What Do You Know?

There's not much mystery behind an insurer's decision to undertake a data warehouse project. “We had this general desire to create a data warehouse so our senior managers would have better access to data, be able to look at key business indicators, and drill down into the data,” says Phil Marzullo, CIO of Folksamerica Reinsurance. “But the requirement that finally gave us the momentum to do it was a real need to build a loss-reserving system and replace the complex Excel spreadsheet reserving system we were using.”

Marzullo felt with Sarbanes-Oxley regulations taking full effect in 2005, the company needed to put a loss-reserving system together that got it away from Excel spreadsheets. “We had an old legacy system–a typical story with most insurance companies,” he says. Marzullo doesn't believe there are a lot of general accounting systems that keep track of policies, premiums, and claims in the reinsurance world. Folksamerica's legacy system didn't have the database that would enable business users to extract data easily or put data in the hands of specific users.

In 2005, after making the decision to build a data warehouse, Folksamerica looked at several business intelligence vendors, and during the evaluation process, the company learned one vendor, Information Builders, had an existing data model in place. “I thought at the time this might be an advantage for Information Builders in that if it already had an insurance data model built, we could use that as a starting point and maybe get our DW built in a shorter period of time,” says Marzullo. The IT staff at Folksamerica is made up of about 30 people, he notes. “We do most of the work in-house,” he says.

Folksamerica created a pilot project for the BI vendors in which the reinsurer gave the vendors information and asked them to return with reports, some of which Marzullo claims were complicated. “Information Builders came back within less than four weeks–about half the time of the other vendors–and its results were much better than the other vendors,” he says.

At that point Folksamerica finalized its selection. “Information Builders came in and put a lot of time and effort into making the insurance data model more reinsurance-like and providing the level of detail we needed because we were buying this ultimately to build a loss-reserving system,” says Marzullo.

Fortunately, Marzullo had previous experience building a data warehouse in prior IT positions he has held along with experience working with Information Builders. “It helped quite a bit I had been through this before because I really understood the amount of time and effort needed to do it,” he says. “That experience allowed me to understand if we had a better starting point, we could get things done more quickly. In fact, that's what happened. It took us less than six months to build a data warehouse. Typically, that's a 12- to 18-month ordeal.”

Currently, Folksamerica is demonstrating the capability of the data warehouse and the BI tools to senior managers. The goal is to get them to think more about key business indicators and performance indicators and how they want to run the business. “Underwriters in a reinsurance company are sort of like sales people,” says Marzullo. “In our company, they are the ones who have relationships with the brokers. These tools allow [underwriters] to take the reports, the data, and the past experience with each of the brokers, sit in a broker's office, and pull up this information. It gives the underwriters a real edge.”

Over the next year, Folksamerica is looking to leverage its advancements into an enterprise risk management strategy. For a typical insurer, risk management involves looking at its portfolio and deciding where the biggest risks are. Reinsurance companies exist to ensure a carrier is not overexposed in a geographic area or in a single point of time. Folksamerica has sophisticated disaster modeling software that allows the company to predict future risks. “We are in the process of putting those models and projections together with our actual experience to see where we should modify our portfolio to have less risk and where we can maximize profitability and combine that with some financial information that allows us to decide where we want to invest our money and write business,” says Marzullo. “All this data allows you to make a better-informed decision on where you want to drive your business.”