This document discusses four worst practices that property and casualty insurers should avoid when leveraging business intelligence during core systems changes:
1. Fearfully focusing only on the "go live" date of the new system instead of keeping the long term business goals in mind.
2. Starting off with massive gaps in business intelligence and analytics capabilities after the transition instead of focusing on flexible self-service analytics.
3. Prioritizing only operational objectives instead of seeing it as a opportunity to transform how data drives business decisions and performance.
4. Lacking an integrated vision for how the new data capabilities can create competitive advantages through improved decision making, rather than letting IT lead without business input.
The
1. A White Paper
Four Worst Practices for Leveraging P&C
Information When Core Systems Change
How Insurers Can Avoid Risk and Drive Profitable Growth
Through Better Business Intelligence
WebFOCUS iWay Software Omni
2. 1 Introduction
2 Worst Practice #1: Fearfully Focus on “Go Live”
2 What to Do: Keep Your Eye on the Prize
3 Worst Practice #2: Starting Off With Massive Gaps in BI and Analytics
4 What to Do: Focus on Flexible, Business-Ready Self-Service
5 Worst Practice #3: Operational Objectives Instead of Transformational Opportunity
6 What to Do: Prioritize Analytics as Much as Operations
7 Worst Practice #4: No Integrated Vision for Turning Data Into New Business Advantage
8 What to Do: Start a Conversation to Change the Channel
9 Conclusion: Empowering Your Business With Information to Compete and Succeed
9 Prebuilt P&C BI and Data Application
10 Flexible Platform to Adjust to Fit Tomorrow’s Needs
10 P&C Process for Developing Business Vision to Use Information to Compete
Table of Contents
3. Information Builders1
Introduction
First, the good news: Leaders at property and casualty (P&C) insurers recognize that aging systems
put their companies at risk, and have invested heavily in core system upgrades and replacements.
These big bets by P&C executives promise agile capabilities to support new products, meet
customer expectations, and improve operations.
The bad news is that analytics and business intelligence (BI) are getting lost in the transition.
Often, neither IT nor business leaders even understand what they’re losing as core systems
change. Business decisions and performance will degrade as a result.
A core system upgrade offers a unique opportunity to assess how overall business performance
can be dramatically improved by combining BI and new core functionality. Embracing this BI
opportunity with a collaborative approach benefits both the business (enhanced decision-
making) and IT (streamlined data/reporting). Unfortunately, many P&C companies simply want to
plug BI gaps that emerge during the core system upgrade, without considering the bigger-picture
implications.
We’ve identified four worst practices that should be avoided during core system upgrades.
This white paper looks at these common pitfalls and provides recommendations on how to
avoid them.
This paper is the result of intensive paid research with 103 business executives and CIOs from
specific P&C companies between $300M and $3B NWP actively looking for new strategies in
how they turn data into a new business advantage. The specific topic of leveraging P&C business
information when core systems change was one of the recurring themes needing senior
leadership attention.
4. 4 Worst Practices for Leveraging P&C Information2
A core system upgrade is all consuming, and typically stresses both business and IT leaders in
multiple ways:
■■ Executives who have survived previous upgrades but fear the ghosts of failures past – delays,
piecemeal execution, rising costs, change-management issues. They are keenly aware of the
impact on their careers if disaster strikes again
■■ Executives who haven’t lived through a core upgrade (at some companies, P&C systems are 20
or even 30 years old) and are justifiably concerned about the unknown road ahead
■■ Executives who must integrate multiple core systems acquired through mergers, but are left
wondering if these systems will really serve a newly unified business
■■ CIOs and senior IT leaders understand that upgrades are risky efforts, but fear any add-ons (e.g.,
BI) without proven, cost-effective approaches
In each case, executives worry about the core upgrade – the challenges, costs, time, and IT
resources on the line. Little consideration is given to the impact on BI. Frequently, system
integrators (SI) are added into the program, escalating the stakes and narrowing the focus to
hitting the go-live date – at the expense of focusing on running a profitable business after
day one.
