Remember the old Etch A Sketch toy that allowed you to “draw”things on a screen by turning dials either vertically orhorizontally? Making a choice about which dial to turn is adecision many insurance carriers are facing today when theycontemplate which way to proceed with business intelligence (BI)technology. Should they go vertical with an industry-specific tool?Or horizontal with a tool that crosses industry boundaries?

Today's BI software market is split between these two types ofproducts, explains Matt Josefowicz, group manager of the insurancepractice at Celent. “It depends what the task is and what peopleare looking for,” he says. “There are some insurance-specific datawarehouses that have some reporting tools with them, but a lot ofBI work–reporting, data analysis–is done with cross-industrytools.”

The cross-industry products tend to have a set of verticalizedtechnology the vendors can give to their insurer clients,Josefowicz indicates, even though it's essentially a cross-industryplatform. “The insurance-specific tools tend to be less in thereporting end and more in the repository end because those[repository tasks] imply a need for a specific data model,” hesays.

In a recently published report for Gartner, KimberlyHarris-Ferrante, research vice president, argues the industry needsmore vertical BI platforms and points to the fact manycross-industry BI vendors are investing in their products to makethem more vertical. However, she concedes, finding a vendor forindustry-specific projects may be a challenge due to marketconfusion. “Insurers must have a clear understanding of the demandsof business users and select solutions that provide usefulinformation for their job functions,” writes Harris-Ferrante.“Insurers should try to minimize the number of BI vendors usedwithin the organization by selecting solutions that have stronghorizontal capabilities as well as insurance-specificcapabilities.”

As for where to deploy BI projects, distribution is a big targetfor insurers, notes Josefowicz, particularly producerprofitability. Insurers also are generating some metrics andtransparency to the claims process for P&C. “They are lookingat the total book of business and customer data,” he says. “Anytype of management reporting used to understand the operation anddeploy resources to make the operation more efficient” is afocus.

INSURANCE SPECIFIC

Insurance House is a personal and commercial lines carrier thathas developed multiple uses for business intelligence. “We use [BI]to aid our product development decisions, watch our claimsactivities, and adjust how our products satisfy the demands of ouragents and insureds. It's more of a tool to help us put the rightproduct in the marketplace, watch how it performs, and adjust [theproduct], if necessary,” says Robert Golden, director of strategicbusiness services for Insurance House.

One of the reasons Insurance House selected the INSsight productfrom Skywire Software was because the product is insurancespecific, explains Golden. The company didn't want to expend theextra time and work involved with tools that needed to be craftedtoward the insurance industry when vendors such as Skywire alreadyhad provided a portion of the due diligence. By considering onlyproducts that dealt with property/casualty insurance, Goldenbelieves Insurance House hastened the project's time line.

Without the benefit of INSsight, Insurance House would haveneeded to compile multiple concerns into a common view ofstandardization, which Golden indicates would have become InsuranceHouse specific as opposed to insurance-industry specific. “Givenour growth strategy, which is in part by acquisition, we want toposition ourselves so we have a standard that will allow us tointegrate data as we move forward,” he says.

“Where the insurance-specific applications add a lot of value isin collecting and normalizing the data and putting it into aninsurance-specific data model,” Josefowicz says. “In terms of thereporting tools, the cross-industry tools do a good job once thedata has been consolidated and normalized.” He believes the firstelement in any kind of data mastery project is identifying andnormalizing the source data and pulling that all together into aplace where it can be accessed by the reporting tool. Doing thereporting on top of that data is comparatively easier, he adds.

One area where vendors have been aligning themselves withinsurance is in visualization, according to Art Barrios, managingdirector of the insurance practice at PricewaterhouseCoopers. Toolsthat support visualization take data and represent it graphically.For an insurer, this would involve mapping relative to where thecarrier has a concentration of policies or a specific type ofcoverage, such as flood or earthquake. “[Carriers] use that forreinsurance purposes to identify where they might need to lay offrisk or swap policies with another company that may be underexposedin that area but overexposed in another area,” he says.

Still another activity vendors focus on involves businessanalytics or predictive modeling–tools that are strong in thestatistical space because insurers have to predict catastrophiclosses. “[Insurers] use tools to come up with statistical oreconomic models they could feed into their pricing algorithms,”says Barrios.

Of the various available options, many cross-industry tools thathave adopted the ACORD data standards tend to work better in theinsurance space than others, Barrios contends. “Certainly there areuses within the insurance industry that specific tools align withbetter than others.”

