change, the status quo will be maintained because it is
comfortable and does not represent new risk. In this case,
no measurable business value is achieved and the project
is declared a failure,” she explains.
Insurers may also have problems when they try to do
a BI initiative internally, without expert assistance from
technology providers and external advisors who have
successfully executed BI initiatives in the past, she adds. “BI
projects tend to be long even in the best of circumstances
and institutions cannot afford to ‘feel’ their way through a
project plan and execution.”
But Donald Light, senior analyst at Celent, an international
consultancy in Boston, disagrees with the failure claim.
According to him, “Celent does not see a higher rate
of initiative failures with BI compared with other types of
projects. Five to 10 years ago ‘data warehouse’ projects,
as a group, had a mediocre track record. Many companies
tried to do too much in too little time. Over the past several
years, though, most BI initiatives have been more focused, or
at least, more phased, and have had a better track record.”
At the center of the claims process
But just why are BI projects so important in the current
insurance environment overall and in the claims process
in particular? “BI for claims opens a whole new lens into
effectiveness and efficiency of the entire ecosystem of
claims, from the internal operations to the claimants
to policyholders, and with all third party relationships,”
Smallwood explains.
Insurers that apply BI and analytics to even a small piece
of the process can detect fraud in real time, improve service
levels for claimants and provide accurate reserving, she
continues. “In addition, it can provide real-time dashboards
and scorecards of powerful real-time information that can
change outcome and improve losses and severity in the
long run.”
Smallwood points out that “managing today’s business
is all about having real-time insights. Intelligence from the
past, current and future is essential; many insurers are now
realizing that having quality data and the right tools gives
them a definite competitive advantage.”
According to Pauli-Bradshaw, claims executives have a
dual focus on expense reduction and customer satisfaction.
“Without business intelligence it is not possible to
address both goals with equal value,” she notes. “Claims
organizations are the recipient of enormous amounts of
data elements—text, IM, adjustor notes, FNOL, etc. In
order to take advantage of this by turning it into actionable
information, business intelligence tools are mandatory.”
Pauli-Bradshaw adds that claims operations can be very
complex, even for commodity lines of business, and that BI
tools can provide appropriate information and analysis that
will allow claims business analysts to optimize processes
and outcomes. “Claims organizations that rely on traditional
static reporting and information will find themselves
unable to compete from a financial and customer service
perspective.”
“In addition, regulators and consumers want
transparency from financial institutions,” continues Pauli-
Bradshaw. “Without business intelligence this cannot
be achieved. Also, consumers are demanding a better
insurance experience, on their terms, and without business
intelligence that facilitates process improvement, old,
arcane procedures will remain.”
While most insurers want to reduce costs, she adds,
carriers must allocate resources to the most profitable
producers and customers, and the most profitable
businesses. “Without finite information, these decisions
cannot be made with accuracy and speed,” she explains.
“BI is the foundation of innovation. Carriers want to develop
innovative products and services to differentiate themselves
in the market place and retain customers. BI informs these
decisions.”
“Insurers that apply BI and analytics to even a small piece
of the process can detect fraud in real time, improve service
levels for claimants and provide accurate reserving.”
“; Without;business;
intelligence;it’s;not;
possible;for;claims;
executives;to;focus;
on;the;twin;goals;of;
expense;reduction;
and;customer;
satisfaction.”
“BI is beginning to make inroads in the claims process,”
says Celent’s Light. “Adjusters and all levels of managers
use BI to understand workloads, processing times, and
bottlenecks. More analytically oriented uses include
assessing potential for fraud, subrogation and salvation;
as well as managing provider/supplier networks.”
On an operational level, Light points out that, “there
remains a great unfilled need for flexible operational
reporting so that staff and managers can see how they are
doing.” In addition, he notes, there is a pressing need for
analytics that help managers get a better idea of “what they
should be doing.”
What’s ahead for BI
What are the most daunting challenges facing insurers
who undertake BI projects?
“Data quality, data quality, data quality and data quality,”
asserts Pauli-Bradshaw. “That aside, the challenges are all
around the points of failure I talked about. One additional
challenge is finding or developing a new breed of business
analysts who can view information in different ways, and
create strategies accordingly.”
Smallwood agrees that data quality is the most
formidable challenge to BI. “Leveraging all the powerful
BI tools and predictive analytics tools to make real-time
decisions based on accurate, complete, consistent,
relevant and timely data is the goal,” she notes. “With the
current status of the quality of data, or lack of quality data,
the BI tools are not providing the value that is possible.”
BI is the foundation of innovation; carriers want to
differentiate themselves in the marketplace. BI informs
these decisions.”
Light points to the need to align the data models that
are already in place (for various core systems) with a
single BI data model—then managing that alignment
over time.
Meeting these challenges, according to Smallwood,
starts with being well versed and trained in the tools, as
well as a data strategy and BI road map. Full business
sponsorship and participation in the BI project and a
formal data governance board are also keys, along with
“the never-ending work of data quality,” she says.
In addition, insurers need to partner with proven
technology providers with a history of successful BI
implementations, says Pauli-Bradshaw. “Outsource
the project management to providers that, again, have
successful initiatives under their belts.
Recognize the cultural issues and deal with those
up front, before the initiative even gets under way,” she
explains.
“Without business intelligence it’s not possible for
claims executives to focus on the twin goals of expense
reduction and customer satisfaction.”
Light echoes the need to select the right provider.
“Choose your BI platform partners very, very carefully,” he
recommends. “Staff up correctly with data base analysts
and people with analytics skill sets.”
Pauli-Bradshaw also recommends establishing short-
term deliverables in the project “so that the organization
gets business value and sees results. The length of BI
initiatives can depress focus and energy. The sheer weight
of the enormity of the initiative can smother it, if there
isn’t a ‘win’ to celebrate,” she warns.
Core competencies
Given current conditions and, perhaps, a recovering
economy, how will BI and its initiatives play out over the
next several years in insurance?
“This will continue to be a very active area as insurers
grapple with slow/no growth and smarter competitors,”
says Light.
Pauli-Bradshaw believes the carriers that get BI right
“will pull away from their competitors with the force of
a rocket! Eventually the carriers that are not able to
create and leverage business intelligence will experience
adverse selection that will impact bottom-line results.
The most profitable distributors will choose to place
business with carriers that intimately understand their
chosen markets and respond with unique products,
pricing and services, and make it easy to do so. BI has
to be a core competency.”
“Unfortunately, I do not see things changing in the
near term,” observes Smallwood. “Insurers will continue
to implement version BI and data type projects with
successes and failures. Until there is a shift in the
mind-set about the importance of quality data—data as
an asset for the enterprise and full business participation,
the industry will continue to move forward, but not as
quickly as it could or even should.” n
Ara Trembly, founder of Ara Trembly-The Tech Consultant, is a widely known and highly
experienced consultant, journalist and speaker in the technology field, notably for insurance
and financial services audiences. He has written literally hundreds of articles for a wide range
of business and technology publications, including Computer Decisions, Beyond Computing,
PC Today, Office Systems and many more. He was formerly the technology editor and a columnist
for National Underwriter--and is currently a featured blogger for Insurance Networking News.
