For some time now, insurance companies have made technology investments a priority. The result? Instead of disparate, paper-based information residing in hard-to-access metal file cabinets, all kinds of e-data languish in disconnected computer systems.Now, insurance companies are realizing that if they do not find a better way to use this data, the whole foray into information technology might go for little more than naught. That's where performance management "scorecard" systems come into play.
These systems, which draw on data from legacy systems, provide executives with a comprehensive view of the performance of a business. As such, insurance professionals can measure a company's activities in terms of its vision and strategies.
"In the 1990s, insurance companies began to invest in all kinds of information systems. They were drinking too much of the technology Kool-Aid and ended up with lots of information and data and didn't know how to make the pieces work together," says Mike Callaghan, vice president, Opus Solutions, a Hinsdale Ill., Verint Systems Inc. company that provides performance management consulting services and technology products.
Robert Lasher, president and CEO of iPartners LLC, an Atlanta-based application service provider (ASP) to the property/casualty industry, agrees that insurance executives typically struggle when trying to make decisions and act strategically based on data pulled from traditional information technology systems.
"Scorecards provide managers with the knowledge to make more informed decisions. In addition, scorecards serve as a great way to communicate key measures across an organization," Lasher says.
Identifying the need to make better use of data is just the beginning. Insurers need to find a system that can create a way to view useful performance measurements, via scorecards that contain the information needed to drive their businesses forward.
In addition, insurance companies have to find a way to cost-effectively get these systems up and running-a challenge that is often daunting for small or mid-sized companies.
Trying to keep track of performance information was becoming a problem for Majestic Insurance Co., a workers' compensation carrier based in San Francisco, says Grace Pan, controller and vice president.
The company, which has about 85 employees and writes approximately $90 million of business annually, was required by its board to present companywide performance metrics on a quarterly basis. In addition, company leaders realized that having access to performance management information was becoming an imperative for executives and staff as well.
"With a small company, people wear multiple hats and perform multiple tasks-and they don't have the time quarter to quarter or month to month to come up with these reports," Pan says. "When we were producing these reports on paper, we would come up with two-inch to four-inch binders. It was just too much information to process."
The reports were not only cumbersome to produce, they were not very useful to the Majestic's board members, executives and staff. "The board members want to glance at the reports and get the information they need. They don't want to struggle with a four-inch binder full of material," Pan says.
To address the problem, Pan considered hiring a full-time staff member to create more user-friendly performance scorecards from the company's disparate information systems, but quickly realized that such an approach just wouldn't be time- and cost-effective.
As a result, Pan began to look for a system that would help to create performance management scorecards. Before scouring the market, however, she met with other members of the management team and came up with the following list of vendor criteria: data warehouse background, insurance industry knowledge, financial reporting knowledge, mobile access to the system, automatic alerts for specific performance criteria and a consultative orientation.
"We needed a company that knew both the insurance and financial industries and one that could partner with us to develop the performance metrics and performance criteria that we wanted," Pan says.
Pan chose to implement the Insurance Scorecard from iPartners. The Insurance Scorecard is a hosted Internet application designed to help managers in mid-sized property/casualty insurance companies view and analyze data. It provides a comprehensive picture of the entire business, both in summary and in detail.
It also facilitates analysis, so managers can identify trends, spot problems before they become serious and spend their time on corrective actions rather than on tedious tasks.
For Majestic, one of the most appealing aspects of the hosted application was its ability to let the carrier begin to ramp up its performance management initiatives quickly-and without some of the "pain" associated with implementing a system in-house.
"With an ASP, all of the heavy lifting is on the vendor's side," iPartners' Lasher notes. As a result, insurers simply have to provide raw data in any format. The ASP then cleanses, aggregates and loads the data that is ultimately used to produce the reports.
SMALL COMPANIES ON BOARD
Because an ASP provides an affordable and relatively easy way for insurers to get started in using performance management scorecards, mid-size and small companies can now jump on board.
"Mid-tier companies need to do this as much as the big players at the high end of the market. They have to know their business," Lasher says. "But they don't have the same amount of capital, budget and staff time to develop these systems internally."
Since iPartners focuses on the insurance industry, the system already has about 50 specific insurance industry performance measures in place.
"Users can go from zero to 60 a lot more quickly, so they can start working with it right away instead of trying to figure out what they want to measure, analyze and include in reports," Lasher says. "They can then sit down, and modify and customize the system after they get started.
"It's a tool that enables companies to respond to market changes quickly," Lasher adds. "For example, you can see what is happening with a new product and immediately make more informed decisions."
For staff members at Colorado Farm Bureau Insurance Co., a Centennial, Colo.-based company that serves farmers, ranchers and homeowners, the iPartners' system proved to be useful in the company's day-to-day activities.
The scorecard has become a popular tool in areas where usage was not even expected, he says. The company's sales force, for example, uses the system regularly.
"They can look at their book of business and see what is growing and what is shrinking," says Bob Goldberg, vice president of technology for the carrier.
"They can look at what areas are profitable and non-profitable. And, they can see where these products are profitable. For example, they can drill down and discover that a product is profitable in urban areas, but not in rural areas," he says.
SURVEY REVEALS MOST INSURERS DON'T KNOW THE SCORE
Many insurance companies feel the pain associated with not having access to useful performance measurements. As a matter of fact, through a survey of its clients, Opus Solutions, Hinsdale, Ill., discovered the following information:
* Only 9% of insurance companies can accurately measure the cost of a customer transaction, and only 4% have an accurate expectation for unit cost.
* The average insurance processing unit operates at 62% productivity and 51% utilization.
* The average post-sale customer inquiry is touched 2.4 times and costs $12.40 in direct labor.
* The average manager within an insurance processing unit reviews 34 separate system-generated reports per month. These same managers report spending 14 hours per month preparing manually generated reports from 34 core sources.
* Of the companies that meet or exceed international service expectations, only 51% were rated at or above "average" in customer satisfaction surveys.
* Only 4% of all processing operations measure true customer turnaround time.
* Only 22% of service-based operations accurately forecast customer volume. Less than a third of those can translate volume into work hours.
John McCormack is a freelance writer based in Riverside, Ill.
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