As competition ratchets up in the insurance industry, insurersneed to hone their operations by using the power of information,but the industry is still struggling to overcome the limitations ofthe early generations of insurance systems.

Core legacy systems were designed to processtransactions--deliver quotes, produce policies, collect premiums,pay claims, manage compliance and handle accounting. Essentially,they processed inbound and outbound cash. They weren't built totransform data into actionable information for decision-making oroperational management purposes.

As a result, most insurance companies are sitting on a potentialgoldmine of information they can't get to--at least not withoutentering into a multiyear data project costing many millions ofdollars.

However, this is changing as products that let insurancemanagers take the pulse of the business are becoming commerciallyavailable.

Today, market cycles have been compressed down from six or sevenyears to one or two years. The new generation of systems must bothhandle transaction processing and become true information and"business intelligent" systems.

New technology that enables this is based on fast, inexpensivehardware and industry standard software building blocks. Low-endservers that now hold terabytes of data can be assembled quickly tocreate more robust, flexible storage systems than is possible withmainframes.

On the software side, some major software companies now offerpowerful off-the-shelf components that solution providers can useto create more robust, powerful systems than were possible before.It's like using prefabricated panels to build a house instead ofpounding in every nail by hand.

This speeds development and provides more robust capabilities,allowing developers to focus on the business application athand.

A powerful reporting and business intelligence system requiresthe following three main components.

o Data warehouse and data marts.

The first component of the new breed of data warehouse andanalytical reporting solutions is the data warehouse itself,because trying to tap application databases directly wouldadversely affect those systems' performance.

The data warehouse defines the underlying insurance data modelwith all of the business objects within a carrier organization anddefines the logical and physical relationships among those businessentities. Extract/transform/load scripts (ETL) are used to extractdata from the core application databases and load the datawarehouse.

In the past, carriers have typically had to write their own ETLscripts to extract data from multiple databases, transform thatdata to meet business needs, and load it into the warehouse.

However, newer solutions now offer pre-written ETL scripts thatshortcut the process of loading the warehouse. This dramaticallyreduces project schedules and associated costs and allows forfaster implementation of the solution.

In a similar fashion, data marts that provide pre-definedreporting views of information are pre-loaded with data from thedata warehouse. This is another area where custom work was requiredin the past, but no longer.

Because of the complexity of the interfaces with the underlyingapplications, as well as upstream and downstream systems, mostreporting systems aren't "plug-and-play." They required large-scaleprojects to implement.

But instead of this type of massive project, newer productsallow carriers to implement the solution in less than a year and ata significantly reduced cost.

Additionally, data warehouse solutions employing standardizedinterfaces and Web services can interface with any existinginsurance system, whether old or new.

o Report authoring, publication and distribution.

This is the reporting user interface that enables users todefine and publish reports to the various groups of users--whetherthey are internal or external users. This facility allows the userto manage report listings, user subscriptions and notificationlists that specify which users will see which reports, based onsecurity that is segmented down to particular data elements.

The solution can notify users automatically and can distributereports by e-mail and, if desired, to PDAs, cell phones and othermobile devices.

o Business intelligence and advanced analytics.

Business intelligence and advanced analytic capabilities setdata warehousing and reporting solutions apart. Without them, allthat's delivered is a reporting solution.

The new breed of data warehousing and reporting solutions havethese capabilities built-in or "out of the box." Not only is onlineanalytical processing included to crunch the data and identifytrends, but more important, so are the definition and management ofbusiness scorecards and key performance indicators that transformtraditional reporting systems into operational intelligencesolutions.

These capabilities act as sentinels that alert the carrier whenkey business thresholds are being approached so that the carriercan take action before the issue adversely affects itsbusiness.

This allows the carrier to continually balance its riskportfolio, aggressively manage its distribution partners, andmeasure supply-chain partners to a degree previously notpossible.

With all three components, you can build a system that goesbeyond reporting and becomes a key asset in running thebusiness.

With traditional reporting systems, batch reports are runmonthly or quarterly. By the time you've received a report andanalyzed it, something may have gone terribly wrong or off thetracks, and you'll have to scramble to prevent more damage.

Wouldn't it be much better if you could easily identifydangerous trends and budding opportunities early?

Now you can. A reporting system with business intelligence letsmanagers create scorecards and set warning indicators.

For instance, let's say that you want to limit your exposure ina certain geographic area, or line of business or product. Now youcan have the system automatically alert you when you're approachingthe threshold so you can take action.

Let's say you've reached your limit in Florida. You turn off thespigot.

You can set up virtually any alert you want, as long as the rawdata has been captured in one of the core systems. Your indicatorsmight include investment returns or the number of days toadjudicate a workers' compensation claim for, say, temporary totaldisability.

The alerts can be set up to be triggered when either good or badthings happen. For instance, let's say you have a program to insuremunicipal vehicles. The system alerts you that losses are very low.You can now open up the underwriting floodgates, write more of itand reset a higher threshold.

Business intelligence that converts data into information youcan act on is a strategic advantage for any insurance company. Whenyou know what's going on with your business at all times and don'thave to guess, you're in position to win.