USER-MANAGED SYSTEM

Prior to joining American Modern Insurance Group last summer asan assistant vice president, Mike Koscielny spent nearly five yearswith AAA Michigan, and both carriers are using the Fair Isaacproduct Blaze Advisor, a cross-industry tool with a strong focus ininsurance and financial services. When going through the assessmentprocess at AAA, the carrier studied all sorts of tools. Five yearsago, the BI technologies still were raw in many respects, pointsout Koscielny. “They were code driven and aligned more with thetechnology people rather than the business users,” he says. “AAA'sintent was to have the business users own this for variousreasons–flexibility, regulatory tools, and the rest. When it camedown to making decisions, the business drove that.” The onlyavailable business-user-managed system at that time that allowedbusiness users to manage the flow of information was the Fair Isaactool, recalls Koscielny. As for today, “having the technology inthe hands of the users has been the focus [at American Modern], aswell,” he says.

BI IN ACTION: MARKETING

Insurance House has territory managers in the field, and Goldenexplains the company relies on them for their assessments ofopportunities the carrier might seize along with good competitiveinformation on why the carrier's products might not be performingwell. “The problem is if we took on every one of thoseopportunities, we'd be chock full of projects,” he says. “We try touse our intelligence to 'true up' those opportunities if they arehunches and try to prove what, in fact, is a good product move forus. Once we make that move–which gets my folks engaged, and we dosome application development–it gives our product development andmarketing folks an opportunity to wrap a campaign around it andmonitor [the product] as it goes into production.”

GAB Robins is a third-party provider that handles claimsoperations for property/casualty carriers. The company uses ahorizontal BI solution from Cognos, which despite beingcross-industry, is popular among insurance companies, according toHarris-Ferrante.

One application the TPA provider uses Cognos for is to checkwhat it calls service-quality metrics. “We use that to monitor thelevel of service we provide our clients,” says Curt Culver,associate vice president, resource management, for GAB Robins. “Weidentify potential problems we have in our organization. We canlook at the process from a corporate level and draw a breakdown tothe individual adjuster.” Culver notes this allows the TPA toaddress any potential issues it might have and keep the level ofservice where it wants it to be.

The second area in which GAB Robins uses its BI tool is tomarket its services to clients, enabling the customers to identifypotential problems within their organizations. Such early warningseventually would lead to a reduction in losses.

The TPA is using the Cognos BI product as the developmentplatform, and this allows multidimensional reporting. “The Cognosplatform is not [insurance specific], but the applications wedevelop are,” says Culver. “One thing we need to consider is thevariety of clients we service on a day-to-day basis. We haveself-insured from all industries as well as a variety of insurancecompanies that have similar requirements but frequently have theirown requirements. It's important whatever application we offer hasto have a level of flexibility that provides the capability toservice each of our clients on an individual basis.”

CLAIMS AND UNDERWRITING

Prior to hooking up with Skywire, Insurance House didn't haveany sophisticated monitoring tools in its claims operation to watchout for things such as fraud or evaluate the average close time onopen claims. “A lot of things that drive our metrics from a claimsperspective needed to be monitored more actively than we couldprior to partnering with Skywire,” Golden says. “We are trying tokeep the claims expense minimized by using the tool to monitor theadjusters' activities.”

At AAA, the carrier used the technology as part of the frauddetection process at the point of capture of loss, statesKoscielny. “We were able to automate the process to alert adjustersto some losses that on the surface appeared to be questionable,” hesays. AAA also was working to use the Blaze Advisor tool in thecustomer service area. “As a call came in and the caller wasidentified, the CSR would have a pretty good idea whether this wasa high-profile person–not only with [AAA] membership, but auto,home, and life products–and this was someone to give extremecare.”

When carriers apply some business rules to their data, it allowsthe underwriters to make better decisions on exceptions, althoughKoscielny points out there are fewer exceptions today than therewere prior to the use of rules technology. “One of the pieces wemissed in that process was identifying the quality of the agentsubmitting the business and recognizing certain agents, based ontheir performance with us, may be more worthy of exceptions [fortheir clients] than others,” he says. “Not all agents are createdequal.”

Making data available in a way that doesn't require theunderwriter to spend hours looking through it means the underwritercan measure the agent's success rate relative to a half-dozendifferent criteria that are stored in the data warehouse and can bepassed through rules. “That would be another step in the process todetermine whether this is the right decision,” he says.

REPORTING CAPABILITIES

Bankers Financial Corporation recently decided it could enhanceits reporting capabilities with a cross-industry BI tool fromLawson, according to Brad Martz, executive vice president and CFOfor Bankers. “It's going to start out as an accounting tool,” hesays. “We're going to automate managerial reports with ourfinancial reports. We will be bringing in nonfinancial informationor financial information related to production or claims activitythat wouldn't necessarily be tracked efficiently in the generalledger.”