What to Do: Keep Your Eye on the Prize
The concerns are justified: Core upgrades are complex and difficult. However, executives need
to achieve the benefits that stakeholders expect from such a major undertaking, or stakeholders
won’t think it was worth the trouble.
These are transformational projects that should improve profitability, help innovate new products,
improve agent-to-customer service, and empower the business with new insights. This won’t
happen in P&C without using the upgraded systems to capture new data, link it to data from
outside the insurer, and upgrade the insights obtained from them. As you lead your company to
the go-live date, having this vision in front of business and IT leaders will help everyone drive to
the right results, and not just place a check mark on a calendar.
Worst Practice #1: Fearfully Focus on “Go Live”
Executives worry about the core upgrade – the challenges,
costs, time, and IT resources. Little consideration is given to
the impact on BI.
5. Information Builders3
For most insurers, a new core system highlights that the existing reporting was closely tied into
the legacy core system. From there, many P&C companies try to start small with a post-upgrade BI
build-out, hoping to limit their investment and distractions.
It always sounds reasonable to both business and IT leaders when proposed: Actuaries and other
leaders believe they’ll eventually get the same BI they’ve always relied upon – maybe more –
though only the most critical metrics will be there at go-live. CIOs feel that they can incrementally
assign IT staff time. These plans always project a gradual BI build-out with a modest burden on
costs, time, and IT. Alas, that’s never the case. Gradual often turns into never-ending, and neither
business nor IT executives are pleased with the results.
The problem is knowledge. Executives in a P&C company simply can’t know all of the ways
people use BI to run the business. Existing reports and data typically culminate in an Excel-based
navigation layer of sprawling complexity throughout the insurer that has evolved over decades, at
great expense and with limited accessibility.
For example, we helped one $300-million P&C insurer recover from a custom build-out. The
company found 1.5 million internal spreadsheets before it finally stopped counting. Most
executives have little insight into these legacy processes, and are often aware of only a few
tools or uses specific to their own needs. That’s why slow and gradual BI build-outs throw huge
numbers of businesspeople into the dark for months or years following the core systems upgrade.
Business leaders are not the only ones who end up surprised by the depth and breadth of BI reporting
requirements as a core upgrade unfolds (see Fig. 1). IT executives find themselves operating in the dark as
well – until it’s too late. As soon as the custom build-out begins, all the scattered pieces of the BI puzzle
begin to come to light – while delays, costs, and frustration levels begin to rise.
Fig. 1. Bringing BI to P&C insurers
Worst Practice #2: Starting Off With Massive Gaps in BI and Analytics
Policy
Claims
Billing
Legacy
Claims
Data
Warehouse
Others
Actuaries
Claims
Finance
Executives
Underwriters
VM Reports
Query
Reports
Reports
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Reports
Reports
Reports
Reports
Info
Center
SQL
Extracts
Query/400
Homegrown Report
Prop.
Custom
IQ
MD
PM
ComDB ECF-R
Shadow
ARD
• Policy
• Claims
• Policy Summary
• Claims Summary
• Payments (TBD)
• Billing/Payroll (TBD)
• Payments
Details
• Predictive
Modeling
DW
• Payments
Details
• Policy
• Claims
• Payments
• Other
• ACE
• HR
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• Claims
• Expanded
Claims Details
Misc DBMS
Source Layer Data Access Layer Business User Manipulation Layer
L L L
Access
Excel
Excel
Excel
Excel
Excel
Access
Access
Access
Access
Fig. 1. Bringing BI
to P&C insurers is
often an exercise
in chaos.
6. 4 Worst Practices for Leveraging P&C Information4
Another problem with a custom build-out is linking legacy BI data with the new core system.
The old data is often closely tied to the old core system, including old naming conventions and
processing quirks.
Often, the new data warehouse is just an operational copy of the old core system data, providing
minimal value in leveraging the 300 percent more data fields in a typical new core system. Even
worse, plans to build a new data warehouse typically only look upstream, leaving the business to
rebuild an ancient downstream reporting system.
