Insurance carriers have looked with pride at their reputation for acquiring extensive data on their policyholders, risks, and exposures, but their great success in collecting it has created an equally great dilemma in compiling and leveraging it.

Intelligent business decisions based on the information a carrier has amassed can be lost in the data deluge. Companies have spent a lot of time gathering data and formatting it into a useful format that can be passed on to someone else, Schwartz says. They never had time to analyze the data.

That was prior to the introduction of business intelligence tools into the marketplace. Carriers may believe they have been doing some form of business intelligence over the years as they analyze their own data, but if they think thats the same thing, they might be fooling themselves. There is an order-of-magnitude difference, says Keith Downs, vice president, operations and technology, for Vanguard Fire and Casualty.

Data, Data Everywhere

Heres some data on data. A recent study by the University of California at Berkley reports the world produces between one and two exabytes of unique information per year, which is roughly 250 megabytes for every man, woman, and child on earth. An exabyte is a billion gigabytes. Clearly, we are becoming overwhelmed with information, says Schwartz.
While many people assert there is no such thing as too much information, there is too much data to look through if you have to do it the old-fashioned way, says Downs. Tools help in putting scope to the data, he adds. Theres never too much policy data or data about the areas where were writing [policies]. Demographics change all the time.

With all this data available, IT departments are faced with several challenges: Part of the problem is we have a lot of data coming at us that is irrelevant for specific decisions that have to be made, says Schwartz. Information is being rekeyed, which is expensive in terms of time and cost. The tools are allowing companies to work a little smarter and spend their time analyzing the data because it already has been gathered for them.

Gather and Analyze

Tom Chesbrough, executive vice president of software supplier Thazar, says insurance carriers are looking for a depth of knowledge they ordinarily couldnt find. They are looking deep to understand the factors involved in identifying risk and pricing characteristics and more predictive characteristics, and they keep driving in that direction on both the policy administration/pricing side and the claims reserving/analysis side, he says.

While much of the effort has gone into data collection, crunching that information is what makes it an effective tool for carriers. Companies are becoming enabled to progress from gathering to analyzing the data, says Schwartz.

With BI tools, we can see what is going on and communicate what is going on, says Gabriel Fuchs, senior manager, sales and marketing, for La Suisse Insurance in Switzerland. BI gives us an overview with details behind it. We can be more proactive.
According to Downs, analysis is what makes Vanguard stand out from other insurers writing property coverage in the volatile Florida insurance market. Vanguard was started five years ago in the wake of Hurricane Andrew. In our market, catastrophe expertise is the only thing that is going to help you be profitable, he says. The market is sensitive to how well you can spread your risk around the state, the types of dwellings you are writing.

Downs believes that is where BI tools can make the difference. The more information you have about the business that is available to write and the business you do write, the better off you are going to be, he asserts. If we are going to become experts in this catastrophe market, we need all the tools that can help us better understand our current business and the available business that is out there.

Setting Standards

While the decision to use BI tools based on their benefits might be a slam dunk, implementing them is not without some difficulty. Think of it as an insurance company Tower of Babelwhile insurers may possess the same data, different parts of a company may have trouble communicating basic things such as terms and definitions. Our operational systems organize our data very differently across our lines of business, says Coleman. The field called transaction code in our annuity system is not the same thing as transaction code from our mutual fund processor. It is an arduous process to sort out all of these data definitions.

Most of the terms and definitions have been designed individually in their own silos, but as the quest for more and better information continues, insurers have found the need to pull data together from those different silos. The business people cant tell you where the data is stored, and the IT people dont really know what the data means in a business context, says Coleman. So you have two people talking cross-wise to each other, and the IT person ends up guessing about what looks most like what the business person is saying. The tools are pretty powerful, but this is a big hurdle to get over.

To jump the hurdle without tripping, a carrier needs a strong data architecture group, according to Coleman. Such a group is responsible for managing data across the enterprise, setting standards within the company, and managing code values. Setting standards and having a dictionary to explain the terms, Coleman maintains, brings some logic to the situation.
Joe Flynn, assistant vice president, application development, for the PMA Insurance Group, with net premium written of $603.6 million, agrees with the importance placed on adapting a standard language for the BI tools. Documentation and a data dictionary, he says. You need to define all your terms. We sat down with our underwriting managers and designed a data mart to pull together information most important to them.

But Coleman adds a word of caution regarding data marts. Separating data into its own departmental data marts has been tried, but Coleman believes carriers need to keep a close eye on how one department uses data acquired from a separate department. In my experience, once you give people a little bit of data, they are going to want a lot more, he says. If you havent thought things through, youll be forced to pay the data tax sooner or later.

Managing the Data

Thrivent is looking to better manage data in many areas, Coleman says. One of these areas is performance management. This is information that helps our managers track progress against goals and identify trends early. These scorecards will help keep our managers focused on what weve all agreed is important, he says. Compliance and compensation modeling also are areas that will utilize business intelligence technologies. New systems and tools such as Centives EIM, Callidus TrueComp, and Siebel are being evaluated that will help us identify, investigate, and react to trends quickly, he says.
Supplying information directly to the end user not only speeds the process, Schwartz says, but allows business users to be more creative in combing the data. There are reporting tools that take reporting from a data-centric modeldealing with fields and tablesand brings it into a business-centric model that deals with customer information, he notes. It takes [the work] from a technical task to a business-user-friendly task, and that ease of use enables business users to interact with the information and bypass the information-gathering pointthe IT department.
IT is not completely out of the loop. It still is charged with setting up the infrastructure in a way to protect the business user from making errors on the database, for instance, pulling up queries that bring the database to its knees, says Schwartz.
Having the input of the users is the only way to ensure they get the data they need, adds Flynn. We sat down with our underwriting managers and designed a data mart to pull together information that was most important to them, he says.

