Imagine you’re driving a car without a dashboard. No speedometer to check your speed, no fuel gauge to monitor your gas level, and no GPS to guide you towards your destination. It’s a scary thought, right? You need to find out where you’re going, how fast you’re going, or if you’ll run out of gas before reaching your destination. Running an insurance company without business intelligence (BI) software is the same.
With no data analytics to track customer behavior, no reporting tools to measure financial performance, and no predictive modeling to identify potential risks, it’s a recipe for disaster.
Therefore, having the right technology in place is crucial for success in the insurance sector. Insurance companies need BI software to stay ahead of the curve, make informed decisions, and provide their customers with the best possible service. Let’s dive deeper into why insurance companies must invest in business intelligence software.
Why Do Insurance Companies Need Business Intelligence Software?
Better Decision Making
BI software provides insights that help insurance companies make better decisions. By analyzing large amounts of data from various sources, such as policyholder information, claims data, and financial reports, BI software identifies patterns and trends that can inform decision-making.
For instance, if an insurer wants to launch a new product, BI software can help them identify profitable market segments, determine appropriate pricing, and project future sales.
Cost Savings
BI software helps insurance companies save costs by detecting fraudulent claims, reducing underwriting expenses, and optimizing operational efficiency. According to a study by the Coalition Against Insurance Fraud, fraudulent claims cost insurers tens of billions of dollars annually.
BI software can flag suspicious claims and alert investigators, helping to reduce fraudulent activity. Additionally, BI software can streamline underwriting processes, automating tasks and reducing manual errors, which can lead to significant time and cost savings.
Competitive Advantage
In today’s data-driven world, insurance companies that don’t leverage BI software risk falling behind their competition. With BI software, insurers can analyze industry trends, identify emerging opportunities, and respond quickly to changes in the market.
This ability to adapt gives insurers a competitive edge, enabling them to attract new customers and retain existing ones.
Improved Risk Assessment
One of the most significant benefits of BI in insurance is its ability to improve risk assessment capabilities. By analyzing data from various sources, including policyholder information, claims data, and demographic data, insurers can gain a better understanding of the risks associated with different policies and customer segments.
This information can then be used to refine risk selection, pricing, and underwriting processes, ultimately leading to higher profitability and lower loss ratios.
Enhanced Customer Engagement
BI can also help insurers enhance their customer engagement efforts. By analyzing customer data, insurers can gain valuable insights into policyholder behavior and preferences, which can be used to personalize marketing campaigns, improve customer service, and tailor policy offerings to meet specific needs.
For instance, a life insurer might use BI to segment its customer base based on age, income, and other relevant factors. The insurer can then design targeted marketing campaigns that resonate with each segment, increasing the likelihood of policy purchases and retention.
Streamlined Operations
Another benefit of BI in insurance is its ability to streamline operations. By automating data collection and analysis processes, insurers can reduce manual errors, decrease processing times, and improve overall efficiency. This can lead to significant cost savings and allow insurers to focus resources on more value-added activities, such as product development and customer service.
A health insurer might use BI to automate the claims processing process, reducing the amount of time it takes to review and approve claims. This not only saves time and resources but also reduces frustration for policyholders who are waiting for reimbursement.
Fraud Detection
BI can also help insurers detect and prevent fraudulent claims. By analyzing patterns in claims data, insurers can identify unusual or suspicious activity, such as multiple claims from the same policyholder within a short period or claims that exceed typical limits. This information can be used to trigger further investigation and potentially prevent fraudulent payouts.
A workers’ compensation insurer might use BI to analyze claims data and identify patterns of suspicious activity, such as claims submitted by employees who have recently been terminated or claims that coincide with holidays or weekends.
IFRS 17 – An Application For Insurance Companies
It’s an international financial reporting standard that is developed by PPN Solution aims to replace IFRS 4 for insurance contracts. Some of its key features include:
- Insurance companies can upload actual premiums and expenses in the Board application using smart objects upload and data readers.
- Can define product and cohort assumptions based on maturity and death benefits.
- The allocation matrix can be defined based on cost center, allocation drives, and cohort level.
- Expenses can be tracked by cost center, cohort, and policy ID level.
- Policy premiums can be viewed based on age brackets and frequency payments using different charts.
- Can calculate death benefits based on death percentage, death multiplier, and death compound interest.
- Easy calculations of maturity benefits based on analyzed factors and maturity value at different levels.
- Companies can prepare detailed and summary reports for discounted and risk-adjusted cashflows.