Worst of all, P&C companies frequently limit BI scope for go-live to simple operational reporting
of counts and amounts, hoping to rely on the new core system’s reporting and/or squeeze the
new data into old downstream processes. Neither approach works well, leaving executives to sift
through core-system operational data for everyday BI requirements and forcing them to make
critical decisions based on limited information or gut instinct alone. This scenario is devastating
to morale, just at the moment when an insurer needs creativity and insights – and is light years
removed from the promises of the original transformation vision.
What to Do: Focus on Flexible, Business-Ready Self-Service
You can’t duplicate your existing BI structures on the day your upgrade goes live. Moreover, even
if you could, you wouldn’t be transforming the business – the reason you’re upgrading in the
first place.
Instead, concentrate on business-ready data and BI. Business-ready, self-service BI empowers
business leaders to answer their own questions, and compresses thousands of operational reports
into a few dozen powerful BI apps that accelerate learning. Behind these apps, you can deliver
business-ready data – current and historical – from detail to summary. This is all harder than it
looks; consider adopting pre-built P&C informational solutions.
Remember, too, that BI needs evolve. Provide rapid ways to deliver new reports, dashboards,
analytics, and data.
Concentrate on business-ready, self-service BI that empowers
business leaders to answer their own questions.
7. Information Builders5
Most insurers fail to leverage their core system upgrades in transforming BI into a competitive
weapon – and miss a once-in-a-generation opportunity to reinvent their businesses. A core
upgrade isn’t just about capturing more data; it’s about using information to drive improved risk
management/pricing and customer/agent intimacy.
The insurance industry is unique within financial services in that operational efficiencies have
limited impact on profitability. To boost an insurer’s bottom line, executives must instead focus on
leveraging a core system as a transformation to improve loss ratios.
Improved intelligence and data-driven analytics positively impacts decisions throughout the
enterprise, which provides a direct path to improve loss ratio:
■■ Marketing – Identify customers most likely to acquire and retain products where the insurer has
the best loss ratios
■■ Distribution – Ramp up profitable growth by enabling brokers and sales with self-service
capabilities to see relationships between current behaviors, suggested actions, and expected
loss ratio implications
■■ Pricing – Leverage analytics for granular pricing, optimizing the business impact by collectively
accounting for ultimate losses, lifetime value, and retention
■■ Underwriting – Provide clear risk-level visibility regarding historical and expected loss ratios
and retention, which drives profitable growth, accelerates confidence via automated decision-
making, and reduces both loss and expense ratios concurrently
P&C companies must also leverage data across multiple functions. For example, it’s not unusual for
a senior vice president (SVP) of claims to sponsor a new claims system. Operationally, that makes
sense. However, a transformational opportunity arises only if claims information is linked to policy
information, providing business-ready information that enables actuaries, underwriters, and execs
to improve overall profitability; manage risk; and set accurate, competitive pricing.
Yet we rarely see claims transformation projects with clear documentation for business-value
exploitation of new loss information across the entire company, and fewer still have underwriting
or actuarial requirements for data to be collected before the claims system is chosen. Why? Our
daily (operational) reality is based on the silos, so it is not surprising that the custom rebuild of BI
usually keeps silos intact, blocking an enterprise view.
Worst Practice #3: Operational Objectives Instead of
Transformational Opportunity
Transformational opportunities arise when claims information
is linked to policy, providing company-wide visibility to manage
profitability, risk, and performance.
8. 4 Worst Practices for Leveraging P&C Information6
What to Do: Prioritize Analytics as Much as Operations
All these data-driven improvements dramatically impact profitability. A study produced by A.M.
Best and McKinsey & Co. found that the key differences in profitability among the top quintile
of P&C insurers were caused principally by their underwriting results (see Fig. 2), with a wider
distribution of ROI than seen in other financial services.1
Core system impacts on expense ratio
account for little of this variation. By contrast, the study singled out IT as a strategic imperative due
to the disruptive nature of analytics on P&C insurer’s profit.
Fig.2. P&C return on equity.
This means that if you provide the ability to improve your loss ratio, you will drive profitability.
