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The Business Intelligence Secret Sauce - By Janakiraman Jagannathan, MSB Product Manager

By Janakiraman Jagannathan, MSB Product Manager

In today’s business world, Business Intelligence (BI) Technology has created a level playing field, but what truly differentiates industry leaders from ‘me too’ analytic users? The answer is in the secret sauce: truly differentiated data. Today, every P&C carrier is committed to using analytics to make informed decisions throughout their business workflow. The level of business intelligence usage varies from simple reporting on internal operational data to advanced predictive models. BI and analytics solutions are table stakes to compete in today’s market - so what separates industry leaders from everyone else in this space? Carriers who make effective use of truly differentiated external data gain the secret sauce of a new competitive view into their business and an entirely new dimension of business insight to outmaneuver their competitors.

The Typical Business Intelligence Program

Most organizations have invested in people, process and technology to set up their analytics practice. Operational data gets consolidated within an enterprise data warehouse and ongoing initiatives are focused around collecting data available throughout enterprise systems and using it for reporting, analytics and predictive modeling. Much of the effort is focused on improving data quality, although this is just one of the aspects of a successful BI strategy. Another critical factor for carriers to address is their external data evaluation and acquisition strategy. If a carrier is using only its own data for analytics purpose (no matter how large they are), their analytics applications tell only one side of a larger story. Where are the benchmarks from which you validate and interpret your results? It is as if every window in their BI house is a mirror. How does a carrier look outside and gain true perspective into their BI strategy?

The Secret Sauce

Most carriers do not use data beyond what is available in-house or common data sets that are pervasive in the industry such as credit and PPC. The secret sauce that helps carriers create the next generation of business intelligence answers and rating sophistication is the augmentation of internal data with valuable industry benchmarks and external data. External data and industry benchmarks are data that can provide an entirely new dimension of analytic insight into a book of business, which are not an output of operational workflow and are typically obtained from sources outside the carrier’s organization.

For example, a majority of carriers measure their sales channel and agent performance using just two metrics – loss ratio and premium volume. Though your sales channel might be performing well based on these two metrics, it is valuable to know whether you are getting a segment of business that is representative of the geography, how your sales channel compares to the rest of the Industry and, most importantly, what business you are not getting in a particular market.

Industry Benchmarks and External Data

There is only so much that your current data sources can tell you. The best performing carriers know more than their competition and have a strategic focus to utilize external data to fill in blind spots in their operational strategy. With just your internal data from your homeowner’s book, it is difficult to know:

• What percentage of your book has an inverted loan-to-value situation is possibly vacant or is located in distressed neighborhoods? Do policies that exhibit high loss ratios come from this group?
• Whether you are writing different homes in a particular geography than your competition and how this aligns with your underwriting strategy.
• How your sales channel is performing, when compared to the rest of the industry, in the same local market and compared to what housing stock exists in that same market
• Whether you have properties that are coded with lower grade kitchens and baths in neighborhoods that are considered high net worth.
• What is the true CAT exposure on your book without factoring in ZIP and county-level Replacement Cost Industry Benchmark against the modeled PML?
• Whether you are missing key predictors that can provide additional lift to your models – capturing signals that are missed with your current underwriting data.

Qualifying External Data Sources

Getting started or advancing your external data acquisition strategy can be difficult – especially if there is no clear strategic approach defined in your company. While an organization approach is best, many companies can still make progress by taking a project-specific approach as well.

First, identify what type of external data and industry benchmarks are required to accomplish your business goals around premium leakage, loss mitigation, sales channel performance, pricing strategy, new business growth, customer satisfaction and enterprise risk management.

Next, qualify that the industry benchmarks and external data are developed using sound research practices, is a statistically valid representation of country and are refreshed periodically. Ensure you get a good understanding of the science and methodology behind the data source. Very few companies that have the required expertise, research infrastructure and significant market share can deliver a good industry benchmark.

Finally, business leaders should look at ways to leverage external Software as a Service (SaaS) models. This helps alleviate constraints and resource challenges common to today’s typical BI runtime environment. In addition, best-in-class data providers deliver in-depth, co-management support, knowledge transfer and insight into the use of their data applied to your problem at hand. In a world swimming in data, a partner ready to help you skillfully mesh their data with yours is where true business intelligence is created.

Get Started Now

Identify the list of industry benchmarks and external data available. Evaluate and incrementally add these data points to your analytics processes and decision workflow to measure how they perform. Make external data acquisition strategy a critical piece of your enterprise analytics strategy and your pathway will be clear to outmaneuver the competition who still don’t know what they don’t know.

About Marshall & Swift/Boeckh (“MSB”)

Marshall & Swift / Boeckh, is an MDA company and the leading supplier of local building cost information, residential and commercial property valuation technology and services for the property and casualty insurance sector of the United States and Canada. MSB has five offices throughout the U.S. and Canada. www.msbinfo.com