Are you an insurance company trying to gain a 360 degree picture of your business across the globe? Are you in the process of creating global customer data repository? Are you planning to use your data warehouse for regulatory compliance?

Today’s insurance companies are facing a number of challenges. Globalization, Terrorism, hackers, viruses, regulations and economic instability are just a few of the issues that insurers are tackling. The insurance industry is under the spotlight like never before. Today’s economic downturn is making every company take a hard look at the way business is carried out. The degree of concern is clearly evident in a business strategy closing the non profit product lines, selling the business lines, cutting the cost centers as one of ways to sustain business.

Clearly, insurance companies must streamline their financial performance reporting processes with a greater focus on accuracy and traceability of the reported numbers.

Greater scrutiny on operations

As a result of a number of regulatory requirements across the world (Solvency II in Europe, National Provider Identifier (NPI), Medicare Part D mandates, the Patriot Act, HIPAA, SOX etc.) every function of the business has to operate under increased scrutiny - whether regarding corporate governance, regulatory compliance or general accounting principles. At the heart of the insurance business lies the reality of estimation. Insurers have to estimate every day - to set reserves, to set prices, to estimate impacts. Getting underwriters to properly understand the reality of estimation under a constrained environment is essential.

Increased scrutiny poses a direct paradox with the estimation process, and it requires better analytical tools and techniques in order to strike a balance between the two.

Key ratios under pressure

For a long time there has been a general consensus about the cyclical nature of the insurance business. As a result, the sustainability of corporate performance has not been under much scrutiny. Today’s insurance companies are feeling a different kind of pressure.

Shareholders demand action and a greater return on capital. As a result, there is strong focus on improving the performance measures that build up key performance indicators (KPI) like combined ratio. These include improving customer loyalty, increasing underwriting profitability, improving quote to policy conversion rate and identifying cross-sell and up-sell opportunities.

Other challenges in large Insurance companies

Large Insurance companies are thinking strategically. These companies have several lines of business and operate in countries worldwide. Their biggest challenges are rooted in their sheer size, complexity and the conventional wisdom that 'elephants cannot dance.' Most of these companies have written their own transactional systems to support their operational processes. They often believe that their business is so unique that an outside solution can not meet their specific requirements. As a result, most of their transformation initiatives have had little impact on their overall agility.

To compound the problem, some of these companies have multiple instances of operational systems (e.g. ERP systems) within the company. Changes take a long time because they are dealing with internal political as well as organizational battles.

What is the need for a Business Intelligence (BI)/Data warehousing (DW) system in an insurance company?

In a traditional environment, operational systems like policy management and claims management systems provide function-specific reports which can be used to extract information about a particular event. These operational reports are useful for functional staff; however they provide very little strategic insight about the overall effectiveness of company operations. In order to assess the true health of a company, management needs to assess the interdependencies and impact of several factors like product risks, geography, claims volume, customer loyalty, underwriting effectiveness, etc. on the bottom line. Such an exercise is impossible without the ability to pull together data from various operational processes and analyze the impact of one factor on the other and on the whole. One of the most difficult aspects of this, however, is comparing apples to apples as information from operational systems is rarely compatible.

Business intelligence (BI) is an umbrella term used for an ecosystem of people, process and technologies operating in tandem to provide accurate, timely and actionable information to business users so they can better manage the business. A data warehouse is the hub for any decision support / business intelligence system. Without a data warehouse, there is no consistent and trustworthy source of data for analyzing business performance. Operational systems rarely contain the historic data needed to track trends or compare results, nor are they compatible with each other, so multiple-system queries are impractical or even impossible. To process the data held in a data warehouse, there are numerous general-purpose reporting and analysis tools available in the market that provide powerful analytical features like slide-and-dice and cross-tab analysis, providing a rich presentation capability.

Business intelligence and data warehousing can be used to support a challenging environment for decision support for five pillars of agility in an Insurance company:

• Customer loyalty management
• Business process improvement
• Staying ahead of the curve
• Speed to market
• Proactive risk management

In addition, data warehouse is used successfully in many Insurance companies for regulatory compliance.

For more information on how Expedien can help you, please contact us.