Assurance for the Insurers

It’s an uphill climb to achieve better profit margins in insurance. But industry-specific solutions from SAS can help level the slope.

In trying times, common sense says two things to executives: increase revenues and reduce costs. It’s easy to say, but executing this simple idea can prove much more difficult, especially in a sector like insurance, where the events of Sept. 11, 2001, and an economic recession have brought the healthy profits of the 1990s crashing down into the depths of financial hardship.

Insurance companies were hit harder than most by those events; the tragedy of Sept. 11 alone cost the industry more than $50 billion. And while terrorist attacks and economic instability may seem like old news to some, when these factors are combined with accounting irregularities, fraud and corporate bankruptcies, the result is a dramatically destabilized insurance sector. Shriveling investment portfolios, rising claims costs and increased government scrutiny and regulation have all increased the pressure on insurance executives.

New legislation to counter the concerns of security, privacy and the threat of such white-collar crimes as money laundering, as well as rising costs of claims fraud, have demanded greater emphasis on regulatory compliance and risk management. Certain risks such as operational risks, previously thought to be insignificant, are increasingly on the top of many executives’ minds as they devote more and more time to addressing these issues.

However, declining investment gains, increasing risk exposure and regulatory compliance are not the only issues that are keeping insurers awake at night. Customers’ needs are changing and they are becoming more and more demanding. A plethora of choices has made switching providers really easy and insurers are struggling to retain their existing customers.

Vagaries of capital markets have forced decision makers to take a good look at their strategies for improving profit margins. They are fast realizing that organic growth is essential for success and that they must have an effective customer-focused strategy in place. But the concept of customer centricity does not simply mean that more money must be spent on marketing campaigns to acquire customers. Rather, the key to profitability lies in spending intelligently and making the best possible use of available resources.

A foundation of data
By its very nature, the insurance industry generates revenue through careful, calculated assessments of risk. One central concept of calculating risk exposure is that all customers are not alike. They exhibit different behaviors and attitudes, and they should be treated accordingly. For example, a customer with a history of automobile accidents might have to pay a higher rate for auto insurance than a customer with a clean record; a prospective customer with an exceptionally high propensity to claim might not be offered a policy at all.

Customer differentiation that helps maximize the revenue from customers while minimizing the costs to serve them is particularly valuable for insurance companies. However, it is not so easy to implement such a strategy. Companies need workable, effective solutions that enable them to take intelligent actions quickly in response to rapidly changing economic conditions.

Unfortunately, few insurance companies have been able to access and analyze their data effectively enough to be successful. Many organizations have invested in operational systems and infrastructure to capture and store huge volumes of data – data about customer behavior, demographics, campaign results, even claims history. Since this data is often scattered throughout the enterprise, between geographies and lines of business, it is extremely difficult for companies to bring it all together and analyze it effectively to gain a more comprehensive customer view.

A prebuilt structure
SAS offers a number of insurance-specific solutions, the SAS Insurance Intelligence Solutions, that use a common data environment to gather and analyze an organization’s data, no matter where it resides, to help executives drive increased profits through reduced costs and increased revenues. Built on decades of experience in the insurance industry, SAS Insurance Intelligence Solutions combine in-depth analytics and award-winning data management capabilities to help insurers improve customer relationships, enhance marketing efforts and manage risk. With SAS, companies can access silos of data and link the disconnected operations that plague them. They can understand the risk and profitability potential of their customers and use that information to run targeted marketing campaigns, rate policies and improve the overall quality of their business. SAS solutions help insurers understand the product affinities and the cross-sell/up-sell potential of their customers so that they can offer the right products to the right customers. And, they can do all this while keeping their marketing expenses under control by increasing the effectiveness and efficiency of their marketing campaigns. As a result, these organizations can optimize their marketing dollars, improve risk-reward profile and maximize profitability.

The SAS solutions also allow executives to develop and communicate a strategic vision to the entire work force, measure performance consistently across the organization based on industry-specific key performance metrics, drill down to root causes of any deviations and empower individuals to take preemptive action. Because these solutions are fully integrated, decision makers throughout the enterprise can have full confidence in the reliability and consistency of the information they receive. This, in turn, makes it easier to establish top-down objectives across the enterprise, align processes and resources around common goals, and monitor progress. Armed with SAS solutions, insurers can align their business strategies with overall corporate strategy, boost profitability and manage risk better.

Rapid return on investment
Because SAS Insurance Intelligence Solutions were specifically designed to address the business challenges unique to the insurance industry, there is no need to spend a large amount of time and resources adapting them to fit a particular environment. And since these solutions share a common foundation and can be deployed in a modular fashion, insurers can achieve quick results for a specific business problem and build on that foundation over time.