Moreover, in terms of company valuations, this same research shows insurers must be profitable
before they grow. Therefore, focusing solely on operational efficiency is a risky strategy, and you
should consider leveraging data, analytics, and BI effectively to enhance business understanding,
decision-making, and profitability.
Top quintile 20.8%
13.1%
9.3%
2.1%
Bottom quintile
2nd quintile
3rd quintile
4th quintile
-4.5%
1
“Journey III: The Next Frontier in Property and Casualty Insurance,” McKinsey and Co., January 2011.
9. Information Builders7
Core system changes typically absorb most IT resources (planning, selection, integration), which
puts IT departments front and center in the planning. IT justifiably has a strong voice in selecting
the reporting and data movement tools, and the in-build efforts that follow.
It’s no wonder, then, that business leaders often allow IT to take a leadership role not only on
core upgrades but also on resulting BI build-outs. Unfortunately, this often leads to missed
opportunities – or worse.
A business-focused strategy to leverage data is easy to theorize about, but difficult to execute for
several reasons.
First, many leaders believe that BI is about technology – forgetting that there’s a reason it’s called
business intelligence. Too many companies run BI like an inexperienced orchestra, where players
concentrate only on their own noisy instruments and scales, completely ignoring how their efforts
contribute (or, more commonly, don’t) to creating beautiful music.
Second, while many PC insurers in different lines may implement similar core systems, how they
use information from those systems will be very different. This means that developing a business
strategy for information requires deep knowledge of both the business model and PC analytics.
Unfortunately, business leaders rarely have a complete BI vision; they’re typically unaware of what’s
possible with state-of-the-art PC business analytics, and haven’t yet prioritized their BI needs
(risk management, pricing, customer intimacy, channel alignment, claim leakage). Most damaging,
however, is that they lack an integrated business vision for the company’s BI.
Worst Practice #4: No Integrated Vision for Turning Data Into
New Business Advantage
Arising out of our research with 103 PC business leaders, here are some examples of
what is top of mind for PC CEOs:
“Our reporting gets a ‘B’ for what I need today. It gets an ‘F’ for what we need tomorrow.”
“We have a lot of data. We’ve been doing this for a long time. We can approach the
market the same way, or [figure out] the next leap we need to make. I believe it has to
do with increased use of data and information to enhance our decision-making.”
“We have five strategic initiatives, and four are clear. But what is our business initiative
for monetizing data?”
10. 4 Worst Practices for Leveraging PC Information8
Finally, developing an innovative BI plan usually takes several months, which means business
executives often disengage from the process. To make the most of a business leader’s energies,
keep the pace short, creative, and focused on the business drivers.
What to Do: Start a Conversation to Change the Channel
First, recognize the issue. You’ll know you’re missing opportunities if data/BI investments are
frequently de-scoped, take too long, or lack business executive sponsorship. These challenges
vanish when the business is clear about how it will turn data into a new completitive advantage.
Second, designate a new BI team (of internal executives and external partners) that will frame the
BI discussion in new ways. Relying on the same people who’ve had the same BI conversations
for years is a slow path to nowhere. This is a delicate conversation for many CIOs; they know how
dramatically new BI can impact the business, but feel obligated to support existing plans.
The good news is that when CIOs do initiate BI change, they can ensure consonance between
business leaders’ emerging BI vision and in-process IT plans for data/BI. By bringing the
discussion to light, CIOs and other leaders can make sure that BI efforts are appropriately
sponsored and funded.
11. Information Builders9
PC insurers already have well-defined processes to make promises (policy systems), deliver on
promises (claims systems), and keep regulators satisfied (general ledger systems). What’s missing
are a vision and system that support data-driven decision-making for profitable growth.
It’s imperative that business executives and IT leadership jointly identify new ways that BI will
improve competitive advantage – and develop a compelling, collaborative vision for the entire
organization.
We recognize core systems projects tend to be all consuming. And on the informational front they
often add work by breaking the legacy reporting environment, and introducing new reporting
that is typically modest in scope and operational in nature. This requires insurers to invest heavily
to rebuild. So the opportunity is very great and the time very short, with both magnified because
of the core system upgrade.
