The obvious key to all business intelligence (BI) strategies is data. Having said this, perfect data is not required to derive significant value from what exists at any given point in time. It is a simple fact that all insurers generate copious volumes of reporting. It may be poorly structured and little used, but it reflects the fact that a high volume of existing information is held in structured fields and that someone, at some point, has developed an extract to develop a report.
The following article looks at the key elements of the information lifecycle. The first step involves optimizing existing capabilities in the short term to make the best use of internal data. The second step is expanding capabilities to make effective use of external data sources that can enhance benefits delivery in the future (a topic that will form the basis of a subsequent article). In effect, an existing BI function can be transformed to run on two separate channels, with short-term analytics, using existing data to improve the business while a strategic EDW is developed and deployed to drive strategic goals.
Before delving into approaches, it is worth remembering that insurance-related BI is not as complex as some would have you believe, and it can be broken into five areas that can quickly create business benefit if sufficient transparency can be generated. They are:
- Reducing expense costs
- Reducing the average cost of claim
- Reducing claims frequency
- Increasing profitable sales
- Improving customer retention (for those customers you want to retain)
Collectively, they drive profitable growth.
Clearly, the list does not cover every aspect of insurance. Everyone has a favorite corner of the insurance universe to explore. The items do represent those areas where the money is spent and where improvements can reduce combined ratios and drive profitable growth. If your BI cannot be tied back to one of the above areas in a clear line of progression, then it is information for information’s sake and adds no value to the business. This is not to say that the information is the wrong thing to gather -- rather, it is the fact that it is not being used effectively. This becomes something to be fixed.
Any BI strategy has to be based on current reality. Many companies strive at considerable cost to develop an all-encompassing data warehouse, only to find that as fast as they integrate applications, the landscape changes and they have to change the model. Insurance companies are particularly vulnerable to this problem since sales, service, underwriting, and claims often develop and deliver new applications in isolation from each other.
Building a BI strategy then has to be focused on something other than developing the perfect data warehouse. In the most basic terms, if you already have the data, then how will combining that data help you do something new? It might cost less money when it is consolidated, but the cost of consolidation is significant and the cost of maintaining this degree of consolidation is also high.
Peter is a general insurance domain expert with significant experience in insurance operational management and global consulting. He covers business transformation, technology implementation and BPO solutions. Peter has experience working with, and for, some of the world's ... View Full Bio