe03419gben/GBE03419GBEN.PDF
4
http://www.centralbank.ie/regulation/poldocs/consultation-papers/Documents/CP41 -
%20Corporate%20Governance%20Requirements/Corporate%20Governance%20Code
6
Conclusion:
Recognising the long term benefits of a business intelligence strategy represents just the first step in
a cultural sea-change. The real challenge is not in the set up and development of the strategy but in
making the BI an integral and sustainable part of the strategy and decision making process in an
integrated manner across all sectors of the organisation. Insurers who opt for temporary, reactive
solutions ignore the value of appropriately utilising the data open to them. They also fail to realise
that if they don’t make the move towards fully integrated BI models, their competitors will quickly
leave them in the dark.
About the Author:
Máire Ryan McSherry works as Head of Compliance for an Underwriting Agency and as Compliance Manager
for a group of retail intermediaries in the South East of Ireland. Máire has 20 years experience in general
insurance with roles including multi branch management of a retail intermediary, sales management and
training and compliance roles. She also works in a consultancy capacity for the Insurance Institute of Ireland as
author of updated compliance textbooks and regulatory updates for its web based learning platform.
doc_459074024.pdf
The Benefits of Business Intelligence for Insurance Companies
1
The Benefits of Business Intelligence for Insurance
Companies
Author: Máire Ryan McSherry, BA, FCII, LCOI, Chartered Insurance Practitioner
Executive Summary
Insurance companies are failing to capitalise on the customer data they hold, a survey by IBM of
UK insurance companies has found.
1
Insurers grapple with a sometimes overwhelming deluge of data from a myriad of sources including
information via call centres, agents, portals and social media. The explosion in data is possibly the
biggest challenge Insurers have to face. Over half of companies in the IBM survey claiming to use
basic databases and spreadsheets to collect, manage and analyse customer data felt that they were
performing poorly at winning or retaining customers. Insurers who successfully meet the challenge
of data integration whilst harnessing the power of the data available to them will gain a significant
competitive edge in the market place.
Running alongside the need to exceed the requirements of a demanding and widely divergent
customer base is the requirement to adapt quickly to the increased regulatory framework directed
by the Central Bank, meeting local market requirements including the Consumer Protection Code,
but also European Directives. Of particular importance will be the implementation of Solvency II
which has a transposition date of 31
st
January 2015 and an implementation date of 1
st
January 2016.
Preparation for Solvency II, disclosure (Pillar 3) has tended to take a lesser focus than capital
determination (Pillar 1) and risk management (Pillar 2).
2
Even insurers with well-developed
reporting capabilities will find that the timings and detail of Pillar 3 will stretch resources. The
technology decisions for Solvency II must now be made. There is a need to build reporting
mechanisms and systems which can guarantee data quality and accurate monitoring. The systems
need to flexibly adapt to the changing regulatory environment.
It’s true that Business Intelligence projects present certain challenges. Working with a business
intelligence professional who speaks the language of the insurance business while instilling an
organisational culture of accountability for data management and co-operation across product silos
will help eliminate the all too common, ‘lost in translation’ issue.
1
http://www-03.ibm.com/press/uk/en/pressrelease/41587.wss
2
http://www.centralbank.ie/regulatio...urance-companies/solvency2/Pages/default.aspx
2
Table of Content
1. Introduction
2. The World of Finance
3. The Customer Experience
4. Corporate Management
5. Conclusion
6. About the Author
3
Introduction:
The insurance industry is completely dependent on its ability to convert raw data into intelligence on
its customer base, their buying habits, claims profiles, potential fraudulent claims activity, general
markets, competitor activity and the business environment. Tools like data warehousing, dashboards
and data mining facilitate the development of statistical models to examine past performance. The
real value in the use of business intelligence lies in its ability to extend past the examination of
historical analysis towards the prediction of future events.
Placing business intelligence controls at the core of an organisation facilitates a cross team and
product line co-operation, pooling information to enable strategic development, based on accurate
data.
Positioning BI in the organisation structure
Business
Intelligence
Control
Underwriting
IT
Claims
Finance
Actuarial
Management
Compliance
4
The world of finance:
In the past, individual IT systems or packages which enabled reporting, planning, forecasting,
budgeting and analysis were regarded as stand-alone applications. Packaged reporting systems
operated well within the departments for which they were designed but rarely linked up completely
to allow the alignment of strategic objectives with operational forecasting.
