Best Practices for Insurance
While sudden disasters such as Hurricane Katrina require insurance companies to cover billions of dollars in claims, insurance executives are continually faced with a wide variety of smaller issues that play a pivotal role in their success. On an operations level, there is a pressing need for more effective underwriting, pricing, and claims settlement practices. Customer acquisition, retention, and growth are also perennially important. Finally, an ongoing surge of industry regulation over the past five years has necessitated better financial management and regulatory practices.
What do all of these business challenges have in common?
"They all require careful data management, analysis and reporting," answers Patricia Saporito, insurance industry practice manager at Information Builders.
According to Saporito, today's insurance executives are demanding complete, auditable procedures for information analysis and delivery, along with a broad assortment of management reports for all lines of business: premium analysis and loss development reports for actuaries, risk analysis reports for underwriters, and comparative analysis reports for business unit managers, to name a few. To meet these challenges, Information Builders offers a business intelligence (BI) environment tailored explicitly to the needs of the insurance industry, backed by a complete back-end environment for data integration and Web services. "Insurance companies increasingly depend on technology and analytics to optimize profits, contain costs, mitigate risks, and deal with compliance issues," Saporito says. "We're here to help."
At the heart of this comprehensive software platform is the WebFOCUS Insurance Reporting Foundation (IRF), a vertical reporting solution for claims, underwriting, actuarial, sales, and executives. This turnkey solution includes a data model, prepackaged reports, ETL software, and all the necessary services to install, configure, and tailor the environment to each insurance company's needs. Through iWay, customers also have a complete integration environment for creating a service-oriented architecture (SOA).
Driven by Data
The WebFOCUS Insurance Reporting Foundation is built on an open architecture, which makes it easy to implement within an enterprise framework. It includes a complete data model and a parameterized reporting framework that functions right out of the box – reducing risk, saving time and money, and improving service and business performance.
"Insurance is an industry that is run on data," Saporito points out. "Managers at every level need ready access to insurance policyholders, risk and claim information, and with performance metrics to support and manage compliance with various regulatory elements. Information Builders can help them to see the big picture when dealing with projects and regulations."
Using this complete software platform enables more sophisticated approaches to risk management, financial reporting and corporate governance. "Our customers use the IRF for pricing, loss reserving, risk assessment, distribution analysis, claims management, and many other common business functions," Saporito adds.
While IRF is focused on property and casualty (P&C) Insurance, Information Builders is expanding the package to incorporate other industry segments. "For example, we recently expanded the application with a new P&C reinsurance data model and key performance indicators," says Saporito. "In 2006, we will address life and health insurance as well."
A Standard for Productivity
Ameritas Acacia Companies, which specializes in life insurance, chose WebFOCUS as its corporate standard not only because of its comprehensive data exploration and analysis capabilities, but also for information delivery, back-end integration, and self-service presentation to internal and external users. Leveraging this broad, enterprise-scale architecture, Ameritas has created several reporting applications for internal and external users, such as a self-service application that streamlines billing, enrollment, and reconciliation processes for group insurance customers.
"Being able to efficiently deliver information to our customers and policyholders is saving a great deal of time for our customer service representatives and also simplifying enrollment procedures for our customers," says Barry Ritter, who heads information services for the Ameritas Acacia insurance companies and its broker/dealers. "WebFOCUS enables us to reconcile accounts, make enrollment changes more quickly and obtain payments in a timely manner."
As Ameritas and others have demonstrated, customers can use iWay adapter technology to load data warehouses and data marts, access production data from operational systems, and construct an enterprise data strategy around an SOA framework. "With this in mind, we have developed IRF," Saporito explains. "IRF includes a summary data model as part of the product to support existing reports. If customers already have an existing data warehouse, we will map from our data model to their warehouse. If they want to create an enterprise data warehouse from scratch, we can help them populate it and build it out to the detail level while we create summary reports that they can use right away."
