The insurance industry has always relied upon actuarial science, a discipline that uses mathematical models and data analytics to predict risks. Actuary science can trace its roots back to the 1600s with the creation of the first life insurance policies and pension funds. To know how much money insurers needed to set aside, they had to have a way to estimate mortality and risk. By the 1700s, property insurance companies also began applying calculations, models, and risk management principals to cover homes and other physical objects.
These early actuaries and risk managers were among the first data scientists. Acceptance of and familiarity with predictive models may account for why the insurance industry can enjoy so many benefits from advanced business intelligence platforms.
9 Benefits of BI for the Insurance Industry
Not only can better ways to work with business intelligence improve predictions for underwriting and risk management, but it can also provide a way to help serve customers, reduce fraud, and make better financial decisions. Take a moment to explore the benefits that business intelligence tools can provide for the insurance industry.
1. Risk Management and Underwriting
Historically, insurance carriers have maintained an excellent reputation for keeping a lot of data about their customers and claims that they can use to support future underwriting and risk management decisions. Even so, today's business intelligence tools can provide insurers with better data visualization and predictive models to improve their accuracy even more. For instance, insurers can use better information and data analytics to set premiums high enough to earn a profit but not so high that they overcharge customers.
Many businesses and even individuals rely upon insurers not just for policies but to help them with risk management. Insurers can also use BI tools to serve customers better. Insurance can pay claims, but it's even more helpful if insurance companies can help clients avoid claims in the first place. In that way, insurance companies should provide leadership when it comes to storing, reporting, and using data.
2. Customer Insights
Understanding the process customers use to make decisions can help insurance companies attract more new customers and keep current ones more loyal. For some examples:
- Business intelligence tools can help extract and interpret data from such rich sources as social media and online shopping portals.
- They also allow decision-makers to see which sales channels perform well and which ones struggle. This action will help determine if different performance stems from advertising, audience targeting, or the product.
- Improved insights also help insurers personalize their products and messages to reach more people with timely, valuable outreach.
3. Distribution and Service
Understanding customers has also prompted carriers to find better ways to open up new distribution channels both for selling policies and serving existing customers. As one example, A.M. Best reported the transformative difference that Direct-to-Customer, or DTC, channels have made within the industry in the past decade or so.
This focus arose from a desire to serve a connected younger generation who often preferred to compare, buy, and obtain service online. In turn, online sales and service portals can integrate information from CRM systems to help carriers and agents gather more data to feed their intelligence systems.
4. Claims Handling
Customers regard claims handling as the most important thing their insurer does. Insurance companies can't drop the ball when it comes to prompt, fair claims handling. At the same time, they need to work as efficiently as possible to process claims quickly and within policy terms.
To do their jobs, adjusters and claims processors need to sort through a lot of information each day. Business intelligence can give these vital insurance professionals the tools they need to make quick, confident, and accurate choices and keep customers satisfied.
5. Fraud Detection
According to reports from the Insurance Information Institute, fraud costs the insurance industry up to 70 billion dollars each year. Naturally, insurers have to build the cost of covering fraud into their premiums. Because of this, fraud also translates into higher costs for American families of up to an average of $700 annually.
By reducing fraud, carriers earn higher profits and may also pass savings to their customers. As one weapon against fraud, business intelligence can help target the sorts of irregular activities that they need to investigate.
6. Reports and Financial Projections
Business intelligence software can gather, analyze, and generate reports upon data in real-time. It can even automate reports and report distribution to ensure a quick and efficient workflow. Coupled with artificial intelligence, these advanced systems can help spot trends and alert decision-makers faster than any human analyst without a business intelligence platform.
In turn, insurers can use the predictive capabilities of BI software to make better decisions about investments, premiums, and other aspects of their business. Meanwhile, users can set data governance rules for reports on BI platforms, so only people with the right credentials can see sensitive, private information.
Along with fraud, cybersecurity threatens both insurance companies and their customers. One study from McAfee reported upon the discovery of hundreds of new threats every minute. While mobile devices and remote connections have helped improve productivity, they have also added another layer of risk, so the number of threats increases daily.
For example, The Insurance Journal reported that the cost of cybercrime to insurance and related financial services has increased by 40 percent in just the last three years. Without smart tools, the threat level would surpass the ability of even the most skilled cybersecurity experts.
According to these security experts, teams can use business intelligence platforms to rapidly uncover weaknesses and expose threats, as much as fraud prevention intelligence can do to detect potential fraud.
8. Future-Proofing Business
Recent events, like the coronavirus outbreak, have underscored the difficulty of future-proofing businesses against potential disruptions. While insurance executives may hope that global pandemics of this scale are once-in-a-lifetime crises, they know that the future will bring its share of natural disasters and economic uncertainty.
Besides, insurers need ways to plan for potential technological revolutions, evolving consumer habits, and regulatory changes. Business intelligence platforms provide insurers with the vital tools to rapidly and decisively collect, store, report upon, and use information.
9. Centralized Data Access
Insurance companies rely upon information that comes from a variety of diverse, disparate sources. Some examples include individual customer information, market demographics, and even environmental data. They also need to keep up with changing regulations and even the actions of their competitors.
Meanwhile, this reliance on various information sources forces some carriers to use such disparate data silos as spreadsheets, CRMs, website analytics, and perhaps even filing cabinets. Often data from multiple sources relate to each other. Still, information scientists without the right tools have to face the time-consuming and error-prone challenge of manually collecting and collating the information they need.
A modern business intelligence system will include features to enable data aggregation and collation from any electronic datasets. Once the analyst points at datasets and defines rules, the system can automatically keep this data updated and current. To make full use of this software, any paper files will need to be scanned and stored inside an information system.
How Wyn Enterprise Serves the Insurance Industry
Insurance companies have an established history of relying on information and analysis to serve both themselves and their customers. As such, they need customers, partners, and investors to see them as leaders in innovation to improve customer satisfaction, efficiency, and of course, their readiness for an uncertain future.
Since insurers collect information from many sources, they need to use a business intelligence platform like Wyn Enterprise because it can gather relevant information in a central repository. Once stored centrally, technical (and non-technical) users can operate one intuitive interface to identify trends. These insights enable decisions to improve sales and customer satisfaction, manage risks, and identify new opportunities.
This analytics, data visualization, and decision-making tool can provide insights to empower marketing, claims processing, underwriting, product development, and other aspects of an insurance business. Wyn Enterprise also allows users to set roles that conform to data governance policies and provide people with various security levels different sets of data. With built-in, end-to-end security, the system will keep valuable data protected and comply with privacy regulations.