Bankers has produced its product profitability reports manuallyoutside the general ledger in Excel. “We feel with BI we can bringin the reinsurance information, the allocation information, andsome of the product-level information necessary to do theprofitability by product, agent, and distribution channel allwithin an automated fashion within Lawson,” says Martz.

GOOD DATA

No BI project will succeed without quality data being in place,and Golden reports Insurance House had some challenges in thatregard. “One of the things we encountered was disparate data oncewe tried to bring all the data together,” he says. That was theinitial point of the carrier's relationship with Skywire. “Weprocured the actual model so we could cleanse, transform, andstandardize the data, and at least we could have one truth, if youwill, and then push the data into the marts that became and arebecoming our intelligence edge,” adds Golden.

Insurance House worked with the technical folks at Skywire tocleanse the carrier's data and make sure it was useable before thecarrier got into the phase of using the data in intelligence. “Thebiggest concern I had was to have data that was highly availableand on the Web–but wrong,” Golden says. “We've taken great pain tomake sure that's not the case and that we are working with good,solid information at the point of decision.”

While the insurance industry is data rich, insurers are facedwith barriers that involve data quality as well as legacy issuesthat contribute to poor data quality. “To drive best practices BIin insurance–and financial services in general–you really have toaddress some broad fundamental issues around the quality of thedata and how companies are managing that specifically so you thencan feed it into a BI solution,” says Barrios. He mentions the olddata lament “garbage in, garbage out” and points out, “You can'timplement a great BI tool if you have really bad data.”

Martz explains Bankers must make sure the interface with thecompany's legacy systems is accurate. “Once it's interfaced, itacts like a querying tool–a powerful report writer that will attachto our claims system, our product system, and our general ledgersystem all at the same time,” he says. “It will consolidate thetools used throughout the company. There is not a standard uniformprocess of pulling down data from our systems. That makes itdifficult for IT to support. The licensing costs for thesedifferent applications are ridiculous. It's going to be nice tomandate a standard across the enterprise on the reportingtool.”

LENGTHY PROJECTS

BI and data projects are time intensive, but carriers have toview this in the context of the value they receive from suchprojects. “A lot of companies, especially in the insurance space,do not fully appreciate the strategic importance of data to theircompany,” asserts Barrios. “In the 21st century, most financialservices companies are in the relationship business. They have tobuild a relationship with individuals or organizations.”

Carriers also are in the information management business.Everything they do to develop that business relationship almostimmediately becomes a piece of information–policy information,servicing, investment of funds. “If they don't manage datacompetency as critical to achieving their strategy, they just arenot getting it,” says Barrios. “The ability to manage data is thatimportant to achieving their strategy.”

Barrios warns carriers not to bite off everything at once. “Doit in a tactical and incremental way,” he suggests. Most companiestend to start with customer data in terms of standardizing it,integrating it, cleansing it, and keeping it clean. That is an areathey easily can assign a specific business value, which tends to bearound revenue generation–for example, the up-sell/cross-sellopportunities–as well as overall customer service in terms of beingable to achieve the single view of the customer. “Ultimately, startsmall and enable a specific business process,” he says. “Make surethose lessons and investments are reusable for another project. Ifyou keep doing it that way, eventually you look back at all theprojects and you will see you have transformed yourselfsignificantly. Bigger projects tend to lose focus and not be clearon what specific business value they are delivering.”

Barrios has seen companies buy a BI tool and then try to figureout what to do with it. “Focus on what your strategy is first,” hesays. “Then figure out the processes you need to apply that data tothe business process. Finally, you can take a look at the toolsthat can support this. If you pick the tool first without a clearstrategy, the tool defines what the process is going to be.”

NIGHT AND DAY

Golden believes Insurance House has tweaked its long-rangebusiness strategy significantly as a result of good data currentlyavailable to support trends and make strategic moves. “The area Iinherited has been able to contribute at the strategy table in amuch more significant way,” he says. “We bring a ton of credibilitynow, whereas before what we had were questions coming at theinformation reports we provided. It's literally a night-and-dayexperience from three years ago, when we first began the datamodel.”

Koscielny believes insurers have to think out of the box when itcomes to business intelligence. “The focus I've had in my last twojobs has been raising the level of productivity at the point ofdecision-making and driving these decisions to human beings andgiving them enough information to make a decision within a shortperiod of time,” he says. “From my perspective, we haven't tappedthe full potential of the rules technology that is available to uspartly because we've just begun as an industry to gather all thisdata and put it someplace where we can do these things.” TD