Information Builders' Consulting has the expertise to assist with every aspect of these projects, having worked closely with the top insurance companies in North America such as Aegon, AIG, Allstate, Chubb Group, Cigna, Erie Insurance Group, The Hartford, Harleysville, Highmark Blue Cross & Blue Shield, Nationwide, and St. Paul Travelers, to name a few. This experience has been leveraged in IRF and the enterprise insurance data models.
Additionally, Information Builders recently joined the Association for Cooperative Operations Research and Development (ACORD), a global, nonprofit organization that develops and maintains data standards for the insurance, reinsurance, and related financial services industries. These standards make it easier for insurers to outsource processes that aren't core competencies, implement straight-through claims processing, and automate policy service and sales by carriers and reinsurers. This type of inter-enterprise collaboration becomes especially important for companies that have been involved in mergers and acquisitions.
"The industry has seen a wave of consolidation as companies buy and sell books of business or merge with/acquire other companies," points out Saporito. "Helping these companies build cohesive IT environments is a huge part of our value proposition."
Managing Corporate Performance
According to analysts at Forrester Research, business intelligence applications were among the top applications that insurance executives were considering during a recent survey that examined buying trends for 2005, including first-time BI deployments as well as upgrades ("Industry IT Spending Profile: Insurance," February 10, 2005, p. 8). "While insurance companies have historically been the tech tortoise compared with the high-tech hare of financial services companies, the tortoise may be ready to put on racing shoes," Forrester noted. "The high level of interest that insurance companies have in Organic IT technologies is evidence that they can see the business benefits that these investments could bring, and IT departments at insurance companies, through their adoption of IT management best practices, have built credibility with their business partners" (Ibid, p. 14).
Why is BI so important to these firms? For one thing, insurance executives need tools to quickly generate comparative analysis and key performance indicator (KPI) reports that cover the entire business, so they can spot trends and identify potential problems. The WebFOCUS Performance Management Framework provides a full set of templates and tools to monitor, analyze, and manage the performance of every aspect of their business – so everyone in the organization can participate in a "culture of accountability." This level of accountability is becoming progressively more important as insurance companies derive a higher portion of their profits from returns on underwriting as opposed to financial investments.
BI tools are also useful for analyzing spending patterns and creating targeted marketing campaigns to boost revenue. For example, life and annuities insurers can use Information Builders technology to target which clients with yearly renewable term-life insurance policies would be likely to convert to a 10- or 20-year fixed-rate policy. Careful data analysis can help these insurers spot redundant renewal efforts and yield vital information on each step in the customer interaction process, so they can offer the right product to the right customer at the right price at the right time.
Independent agents have their own special reporting needs, many of which involve delivering information directly to customers via self-service Web portals. For example, National Life uses WebFOCUS to enable authorized users to easily examine policy and sales data. By establishing a relational database of current transaction data, the Toronto-based insurance company is delivering complex query and analysis capabilities to its agents, brokers, and managers throughout Canada. According to Prem Agrawal, general manager of Individual Operations at National Life, users can examine the data in many ways – such as by region, by product, and by broker. They can quickly access aging summaries, view data by face amounts, and select many different time periods.
Discerning Patterns With GIS Technology
Many property and casualty companies are using geographic information system (GIS) technology to better understand catastrophe exposures, their agency network coverage, and customer demographics, making it easier to discern trends and patterns. Information Builders has all the bases covered, thanks to a long-standing relationship with ESRI, the world's leading GIS vendor. The GIS/mapping capabilities of ESRI combined with the analytic power of WebFOCUS helps insurers visualize data on electronic maps, so they can see at a glance where their current exposure lies.
BI technology can also help property and casualty insurers manage pricing scenarios. Effective product pricing involves many factors: the cost of customer acquisition, underwriting expenses and other outlays, the profitability of the customer base and the customer retention rate. "Most consumers view auto, home, and life insurance as a commodity, so they tend to be very price-sensitive when selecting products," says Saporito. "Astute insurers are basing their pricing on a variety of customer data points to determine the right price for the given risk level."
Doing this successfully means understanding the risk attributes for each customer, classifying them accurately and establishing the right price-versus-risk exposure, Saporito adds. Once again, BI and enterprise reporting hold the keys to doing this effectively.
 
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