ANALYTICS & DATA WAREHOUSES -- THE MIND & MUSCLE BEHIND CUSTOMER SERVICE

By Jamie Bisker, TowerGroup

The original concept of a retention program must have come from the same person who coined the phrase, "The customer is always right." The obvious connotation is that even if the customer is wrong, let them have their way for the sake of keeping them as a paying customer. While this is certainly an over-simplification of the entire concept of managing customer relationships, there are important kernels of truth that bear investigation for any carrier interested in improving customer service and, ultimately, customer retention.

The practice of data warehousing is no longer an emerging information technology (IT) construct. Many industries use products from vendors such as NCR Teradata, SAP, SAS, and IBM to collect, consolidate, and store critical business information in a data warehouse for later retrieval and analysis. The road to the current level of success is littered with the standard stories of first adopters, failed projects, and incredible scope creep. However, the reality is that these things work. The insurance industry had its share of less-than-successful forays into using warehouses as data stores for business intelligence projects. Today's implementations are stable and provide the source of data purity that is required for successful analysis.

It is clear that insurance carriers need to become more customer-centric to meet the challenges of the new world of financial services, where traditional lines of distribution are evaporating. Insurers need to take advantage of the deeper knowledge that they collect as a result of normal operations and leverage it for retention and customer service activities. The exercise of collecting, codifying, and transforming data from different operational sources into a data warehouse is often traumatic, but also cleansing at the same time. The effort results in better understanding among operational areas that improve the customer-based view that is becoming essential to the financial services industry.

Data warehouses are sources of information for analysis by business intelligence tools, data mining algorithms, and ad hoc queries. They are not intended to be used in real time for information retrieval by a customer service representative, even when speed is not an issue. The value that the warehouse brings is via the result of analysis done against it. The trends, categorizations, and patterns that can be discovered within a data warehouse will be used to control decisions and make logical assumptions that are critical in customer service events. These results will also be used in marketing campaigns and in the detection of fraud.

An area of increasing interest to insurance companies is real-time access to analysis of a particular customer's worth over time. Concepts such as life-time value, household profitability, and life-cycle event planning can be quantified and periodically refreshed via warehouse algorithms. The results of the calculations are stored for real time access by the decisioning engines that support customer-facing applications.

The key to achieving the higher levels of customer service required in today's marketplace lie within the only natural resource that insurance companies have: their data. The ability to analyze those myriad data points and convert them into actionable information is made possible by data warehousing.

Hear more from TowerGroup analysts about deploying technology to become more customer-centric at the upcoming Executive Leadership Forum: "Customer Service: Profiting From the Relationship," produced by Insurance & Technology, Wednesday, April 2, the Roosevelt Hotel, New York City. For more information and to register, visit https://www.insurancetech.com/events/cslf2.

Jamie Bisker is research director, insurance practice, TowerGroup (Needham, MA). TowerGroup provides a comprehensive range of research and advisory services focused on the financial services industry. Visit TowerGroup online at www.towergroup.com.