Bespoke business intelligence enables real time reporting across various sectors based on pre-
defined organisational strategy. From actuarial and risk through underwriting, claims and customer
relationship management, accurate reporting is a key requirement. Regardless of the above
benefits, insurers are now increasingly obliged to provide quality and accurate data reports as part
of their regulatory requirements including working towards Solvency II.
Financial benefits of reliable BI include:
? Providing business performance management measurement
? Monitoring sales related KPIs e.g. sales targets, agents’ books of business, conversions,
attritions and analysis of business via the varying customer channels.
? Identifying errors and areas where time and cost efficiencies can be made
? Calculating and adapting pricing and underwriting strategies based on accurate forecasts
and trends
? Delivering relevant, concise information to regulators and customers.
? Determining adherence to administrative and operational rules set out by the Consumer
Protection Code 2012.
? Monitoring claims results and determine patterns to gauge fraudulent activity.
? Actuarial and risk management analysis
? Analysis of reinsurance requirements
? Facilitating analysis of budgeted versus actual expenditure for various cost heads and
analysis of financial ratio and profitability figures.
5
The Customer Experience:
Insurance was once a product driven business but has evolved into a customer centric relationship
business. Empowered customers see and say more about the organisations that serve them than
ever before. Customer’s expectations are rising.
3
As a result, insurers need to understand their current and prospective customers to ensure they can
attract and possibly more efficiently retain them for the long haul. Insurers gain competitive
advantage and differentiate themselves from competitors by tailoring an approach specific to each
market channel. The world of social media has added both challenges and opportunities for insurers.
Social media gives insight into customer behaviours, brand impact, retention of long tail business. It
provides a customer service outlet whilst simultaneously building an insurer’s brand. Overload of
data and developing strategies to incorporate social media activity into traditional reporting routes
is a challenge. Insurers utilising business intelligence in a savvy manner are better able to improve
the customer experience and via customer profiling to offer relevant products to their target
audience.
Benefits of the use of business intelligence in CRM:
? Creating competitive advantage through differentiation
? Analysing buying behaviours
? Assessing the impact of new product
? Better targeting of buyers leading to improved conversion rates
? Combating customer churn
Corporate Management
Corporate Governance for Insurance Undertakings is heavily regulated by the Central Bank of
Ireland. Rules include the need for ensuring that risk and compliance are properly managed in the
institution.
4
The board of management therefore has its own business intelligence needs to assist
them meet their requirements.
Of relevance from a BI perspective are reports on analytics tracking performance against pre-
determined strategic targets, tracking regulatory compliance across sectors, including complaints
management and resolution and error handling, statutory reporting on demand, monitoring
adherence to legislative demands whilst promoting cost effective operational activity. Information
on return on investment, product line profitability and overall underwriting costs can be presented
in a dashboard scenario at board level.
System alerts can be triggered if any performance measure reaches a pre-defined threshold. This
real time business intelligence forms the cornerstone of relevant, board specific information.
3
http://public.dhe.ibm.com/common/ssi/ecm/en/gbe03419gben/GBE03419GBEN.PDF
4
http://www.centralbank.ie/regulation/poldocs/consultation-papers/Documents/CP41 -
%20Corporate%20Governance%20Requirements/Corporate%20Governance%20Code
6
Conclusion:
Recognising the long term benefits of a business intelligence strategy represents just the first step in
a cultural sea-change. The real challenge is not in the set up and development of the strategy but in
making the BI an integral and sustainable part of the strategy and decision making process in an
integrated manner across all sectors of the organisation. Insurers who opt for temporary, reactive
solutions ignore the value of appropriately utilising the data open to them. They also fail to realise
that if they don’t make the move towards fully integrated BI models, their competitors will quickly
leave them in the dark.
About the Author:
Máire Ryan McSherry works as Head of Compliance for an Underwriting Agency and as Compliance Manager
for a group of retail intermediaries in the South East of Ireland. Máire has 20 years experience in general
insurance with roles including multi branch management of a retail intermediary, sales management and
training and compliance roles. She also works in a consultancy capacity for the Insurance Institute of Ireland as
author of updated compliance textbooks and regulatory updates for its web based learning platform.
doc_459074024.pdf