Measuring Success Through Data Mining

By the end of this summer, Canada’s insurance information is expected to be available for individual insurers to conduct customized market analysis and benchmark their performance against the industry. The Insurance Bureau of Canada (IBC) will introduce the Insurance Data Enquiry and Access (IDEA) System, which will allow insurers to access its information warehouse – a database containing comprehensive insurance data for the past five years.

CUSTOMIZED USAGE

The IDEA System will allow IBC member companies to instantly knit together data they have stored in the warehouse with customized market analysis. The system provides the company’s data and industry data simultaneously, allowing users to benchmark their company’s performance against the industry.

Although it would be valuable in any insurance cycle, the IDEA System is particularly welcome now because of the industry’s increasingly weak return on equity and each company’s need to fine-tune its approach to competitive advantage.

There is no software to buy, there is no maintenance, delivery is via the Internet through desktop PCs, and data are transferable to other applications.

INDUSTRY-WIDE DATA

The key advantage for insurers is that the Information Warehouse is unique. IBC’s IID is the data repository of Canada’s p&c insurance industry. It maintains statistics and information products on personal property and commercial property insurance across Canada, and is the official statistical agency for commercial liability in Ontario and for automobile insurance in Alberta, Ontario, Yukon, Northwest Territories, Nunavut and the Atlantic Provinces. This means that although a company could, at great expense, build an information warehouse based on its own data, industry-wide information is only available from IID.

IBC’s Information Warehouse displays data for the previous five years and is constantly updated. The IDEA System, specifically, allows for multiple comparative capabilities including location, time, coverage, and industry class. With the click of a mouse, it can also analyze information according to measures such as written premium, earned premium, earned loss ratio, average rate and severity. To make the comparative process easier and more accurate, the Information Warehouse uses universal definitions for company and industry measures.

The IDEA System protects data security and insurers’ proprietary information so that one company cannot access another company’s data. To guarantee the integrity of the system, IID developed a protocol for data usage. For example, if fewer than three companies are writing the business or if one company has 50% of the market, that data will be unavailable to other companies.

Access to the IDEA system and the Information Warehouse will be limited to companies that contribute information data to the statistical plan from which information is requested.

EASE OF USE

A typical IDEA System data analysis scenario could begin with an opening screen showing the company written premium and the industry written premium for the past five years. The next inquiry would add the loss ratio to compare profitability, company to industry. To that, the user could add the provincial overview to see in what provinces his company was having success or problems. If the user pursued problems, he or she would isolate a particular territory and probably the most recent year or two. Depending on the user’s focus the next steps might involve going through the risk classifications to determine a particular customer segment that is problematic. Or the user may want to focus on coverage, building construction type, average rate and deductible type.

If market opportunity is the focus, the user may want to determine where the company is having the most success and whether there is room to expand on that success, or if it should be protected and other related opportunities developed to support the environment.

The inquiry capabilities for the user are vast, as is the amount of available information. To use the Information Warehouse effectively, the user needs to focus on the primary business purpose for which the warehouse has been accessed, and appreciate the big picture uses of the IDEA System. In addition to problem-shooting and opportunity-finding, the system can address claims and underwriting issues, determine earned loss ratio or written premium and compare it with the industry and the organization’s performance elsewhere, and help an organization look for marketing opportunities.

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