AXA OYAK building an intelligent enterprise in a dynamic market

Tighter government fiscal policies and support from the International Monetary Fund have been leading Turkey's dynamic economy toward healthy and largely steady growth since 2002. Increasing employment and growing wealth among the Turkish population have caused a boom in vehicle purchases, which, in turn, translates into a quickly growing market for auto insurance.

With more and more entrants into the Turkish insurance market, AXA OYAK was formed in February 1999 as a partnership that combined the insurance activities and resources, as well as the interests, of AXA and OYAK in Turkey, under one roof.

Since joining the company in 2002, H. Cemal Ererdi, general manager of AXA OYAK, has sought innovative strategies and technologies to gain market share, improve profitability and, ultimately, satisfy an ever-growing customer base.

Applying SAS solutions for Analytics has been at the core of the strategies in various areas, such as risk management, fraud prevention, corporate performance measurement, supplier relationship management, and both customer and product profitability through differentiated premium rate calculation. While many insurers are making attempts in most of these areas, AXA OYAK has taken a very aggressive approach to building an intelligent enterprise by cultivating each of these projects in such a way as to integrate all the intelligence gained into a single, decisive and coordinated corporate vision.

CRM and SRM, hand in hand
In a free market, winning each new customer can come down to very small price margins between you and your competitor, which is why customer relationship management (CRM) and intelligent price differentiation are so crucial. "Slicing the wedge thinner" requires sophisticated analytics that are decentralized and easy for everyone to use. Therefore, managing customer relationships and supplier relationships in tandem is a very smart way to succeed.

"Using SAS, we are able to offer differentiated pricing for more competitive rates for each customer," states Ererdi. "In the 18 months since implementing SAS to support our strategies, we have increased our market share in different categories. As a result, we've measured a 30 to 35 percent increase in technical profitability on auto insurance accounts."

Because AXA OYAK's strategy for CRM was enterprisewide, it was crucial that the IT department accept and participate in it. "By cleaning up our customer portfolio data, we are able to know our customers better," adds Ender Biyiklioglu, IT manager. "Finding and correcting inconsistencies in this data enables us to recognize two slightly different records as being the same customer. With this cleaner data, we can run more accurate customer analysis and communicate with customers in a more effective way."

In addition to creating better customer intelligence, AXA OYAK has used SAS for supplier relationship management (SRM) to negotiate the lowest prices with the most reliable suppliers to process insurance claims.

To give just one example, accurately predicting the model of car stereo that is most likely to be stolen has enabled AXA OYAK to procure the exact model in larger numbers and at a much lower price per unit. This, in turn, leads to faster claims processing and lower losses each time. Customers may not understand how AXA OYAK's SRM strategy has helped them, but they certainly notice having their stereos replaced quickly and the competitive premium rates that AXA OYAK offers.

Getting more out of its suppliers enables AXA OYAK to offer more to its customers and reinforce profitability from both angles. AXA OYAK's success thus far has given it cause to re-evaluate certain goals and in some cases, raise its targets. Ererdi says, "We used to average 1.1 policies per customer, and we aim to raise that average to 2 policies per customer."

Fraud prevention feeds the bottom line
Every instance of fraud takes a direct and measurable cut from the company's profits. To be effective on a grand scale, predicting and preventing fraud must cost less than the actual losses themselves. Using SAS, AXA OYAK can quickly find the relationships between customer behavior and fraudulent claims, saving staff time, preventing losses and discouraging future abuses of the insurance system.

"With our SAS data warehouse, we are able to segment customer data by having discovered certain relationships between data sets which are red flags for fraud-related losses. AXA OYAK discovered that 5 percent of its claims payouts were fraudulent, and these can now be corrected and prevented in the future," says Ali Erlat, assistant general manager of underwriting and claims. "I can safely say that we have reduced our paid claims by 5 to 7 percent. At the same time, we have increased market share. These are just two direct results from our data mining and analysis process using SAS. In 2003, we were able to offer our customers more competitive rates while paying our shareholders larger dividends."

Performance measurement and management
"When I joined AXA OYAK, I noticed that performance measurement was not a very high priority, and this was something I recognized needed changing," recalls Ererdi. "We chose strategic categories such as products, intermediaries, personnel, third-party and suppliers. Then, we selected specific key performance indicators (KPIs) for each category. We can now measure the portfolio performance of each agency on a daily basis, by volume and by product profitability. Also, by monitoring these KPIs, we have gained better insights on which external organizations we have profitable relationships with and eliminate those who represent a measurable risk. This overall approach has given us a clearer picture of what specifically affects technical profitability."

Measuring these key performance indicators enables AXA OYAK to monitor performance on an organizational level, while providing the flexibility to make certain strategic decisions on a local level. And this has paid off in terms of increasing efficiency, saving money and saving time.

"Timing is very important in our industry. I had given my managers certain performance goals to achieve and, with SAS, they were able to meet them," states Ererdi.

Decentralized analysis and reporting
Like any large company, AXA OYAK had large amounts of data stored in disparate data sources, which were "home-grown" systems. Although these were effective storage systems, getting aggregated reports that were comprehensive and comprehensible was a time-consuming challenge. After building a data warehouse, AXA OYAK found that by decentralizing the analysis and reporting end, it could free up time and resources in the IT department, while putting useful intelligence in the hands of people who needed it most for informed decision making.

"It has changed our business environment," adds Biyiklioglu. "Before SAS, reporting was in the hands of the IT department. Now, certain power users have access and can generate reports whenever they wish. Everybody uses the same system with defined sets of parameters, so we can ensure consistency among the power users. It has made it much easier for everyone to do his or her job with this type of decentralized reporting. With SAS, we have reduced the time it took to produce analytical reports by 70 to 100 percent. This can make a huge difference in the efficiency of each department, while decreasing the frustration for the individuals who need this information quickly."

Leading confidently into the future
"Before SAS, the core systems were unable to provide information quickly or accurately enough. With SAS, the data now has meaning for us. It can now be useful. Whenever I ask my colleagues in the IT department or the actuarial department, they are able to get what they need to do their jobs," says Ererdi.

With effective strategies in place and SAS solutions to support them, including ways to measure performance up to the minute, AXA OYAK has good reason to be confident in what the future holds for the company in the Turkish insurance market. Having been progressive in laying the groundwork, it is prepared to adapt to changes swiftly to remain profitable and meet customer demands in whatever new forms they may take.

"We have been able to move beyond simply getting results from our use of SAS," remarks Ererdi. "We are now able to understand all the factors which contribute to getting the results that we do. Knowing why enables us to make better decisions."

"Especially in the second half of 2004 and early 2005, AXA OYAK will increase its technical profitability by 75 percent," concludes Ererdi. "Competitors in our market will have difficulty increasing technical profitability in the future due to economic conditions and dropping interest rates. Effectively, there will not be much room for them to do so." And AXA OYAK will have already strengthened its competitive edge.

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