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Hurricanes – Quick Response Required

An insurance response doesn't require a disaster

This article originally appeared on the BeyeNETWORK.

Another hurricane season is upon us and once again, insurance professionals are rapidly working to be prepared for the worst. They have people working around the clock to ensure that they understand the magnitude of the loss that might be experienced depending upon where these hurricanes make landfall. With property loss estimates of between 3 to 6 billion dollars for Frances, and 6 to 8 billion dollars for Charley, it has already been an expensive season and it’s still not over.  

For the insurance industry, catastrophes are the “nature of the beast”.  They are best handled by quick response teams and a few information and actuarial experts.  These focused groups are supplied with the information they need to do their jobs in near real-time as resources allow. Complex information integration tasks have been previously built and sophisticated models have been created that can be constantly updated with the latest available data. The quick response teams (commonly called CAT Teams) in the field have been equipped with the necessary communication, collaboration and detailed information required for quick action and decisions. With the amount of money that is at risk, it is easy to understand why insurance companies want these people to be well-equipped. However, it is interesting that insurance companies are able to respond to media and key insurance professionals during a crisis, yet during “normal” business times, they take days and even weeks to get back to a customer on simple requests for information. 

Traditionally, insurance information has been collected for the purpose of either producing an insurance policy and the associated bill or for gaining additional information on potential exposures.  The process of collecting this information has been structured for the efficiency of the operation versus the responsiveness of the insurance professional. Information that is collected tends to focus on physical location, potential risk and experience factors, billing and payment history and basic distribution information to pay commissions.  Storing, retrieving or even providing a partial look at customer information is usually a summary look at claims experience or billing history, with limited “drill-thru” capability. 

The insurance industry has historically been a laggard in collecting, analyzing and distributing information about products that are sold, the channels that are served and the profitability of a customer.  Much of the analysis within an insurance organization was, and is, targeted on internal operations and performance.  The latest trend information from Gartner shows that insurance organizations have increased their focus on creating information initiatives focused on customer and vendor management. The early results have shown improved profitability and reduced operational costs of a business. 

With the speed and effectiveness demonstrated during times of a catastrophe, understanding and responding to the changing customers’ needs, preferences and desires in a real-time fashion still remains a fairly new concept for most insurance companies.  However the current information processes have been designed to collect information based on historic clerical methods, to define products, assess risk and limit exposures.  While responding to the mundane customer issue does not carry the weight of massive and quick losses, meeting the expectations of the customer is more important to the long-term success of an insurance company.  

Early stages of technology-driven advancement in insurance have been in ERP (Enterprise Resource Planning), SCM (Supply Chain Management (a.k.a. Agency Management) and lately in the CRM (Customer Relationship Management) systems. These three major systems have not completely lived up to their promise, because insurance systems are designed to collect immense amounts of data and are built to efficiently administer changes in transactions. They do not create valuable information and insight. Layering new “enterprise” systems upon these old legacy systems is a recipe for failure. 

Complex information is required to successfully market and price products and services targeted at high-value customers.  Specific customer profiles and behavior attributes must be tracked.  This information is required both on an individual account and aggregated level. Retaining customers in this highly competitive price-sensitive marketplace requires real-time services which still meet the regulated requirements set forth by the state insurance commissioners. Layering new applications (ERP, SCM and CRM) onto the legacy customer information systems won’t even meet this challenge.  

For instance, most insurance companies segment customers into three primary categories. Large account (typically multi-location, significant exposures, thousands of people), medium accounts (single to a few locations involving some unique exposures, hundreds of people) and individual accounts (typically an individual family with single location and small or limited exposures).  The information needs of these various groups are significantly different.  

Industrial and large commercial market customers are demanding “real-time” services levels from their agents, brokers and insurance companies. These customers are demanding real-time risk data and impact analysis, similar to the catastrophe capabilities used during the hurricanes today. These customers must also have the detail behind the summary information to allow them to proactively manage the risks within their business.   

Medium or mid-market customers comprise an important segment of the insurance customer base and have significantly different needs than the large complex customers.  However, insurance companies have long viewed this group at the “program”, class or aggregate level, not as individual accounts.  Being able to meet the individual needs of the mid-market insured and deal with their issues using real-time information would greatly aid an agent or customer representative and thereby enhance the value.   

Individual customers represent a category that typically receives an inordinate amount of attention for the amount of revenue generated.   Regulatory intervention can be credited for a great deal of this expenditure.  The trend by insurance companies is for this group of customers to receive far less face-to-face attention, expand cross-selling of financial and risk projects and to emphasize a greater self-service capability. The approach includes the agent in the utilization of Web applications to access information.  Most of today’s web-based information offerings are for policy submission with some companies now starting to provide “real-time” underwriting. In addition, insurance carriers are in the process of making claims and billing information available online. Initially, this starts to provide a small level of service capability. However, over the long run, insurance carriers and agents/brokers are going to need to learn what it takes to effectively service these customers utilizing the internet and real-time information.  

As the current hurricane season is showing us, just having information available is not enough. Making sure you are gathering the correct information (customer, business, and environment) is the first hurdle.  Making sure the right people see the right information at theright time in order to make the right business decisions is the next hurdle.  If the reporting functionality of the information systems does not deliver the information necessary to make sound business decisions in an easy and timely manner, then the rest really doesn’t matter.  Business intelligence is about the business, not just about the technology.  Technology must enable the business to deliver more effectively and efficiently the information that the business needs to make sound judgments regarding services to customers and stakeholders.  

Every insurance company must have a well-documented strategy that DIRECTLY aligns the business goals and objectives to their information initiatives. This strategy should clearly address and include business and technology principles. It should also include information needs and wants, alignment of the information supply chains to the business actions with an integrated plan to rapidly delivery these capabilities to the organization. Insurance organizations must use this holistic and strategic view of information if they really want to provide the level of service that customers expect.  Otherwise, proceeding as if customer expectations have not changed could be the biggest catastrophe of all.

  • Donn VucovichDonn Vucovich 

    Donn is Co-Founder and CEO of Knowledge and Information Solutions, a management consulting firm specializing in knowledge and information asset management and strategic business intelligence planning and delivery. As a senior technology and financial executive within fortune 50 insurance and consulting organizations, he has been instrumental in developing and delivering practical business and technical strategies within the insurance industry. Donn can be reached


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