Insurers Seek Competitive Edge Through Underwriting Analytics
In 2002 CNA delivered the first iteration of its enterprisewide business intelligence initiative, known as Merlin. The purpose of Merlin, which CNA CEO Steve Lilienthal describes as "turning on the runway lights" via an executive dashboard, was to unite critical business information scattered among the Chicago-based commercial lines P&C carrier's nearly 20 business unit technology silos into a single data warehouse.
CNA ($10 billion in 2006 revenue) currently is expanding Merlin from being a source purely of financial information to one that includes underwriting information. In November 2007, the carrier completed the first phase of a data mart for its property book of business, the sixth book it has tackled so far for the underwriting initiative, according to Nate Root, SVP of shared services, CNA.
For each book of business, according to Root, "We go through a two-step process to expose data so that people who have the right expertise -- whether underwriting, actuarial or finance -- can actually see the data and experiment with which metrics make the most sense," he says. "We then standardize those metrics and institutionalize them."
About 10 months ago, using the Business Objects (San Jose, Calif.) XI solution, "We drew the data from the underwriting systems, configured it, cleaned it up and made it available to users," Root relates. "In phase two we'll spend probably another eight months, so by August we'll have the analytics that we want to standardize."
Once the metrics have been standardized, CNA will use a combination of Business Objects and custom proprietary applications to make them available to users on an ongoing basis, according to Root. "We will have a set of standardized reports and analytics on our property book of business from an underwriting perspective," he says. Going forward, "We won't have to figure out those metrics -- we'll already have them and be able to monitor them and build strategies with them as opposed to having to have a strategy to build the reports."
Conceding that the larger benefit of the property data mart is hard to quantify, Root points out, however, that the benefits are not immeasurable. "We now have the ability to build strategies and monitor the way we're underwriting that we did not have before," he says. "If you can figure out, say, three risks that you should not have written and in fact do not write them, that could have a very significant monetary benefit."
The ROI picture is blurred further by the fact that much that has been learned and built in the underwriting initiative, and in the Merlin project overall, has been leveraged for the property data mart. And just as the costs of the property data mart are tied up in the overall Merlin initiative, the data mart's value -- along with the other components of the underwriting effort -- blends with the overall value of Merlin.
"Overall, Merlin is about taking the information that we have, standardizing it so that we can speak one version of the truth, and then executing on it," Root says. "Having all the data integrated increases quality, accuracy and confidence, and it also makes the data easier to work with. We are simultaneously getting better information, and it costs us less time to access it."
Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio