Putting Business Intelligence to Work

Business transpires in the Information Age. Although these times offer the most networked, data enriched progression ever in history, many smaller to midsize insurance companies are still using mainframe processing to generate canned monthly management reports to summarize the operational data stored in those systems. Through the years they have pushed the capabilities of these systems to the limit.

During the past several decades, many companies have supplemented these efforts by implementing policy and claims processing systems with the goal of reducing operational expenses. However, the industry’s focus on processing systems has not prevented declining investment income and rising loss ratios from damaging their surplus, and significant reductions in surplus have damaged the stability of several large insurers. These systems have allowed companies to reengineer workflow, but the resulting IT infrastructure of unrelated and nonintegrated systems has proven detrimental.

This is precisely why today’s insurance industry needs to utilize Business Intelligence (B.I.), which are systems that enable companies to more precisely profile their business, accurately assess actual levels of risk, and price those risks appropriately. B.I. systems enable decision makers to integrate their data in one central information management repository and then use integrated robust analytic applications to rapidly drill down and see their data in ways that were not possible before. These new analytic tools can provide daily updates of key indicators that more reliably measure the company’s operational health.

Why business intelligence now?
The market and the economy have changed. The manner in which insurance companies analyze data must change, too. Decision makers at all levels within the organization must step outside of their comfort zone and think creatively. They must look at their data in new ways and make proactive decisions that will provide a blueprint for better financial results.

At U.S. Risk, a national MGA and wholesale broker with over 50 specialty lines of businesses, we are embracing B.I. to get even smarter about our business. Had a customized B.I. system existed years ago, we would’ve jumped at the chance to utilize the technology. In short, certain segments of the insurance industry have craved this type of system and, thankfully, it’s now available.

In the past, business was successfully done based on relationships. As loss costs continued to escalate, the market hardened and we saw the need to become even more sophisticated regarding our business through technology. Today, we need to maximize our resources, be alerted ahead of time when and why a program or line of business is under-performing, and then provide an articulated analysis of our program’s performance to our underwriting partners.

Benefits of business intelligence
Business Intelligence affects many areas of your operation, streamlining processes and helping to identify best practices. Here are some of the key areas affected by a strong B.I. system:

Underwriting: Demonstrate to underwriting partners the factors impacting the performance of products, in order to reconfigure coverage based on risk and better manage pricing.

Claims: Improve claims operations, handling and processing by analyzing loss reserve trends, time service goals and adjustor performance.

Reinsurance: Improve position of company when negotiating rates with reinsurers based on actual loss experience; structure contracts that reflect actual risk levels.

Marketing/Distribution Channels: Proact-ively manage business produced by brokers, producers, and retail agents at program level and by line of business and demographics. Identify which outlets are high producers, or which performers consistently provide you with losses.

Information Technology: Reduces need for involvement and time spent generating reports for business users. B.I. puts the user, regardless of technical expertise or position in the company, in the driver’s seat by providing the ability to access, analyze and manage information to make sound business decisions from a centralized Dashboard.

For example, in North Texas we are frequently visited by hailstorms. B.I. allows a company to determine the concentration of rooftops in any geographical area, and proactively manage exposures, spread risks, and adjust pricing accordingly.

Insurance companies are not the only organizations that can benefit from B.I. Retail agents should align themselves with carriers or MGAs that realize the value of B.I. at the producer level. Underwriting decisions are often made on a class of risk basis. For example, the loss ratio on apartment buildings is high, so the company decides to no longer write that class of business. B.I. at the producer level allows due consideration of the specific performance of the producer’s book. The ability to easily access and analyze accurate, timely information enables organizations to react quickly and take strategic action. As a result, rate increases and changes in underwriting appetite tend to be more gradual.

How to select a B.I. provider
Today, there are many options available for selecting a business intelligence provider. My advice is to identify your needs, selection criteria and budget, and then do research. As a MGA, we have limited resources and we needed a system that already had built-in solid insurance specific standards, and then we could focus our efforts on customizing it to U.S. Risk’s unique needs.

Get smart with B.I.
The key to being the market leader is to get a fresh insight into your business. How? Through Business Intelligence. Be prepared; the industry is changing and you have two options. First, do the same thing you always have done and, most likely, you will not achieve the same results. Past performance is no guarantee of future results. Or, two, you can get smart about your business. Use a business intelligence system to put yourself in the driver’s seat and take control of your company’s destination.

Monte Stringer, Executive Vice President/Chief Information Officer of U.S. Risk Insurance Group (www.usrisk.com), has over 30 years of experience working in the insurance industry. Headquartered in Dallas, Texas, U. S. Risk Insurance Group, is a Managing General Agency and Wholesale Broker for specialty insurance products with 11 offices in the U.S. and Europe.

Topics USA Agencies Market Insurance Wholesale