Turning Data Into Information: Business Intelligence In Insurance (Strategic Focus)

The insurance market is facing short and long-term challenges. In the short-term, weak demand and paltry investment income, plus elevated levels of fraud, will negatively affect profits. Longer-term issues include: the need for robust risk models; new products and distribution channels; and a structure that can effectively comply with regulations. BI tools can help meet these challenges.

Report Highlights
While point solutions are valuable, today's large insurer managing multiple risks over an expansive geography needs a complete view of the operation. The insurer that is able to garner such a view will be better able to be proactive instead of reactive to changing market conditions.

The combination of market drivers and technology accessibility has heightened small insurers' interest in BI. 62% of insurers with fewer than 1,000 employees are planning to increase their investment into BI. This segment of the market outpaces all of the other segments by a fairly wide margin.

In 2009, spending on BI by non-life and life insurers is expected to slow to 4.4% and 3.9%, respectively, thanks in large part to the global economic environment. By 2010, non-life spending on BI should return to nearly 7% annual growth, while life is expected to register at 5.4%.
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Overview 1
Catalyst 1
Summary 1
Key Messages 2
Insurers are facing a laundry list of challenges that BI can help mitigate 2
A confluence of factors is driving adoption among small insurers 2
Meet the needs of the SME market with pre-built offerings and Software as a Service 2
An opportunity exists to move large insurers from point solutions to enterprise-wide solutions with rich capabilities 2
Spending on BI will slow in 2009, however fraud, risk and compliance will maintain medium-term growth 2
Table of Contents 3
Table of figures 4
Market Opportunity 5
Insurers are facing a laundry list of challenges that BI can help mitigate 5
Customer intelligence 6
The business problem 6
The technology opportunity 6
Compliance 6
The business problem 6
The technology opportunity 7
Enterprise performance management 7
The business problem 7
The technology opportunity 7
Financial analytics 8
The business problem 8
The technology opportunity 8
Fraud 8
The business problem 8
The technology opportunity 8
Risk 9
The business problem 9
The technology opportunity 9
Several pockets of growth exist for BI within the insurance sector 11
Moving large insurers from point solutions to enterprise-wide solutions with rich capabilities 11
A confluence of factors is driving adoption among small insurers 13
Life insurers are becoming increasingly interested in BI 14
Spending on BI will slow in 2009, however fraud, risk and compliance will maintain medium-term growth 15
Impact on the Insurer 17
Democratizing BI can lead to improved performance and can be driven by different pricing strategies 17
A shared services strategy enables an enterprise view 18
What the vendor consolidation means for insurers 20
Go to Market 22
All-in-one vendors should highlight the value of an end-to-end solution but not neglect to position themselves as stand-alone solutions 22
Specialized vendors should remain focused and seek strength through partnerships 23
Meet the needs of the SME market with pre-built offerings and Software as a Service 23
Vendors preach but do not often practice targeting customers based upon lifetime value 25
Recommendations 25
Sell to the business and not to the IT department 25
Continue to improve and highlight mobility features 26
Specialist vendors should innovate with agility 26
Develop enterprise wide deployments one department at a time, if need be 26
Understand your customers' businesses 26
APPENDIX 27
Methodology 27
Further reading 27
Ask the analyst 27
Datamonitor consulting 27
Disclaimer 27
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Figure 1: BI has a role to play in meeting today's challenges 10
Figure 2: BI maps onto the key objectives of insurers 11
Figure 3: Current and projected adoption of BI functions, by insurers with 5,000+ employees 12
Figure 4: Outlook for BI investments, broken-down by insurer size 14
Figure 5: Projected BI spending by non-life insurers, 2008-2013 16
Figure 6: Projected BI spending by life insurers, 2008-2013 16
Figure 7: Shared services framework 19
Figure 8: Current SOA adoption, broken down by sector 21
Figure 9: Software as a Service usage, by employee size 24
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