As the saying goes, a little knowledge is a dangerous thing. However, gaining greater knowledge through the more effective use of information is providing true differentiation for today’s leading insurance companies. That’s why more and more insurers are investing in gaining more comprehensive knowledge about their customers, products/services, employees and overall company performance.
These initiatives, known as business intelligence (BI), are being developed to enable firms to become increasingly innovative, cost-effective, agile and responsive to the dynamic market within which they operate.
It’s this dynamic marketplace that is posing a risk to insurers not leveraging their information assets as a competitive weapon. In response, insurers have realized that one of their most valued and differentiated assets is information—information, that when applied to address an important business decision, becomes business intelligence.
The essence of BI is relevant, accurate, timely information—from both inside and outside the company—that can be used in an integrated fashion to make on-demand business decisions throughout the enterprise.
In general, leading insurers have incorporated BI as an integral part of their business strategies and are looking to move beyond historical reporting to a higher level of predictability and business insight. Their goal is to embed analytics into critical processes to manage the business better and make this information much more readily accessible throughout the company. This capability, which can be described as “operational intelligence,” establishes the foundation for using information in context to make timely decisions.
NEW BUSINESS MODELS
Some insurers, for example, take advantage of their customer and product data, combine it with relevant external data, analyze it and use the information to help build specific channel strategies aimed at high-net-worth customers. This information also can be leveraged to attract new customers with personalized product offers, as well as to up-sell and cross-sell existing customers.
Underwriting also has benefited greatly from the strategic use of BI. In this area, BI is enabling insurers to continuously monitor policies and claims in order to instantly spot new trends and adjust underwriting rules, or propose new coverages resulting in increased customer satisfaction and lower cost ratios.
Other on-demand underwriting and claims processing capabilities include: fraud detection, predictive modeling, greater understanding of specific risk factors and their impact on pricing, updated underwriting rules, managed underwriting knowledge (rules and performance) and advanced decision-support capabilities.
Business processes, reinforced through embedded BI, also can be put in place to build tailored policies and financial plans, on demand, for individual customers or households. For instance, today, data from monitoring devices installed in cars help form the basis for a system that develops personalized policies and coverages based on individual driving habits. By collecting and analyzing information about who’s driving, when they’re driving, where they’re driving and how fast they’re driving, this data can be analyzed and used to set specific rates based on this real-time, personalized information.
Another strategic imperative for global insurance executives is innovation. This innovation is manifesting itself through more integrated, streamlined business processes. BI plays a significant role in helping support this business process transformation through operational intelligence. Operational BI offers insurers an opportunity to define their key operational performance metrics, beginning with the corporate strategy. They can then align these metrics through the various lines of business, functions, departments and the specific business processes to better plan, manage and improve overall corporate performance.
Simply put, operational intelligence provides the information required to support the convergence of these transformed business processes with service-oriented architecture.
Information, when used to make better business decisions, really is power. Insurers will continue to find themselves in the throes of unsettling trends that call for more agility, reduced costs, enhanced capabilities and the flexibility to adapt to a constantly changing business model.
To compete and win in this dynamic environment, firms will need to be able to quickly adjust their strategies and business processes. At the same time, they must leverage their information assets to align individual activity with organizational goals while also providing the business insight and the tools to enable improved decision-making and productivity at all levels of the business. Moreover, these BI solutions must be designed to offer a view of the globally integrated enterprise required to optimize overall business performance, which is essential to prosper in today’s on-demand environment.
Michael Schroeck is the global business intelligence leader with Armonk, N.Y.-based IBM Global Business Services.
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