The latest technology advancements for insurers are regularly mentioned in this blog and on other industry sites, but what we fail to recognize is the benefit these technological solutions can offer to a business. Technology that can significantly improve business operations is an advantage for decision makers. Being able to establish automated tasks and workflows based on these outcomes is even better. The analysis of data to drive business operations is often referred to as Business Intelligence (BI).
Let’s begin by defining what Business Intelligence (BI) entails. According to Novarica, Business Intelligence (BI) provides historical, current and predictive views of business operations by using data to analyze information, make decisions and manage performance.
One of the foundations of BI is the data which is analyzed. If bad information is analyzed, the information received is likely to be inaccurate or even rendered useless. Good source data coupled with BI allows decision makers to make informed decisions, allowing business strategies to be adjusted to meet changing needs. According to North Dakota’s Insurance Commissioner, Adam Hamm, the volume of data being collected by insurers grew significantly in 2015. The increased mention of big data and analytics over the past eighteen months has spurred businesses into retaining this data.
Although the benefits of using big data are still unclear for some, insurers investing in big data and analytics are seeing benefits; allowing them to model risk and customer behavior more effectively. Whereas the adoption rates for Cloud, Mobile, Analytics and Social Media are north of 30%, the rate of adoption of Big Data is much lower standing at 15%.
BI opens up a number of opportunities to benefit insurers in the following areas:
1. Assigning Claims
Assign particular claims to particular claim adjusters. Analyzing historical data can provide insight into new claims, flagging high-risk claims that may need more attention. Low-risk claims can then be processed by a less experienced adjuster, and high-risk claims can be processed by more experienced adjusters.
2. Personalized Offering
Analyzing claimant data can predict customer behavior, preferences and highlight cross-selling opportunities based on demographics. Effectively using this information in communications can offer the personalization consumers crave in this day and age. Personalization and interactive communications have been proven to grow relationships with customers.
3. Fraud Detection
Analyzing historical claim data can outline red flag indicators for potentially fraudulent claims in the future. New claims can be flagged, indicating that further investigation is required before the claim is processed.
According to a recent Novarica survey, 70% of insurers are planning major enhancements or platform replacements to their BI capabilities this year, suggesting that insurers are beginning to see the benefits of updated technology. Life insurers have been slower to adopt technology than P&C insurers, but they are beginning to implement BI and data warehousing to improve the efficiency of marketing operations and customer retention.