We’ve worked with more than a hundred PC insurers over a four-decade span. We offer broad
and unique capabilities that empower your PC business to compete:
Pre-built PC BI and Data Application
A pre-built PC solution – one that delivers state-of-the-art dashboards, reports, and analytics
– will accelerate your BI journey. It’s a rapid, automated path toward leveraging old and new
data, because the system captures both. Best of all, instead of painfully rebuilding old reports
or clumsily constructing new ones, a pre-built PC BI solution is business-ready with granular
self-service content that offers business empowerment and flexibility – what you need, when you
need it – for years to come.
Conclusion: Empowering Your Business With Information to
Compete and Succeed
Policy
Cleansing
One Confident View of Insurer
Detail
Sources
Data
Management
Business Ready
PC Informatiom
Performance
Reporting
Informed
Audience
Dynamic Loss
Development
Claims
Stratification
Company Wide
Dashboards
Harmonizing
Summarizing
Claims
Billing
GL
Other
Pre-built Insurance
Performance Foundation Actuaries
Claims
Finance
Executives
Pre-built Insurance Performance Foundation for High ROI
LLL
LLLL
L L L L L
BIandAnalytics
KPI
Highly Summarized
Lightly Summarized
Policy and Claims Details
Enterprise Customized Extensions
12. 4 Worst Practices for Leveraging PC Information10
For one customer the business impact of this application was a 2.5 percent combined ratio worth
$12 million – which was larger than their Guidewire claims system business case. We like to think of
our approach as doubling the value of core systems, while spending less money than the custom-
rebuild efforts underway.
Before approving a custom build-out, consider an alternative. Embedding new BI processes within
a PC insurer is an opportunity to positively impact corporate culture, reduce loss ratios, make
better pricing decisions, drive aligned channels, and execute strategy. This improves collaboration
between business and IT functions, freeing IT resources to focus on new value-add opportunities.
It’s a win-win for business and IT leaders, provided it’s done correctly – and with the right partner
at your side.
Flexible Platform to Adjust to Fit Tomorrow’s Needs
Both the PC BI application and its platform are designed for flexibility with externalized
hierarchies to fit your insurer and open database for use with any existing tools. This includes pre-
built integration capabilities for rapid on-boarding of internal and third-party data. For tomorrow’s
requirements, robust tool suites allow analysts, knowledge workers, power users, and IT to
perform any type of analysis, build content, share insights, and create meaningful self-service
apps for all users. All of this is accomplished in one environment to accelerate your journey.
PC Process for Developing Business Vision to Use Information to
Compete
As with any journey, visualizing where you want to end up is crucial. Information Builders has
designed business-focused strategies within a few days for all manner of PC businesses to
competitively leverage their information – commercial, personal, reinsurance, specialty, excess and
surplus, and for insurers of all sizes and all channel strategies.
We have found within every PC leadership team that there is a holistic business vision waiting
to emerge. An example is the vision Travelers Canada and Information Builders presented at IASA,
targeting a 5 percent combined ratio improvement from business analytics.
There are a few organizations that have pre-built insurer-wide BI content, others that have tool
suites, and still others that can provide PC business analytic guidance. Our ability to do all three
offers a unique value proposition – one desperately needed to provide quick value while reducing
risk during a PC core transformation.
13. Information Builders11
Instead of pointing fingers and placing blame as BI needs go unmet, imagine a solution that
makes everyone happy. This solution is not merely a tool, but pre-built content that rapidly
delivers business-ready information. We can show you what this new approach is doing for your
competition – and what it can do for your company.
Are you ready to jump-start your PC business’s journey to fully use information competitively?
Are you ready for a BI approach – processes, resources, and an engagement model – that allows
business and IT to deliver so much more for so much less?
Let’s set aside an hour for the head of our Insurance Practice to review the research on PC
insurers succeeding here, and explore the business upside for your transformation.
Call us at (800) 969-INFO or visit our Insurance Solutions center at
informationbuilders.com/insurance.
