Reaping the Benefits of Analytics: For Insurers, Six Ways to Make Your Business Intelligence Smarter

Despite their hefty and increasing investments in data warehouses, architectures, analytics, and business intelligence (BI) platforms, many insurance companies still are not getting the value they want, and need, from their BI initiatives.

In essence, past business intelligence initiatives in insurance amounted to the status quo: simple spreadsheets.

For insurers to achieve the desired ROI from large BI investments, they will need to tweak their programs to provide the right information to employees in a timely manner and in a format that helps them analyze, evaluate, and react to changing market conditions to drive business results.

How is it that carriers, supposedly with better data and systems, are still generating reports that offer little insight and impact on the business? There are three primary reasons:

• First, the emphasis of BI initiatives was on the technology rather than the real business asset: information. To extract value from their large amounts of customer data, carriers need an integrated and governed approach to improving data quality and conformance.
  
  
• Second, design of the new BI systems replicated the same segmented, isolated reports already being used by department-specific users instead of emphasizing enterprise-wide insight.
  
  
• Third, BI was viewed as an IT project, guided and controlled by IT rather than the enterprise. Without an understanding of what is possible through new BI systems, executives on the business side did not inquire about the reporting, analytics and intelligence potential.

The promise of BI has not faded. Given today’s growth and advances in analytics, BI remains a compelling way for insurers to incorporate business insights into business processes and open up their growth potential. Insurers can use BI throughout all aspects of the organization, giving employees greater insight to improve performance.

Consider:

• Distribution professionals who are able to walk into a broker’s office and have at their fingertips information on broker performance, upcoming renewals and identified opportunities for upsell, business that the carrier lost the year before, and market data for the region.
  
  
• A commercial underwriter who, when evaluating a risk, can see the performance of the risk, the performance of similar risks in an industry and geographical area, and pricing trends.
  
  
• A customer service professional who has access to a customer’s full account information, including profitability, claims, and service history.
  
  
• A claims professional who can see a vendor’s expense, customer service, and loss outcome information for a specific region and type of service.

This is the real promise of BI, translating insights into action and empowering the business to act differently. By having both accurate data and analytical prowess, insurers can determine the impact of a situation on their business and devise appropriate ways to respond. And, they can push these capabilities to every line professional in the company.

The bottom-line is clear: for insurers to achieve the desired ROI from large BI investments, they will need to tweak their programs to provide the right information to employees in a timely manner and in a format that helps them analyze, evaluate, and react to changing market conditions to drive business results.

Customer acquisition and retention over the next three years will depend heavily on an insurers’ ability to deliver customized experiences to their different customer segments—an ability that will rely on predictive analytics to convert data into usable insights on customers, agents and markets. Historically, predictive analytics in insurance has focused on risk segmentation or pricing. However, it has far broader uses for insurers; it can be applied to key operations of the business to optimize performance in every area. For example, predictive analytics can answer key questions in moving from analysis to action, such as:

• Would a skills-based routing for underwriters make sense, and if so, what does the performance information tell me about how to respond with respect to size, industry, geography, or coverage for a given risk?
  
  
• How do I get the most return from distribution spend? Is there more opportunity with brokers located in cities or in rural areas?
  
  
• Who are the best claim vendors from a customer service and loss perspective for a given loss profile?
  
  
• Which of the litigators are best for a given type of loss or industry?

To gain more insight and value from their BI investments, insurers will need to go further toward the holistic view by taking six key actions:

1. Establish a core set of data most relevant to the entire enterprise. Establishing this core set of data is critical for several reasons. It prioritizes the data requirements of the BI solution, provides direction on where to direct any data remediation activities, and provides a focus for where to start to implement end-to-end data management solutions.
   
   
2. Establish core governance to manage values and definitions. The right governance, with common language and terms, provides for higher data integrity and useful insights. Controlled data management includes the ongoing quality evaluation and management of critical data to ensure that information remains of the highest quality, aligned to conformed standards.
   
   
3. Start controlled clean-up efforts. While insurers are often data rich, they also have a lot of data quality issues. Insurers need to do some clean-up of existing and historical data in parallel with instituting data management solutions to improve data quality. This type of clean-up should be driven by the importance of the data and the ROI of the clean-up.
   
   
4. Rapidly develop tools for business use. Analytics-based tools can help insurers more easily conduct data analysis and mining to identify metrics, trends, interrelationships and anomalies. Internet-enabled scorecards, dashboards, reporting and interactive analytics tools are being incorporated into many insurance processes, such as the front office, claims or customer relationship management.
   
   
5. Embed intelligence into reports. Rather than simply displaying information, reports need to be intelligent enough to highlight areas that need executive attention. This action requires insurers to first explore with a fresh and open perspective how best to use information to improve their business performance.
   
   
6. Build solutions that offer broad and granular insight. Insurance executives need to be able to look at the enterprise-level picture and then drill down to lower tiers of granularity as needed. The big value of BI is gaining access to information that highlight business issues that need attention with enough detail to better understand and resolve them. In essence, holistic BI gets managers closer to the business problem in need of a solution.