Starting to Mature

Schwartz has noticed BI tools have been maturing since he began working in the field in 1999. The progression of what the tools were then and what they are today is just incredible, he says. Todays tools are much more sophisticated and user friendly.

One thing insurers have to battle is the tendency to look at the data in the same old way. You have an incredible opportunity when you move from the old to the new to take advantage of much more functionality, says Schwartz.

Business users likely might be accustomed to studying information off an Excel spreadsheet, and Schwartz believes it is important to change their mindset, something that takes a little time. We change the mindset from How can I make this look like an Excel spreadsheet? to What information do I really need to make this decision?

BI also leaves less room for error, Schwartz asserts. The typical problem with a spreadsheet is the numbers tend to be omitted or added in, he says. It is subject to human error. When you automate a report, the numbers are populated from the data where you have some control. You imbed business rules that are accepted across the organization.

As an example, Schwartz points to an innocent enough area such as sales. You can have three executives come to a meeting, and they all have different sales numbers based on how they recognize sales and when they recognize sales, he says. When you implant a BI solution, you can imbed those business rules, such as when you recognize a sale, in the underlying data mart or within the reporting function. At that point, everyones reports are the same. A hidden benefit, he adds, is people begin to work more closely because they are all on the same page.

Where to Begin

The depth of knowledge needed by insurers, Downs points out, can no longer be satisfied by simply asking the IT department to create queries they can run against the data. We now need tool sets that can monitor the data as it enters the warehouse and provide alerts on a day-to-day change basis to better understand how we analyze the details.

Companies need to attack a BI proj-ect one department at a time, Schwartz believes, and should aim to see results within 90 days. You dont want something that is going to take months or years to implement, he says. That just wont work.
Insurance carriers should start small when beginning a BI project, he adds. Pick a couple of pain points, focus on them, deliver, and then move on, he says. A place to start is in an area where there are problems creating reports, getting the numbers that are needed, or where there is a shortage of analysis. An incremental approach is much more effective in deploying BI solutions, he advises. You are changing the mindsetgoing from static reports to something more dynamic. People start to understand the true potential of BI after they start using their own data.

The Black Hole

For Companies With at Least 1,000 Information Managers

$3 millionamount of money
wasted digging through or
recreating information

$15 millionamount of potential revenue opportunities missed

Source: International Data Corp.

Tech Guide: Business Intelligence

Acorn System
Houston, Texas
713-963-9000
www.acornsys.com

ALG Software
Atlanta, Ga.
888-374-4321
www.algsoftware.com

Appfluent Technology
Arlington, Va.
703-284-0800
www.appfluent.com

Brio
Santa Clara, Calif.
800-879-2746
www.brio.com

Bristol Technology
Danbury, Conn.
203-798-1007
www.bristol.com

Castek
Toronto, Ontario
416-777-2550
www.castek.com

Centive
Bedford, Mass.
781-778-8000
www.centive.com

CNR
Reno, Nev.
775-851-2829
www.cnrsearch.com

Corporate Systems
Amarillo, Texas
800-927-3343
www.csedge.com

Digital Sandbox Inc.
Reston, Va.
703-390-9770
www.dsbox.com

Guidewire Software
San Mateo, Calif.
650-357-9101
www.guidewire.com

The Haley Enterprise
Sewickley, Pa.
412-741-6420
www.haley.com

HCL Technologies of America
Schaumburg, Ill.
847-303-7200
www.hcltech.com

Infoglide
Austin, Texas
512-532-3500
www.infoglide.com

Information Builders
New York, N.Y.
212-736-4433
www.informationbuilders.com

Millbrook, Inc.
Bethlehem, Pa.
610-867-7400
www.millbrookinc.com

NCR/Teradata
Dayton, Ohio
937-445-5000
www.teradata.com

PeopleSoft
Pleasanton, Calif.
925-225-3000
www.peoplesoft.com

Pinpoint Solutions
Livingston, N.J.
973-716-0723
www.pinpnt.com

SAP
Newtown Square, Pa.
610-661-1000
www.sap.com

SAS Institute, Inc.
Cary, N.C.
919-677-8000
www.sas.com

Service Integrity
Newton, Mass.
617-965-0281
www.serviceintegrity.com

Skywire Software
Frisco, Texas
972-377-1110
www.skywiresoftware.com

Spotfire
Somerville, Mass.
617-702-1600
www.spotfire.com

Thazar
Overland Park, Kans.
913-327-7881
www.thazar.com

Universal Conversion Technologies
Addison, Texas
214-348-2000
www.uctcorp.com

Valen Technologies
Denver, Colo.
720-570-3333
www.valentech.com

Visibillity, Inc.
Chicago, Ill.
888-484-7424
www.visibillity.com