Julian Kirkman-Page looks at the changing world of business information.
The Army thought I was too insane and the Church did not appeal, so I have spent the last 25 years being involved in the insurance industry, primarily around the London market. It is refreshing to see that at long last, and having paid lip service to the whole question for two decades, senior management now understands the need for accurate and timely information to help them run an efficient and effective organisation, and one that is at last customer-focused.
The 'word on the street' and the talk amongst the old crowd still focuses on underwriters basing premiums on which way the wind is blowing, management having no real financial control on how the business is running, and customers, brokers and insurers fighting an annual battle over whose figures actually reflect reality. Go back a couple of years and this was, of course, very widely true, particularly so in the reinsurance sector where authority is handed out to cedants and it can take months to understand the true level of a company's overall exposure.
Thankfully this is fast beginning to change, and we are starting to see some real winners who, by the nature of their own success and professionalism, will dramatically change the industry over the coming years. It is interesting to note that within these well-run companies, real-time, accurate and relevant business intelligence information is of paramount, if not critical, importance.
Another driver for the need for information is the compliance issue spurred on by enhanced legislation and in the UK, by the Financial Services Authority (FSA) regulations.
With greater competition and tightening resources, organisations increasingly rely on the use of technology to enhance efficiency. One of the largest recognised areas of improvement involves organisational decision-making and data analysis. However, the process of analysing information and making decisions based on IT-produced reports remains a resource drain on many organisations. Most companies still use well-established but data-based underwriting systems with limited reporting capabilities and often no analysis availability. Reporting is not analysis. A hard-coded report is static and out of date; you cannot change the analysis type and drill through to a different level because you have spotted an anomaly. The ability to sort information from data quicker than the competition gives you a big edge, critical in today's global markets.
So a business intelligence solution sits above business applications and takes and consolidates the data they hold. There are a number of ways of doing this, and data warehousing is, at present, the most talked about.
But this is generally expensive and time consuming, and there are now some very exciting alternative technologies for getting almost immediate benefit from the data locked up in underwriting systems. Business intelligence technology should mean that local departmental management has controlled, interactive access to the information needed, when it is needed, and does not have to request information from a central source. For those companies that have fully embraced it, the internet makes the same service available on a truly global basis.
Access and analysis
With a well-structured business intelligence solution users will feel less like they are working with a complex analysis tool and more like they are connected directly to the business information. Information displayed should be relevant, the product should be intuitive to use and the interface augmented with multiple wizards, which greatly reduces training time and gives control over the data analysis process.
One solution is a senior management or executive 'dashboard' detailing a host of areas of the business critical to one individual from a management perspective (see figures 1 and 2). Such a screen or set of screens could be refreshed on a daily basis but already there are companies running global reinsurance operations which expect real-time information to be displayed.
Imagine the power of arriving at work and having the ten things that worry you most presented in an easy-to-read, totally up to date fashion with the ability to immediately drill down and evaluate either problems or areas of significant success and take swift well-informed decisions.
Direct business benefits
For an insurance executive, a well thought out business intelligence solution will help at least in some key areas.
Flexible real-time analysis
All possible data and analytical interrogations instantly available; breakdown of historic information, for analysis and reporting: 'measures by dimensions', by any combination of;
- risk type, class, aggregations/accumulations;
- premiums class/type;
- claims amounts/types;
- loss ratios;
- reinsurance performance, in/out;
- corporate client;
- geographical spread;
- year/time series;
- individual underwriter; and
- any further dimensions recorded at the transactional level.
Understanding outcomes and exposures by explaining probabilities, e.g. for
- claims reserving; and
- reinsurance evaluation, pricing and negotiation.
Confirming risk assumptions and helping to identify highest-risk and greatest impact areas, e.g. for
- underwriting decisions, underwriting manuals and management control;
- premium rating; and
- reinsurance requirement referrals.
Focusing business monitoring where and when it is needed most, e.g. for
- business planning and forecasting;
- capital adequacy; and
Key to these is the statement 'well thought out'. There are several IT tools available that can deliver many of these benefits. What is required, however, is a detailed understanding of the insurance industry, the business requirements, how the products work in an integrated environment, and how to help management continue to receive benefits from the solution once in place.
Micro level solutions
So far, the solutions outlined have been aimed primarily at macro level, embracing the needs of an organisation as a whole. There is, however, a new set of solutions aimed at enabling specific decision processes.
One of these is a model which seeks to eliminate the 'finger in air' approach to underwriting decision-making, and instead looks to stochastic modeling techniques. This makes use of a range of standard actuarial techniques, including random number simulation, to provide an underwriter with a fast, highly accurate and easy to assimilate view of what the insurance programme design for a corporate client should be, creating - as far as possible - a win-win situation for all concerned. This approach empowers the underwriter and works just as well across an underwriter's portfolio when looking at reinsurance programme design.
There are now IT products that allow for the integration of data with words, paragraphs, sentences and library information to the same overall pool of content. From a personalisation perspective, giving customers a focused message, mixing data with word content in this customer-focused world, is increasingly important.
There are very sophisticated and open IT systems that talk to each other, the internet for swift and intuitive user access, and smart experienced people who know best how to deliver business-focused solutions on a cost-effective basis. In short, there is no longer any excuse for not being 'information enabled'. Whatever your underlying underwriting application, it is easy to take the data held and processed therein, add value, assimilate and integrate that information, and work with a series of tools that will provide you with the most exciting environment you can imagine.
A final thought, based on current experience. In the not too distant future, China will become a huge insurance market. The Chinese do not have a legacy of old business practices and IT mainframe systems, and are currently addressing the very latest in technology to establish a new and fresh presence, examining new and improved ways of 'doing' insurance.
Of the highest priority is the need for business intelligence information.
There has to be a proverb somewhere in there.
- Julian Kirkman-Page is a Director of the Alphabet Group and specialises in business intelligence products and solutions.