By Peggy Bresnick Kendler
Regulatory requirements, competitive pressures and customer service imperatives are driving a growing number of insurers to formalize strategies and technology initiatives to achieve a higher level of business intelligence (BI). But, because of the combination of quantitative and qualitative factors in a BI strategy, tracking and measuring ROI can be a challenge. How can an insurance company determine if it has successfully achieved or obtained business intelligence, and how can it measure ROI/payback on a BI initiative?
According to Jeff Hoffman, vice president, customer and market intelligence, at Chubb Group of Insurance Companies, "Return on investment of Chubb's business intelligence expenditures is measured in relation to the specific business initiative they support. For example, if an initiative's goal is incremental growth of a specific product, BI is seen as required infrastructure to achieve the stated goal. Therefore, if the goal is met or exceeded, BI has been a key success factor and its payback is measured in terms of the overall project's ROI."
At Zurich North America, "Business intelligence is an ongoing process. As the business changes, so must the tools and technologies that capture and provide information," reports Ted Balzano, manager, information and distribution. "You can, however, measure ROI through individual projects. Look to areas where the automation has decreased man-hours preparing data, or measure the success of a new product. You can also measure where improved data quality has led to overall better decision-making, and thus profitability."
Deployment is the "acid test" of any BI initiative, points out Tony Wind, CIO at solutions provider Crystal Decisions. "If the systems are being heavily used, and there is a queue of enhancement requests generated by the user base, and the user base notices and complains of any system downtimes, then that BI system is supplying considerable value to the line of business," says Wind.
"Obviously, there are the hard costs, such as the reduction of manual operating costs (FTEs) to create the information, and costs (FTEs, paper, postage, etc.) to distribute," he continues. "But the real ROI is contained within the newly acquired capabilities (for example, determining which customers are extremely profitable and should get personal attention and service) that the firm has gained and their effect on driving revenue and profitability."
More information about how insurers are gaining competitive advantage with business intelligence will appear in the February 2003 issue of Insurance & Technology, and also will be available at www.insurancetech.com