SOA Health Meeting - June 2012

Business Case for

Business Intelligence

Kevin Pledge

kpledge@insightdecision.com

416 949 8920

@kevinpledge

http://ca.linkedin.com/in/kevinpledge

Kevin Pledge

• CEO and Co-Founder of Insight Decision Solutions

• Chair of the SOA Entrepreneurial Actuaries Section

• Member of working group on Actuaries in Business Analytics

kpledge@insightdecision.com

• 416 949 8920

• @kevinpledge

• http://ca.linkedin.com/in/kevinpledge

Agenda

Kevin: Examples and case studies of BI at work

Neil: Developing trends in semantics and big data

What is Business Intelligence?

1) Combination of data management and analytics

2) A database managed by IT

3) The ability for an organization to take all its capabilities and convert them into knowledge

4) An oxymoron

5) All of the above

Typical BI Architecture

Data Warehouse /

OLAP Server

Presentation

Server

Users

Metadata

Data Store

Integrated Systems

e.g. valuation system

ETL

ETL Source

systems

But others are possible….

‘single version of the truth’

Reality Check

data definitions, data cleansing, aggregations, normalizing, de-normalizing, rationalizing, extracts, transformations, translations,

data dictionaries, restructuring, conversions,

Not worth anything if don’t have a use for it

consistent cleansed data for actuarial

Before: Separate data extracts for experience studies, valuation, financial reporting schedules Separate rules applied for experience studies, valuation, financial reporting schedules • Date of termination in the future, policy status

terminated • Terminated policies with active coverages • Change of primary insured’s gender on joint life plans • Inconsistencies between age, DOB and issue date • System conversion errors $20m reserve for poor quality data

consistent cleansed data for actuarial

After: Single extract, single set of rules Reduction in head count, but increased number of actuaries No year-end panic Increased work capacity – more frequent reporting, more analysis Increased responsibilities, need to develop new skills Released $20m reserve for poor quality data And… I could never work in a traditional actuarial environment again

Improving Analytics

sales reporting

salesforce analysis

accounts

underwriting analysis

claim analysis

inforce demographics

valuation analysis valuation data extracts

experience studies

earnings-by-source

actu

aria

l in

volv

eme

nt

analysis frequency

retention analysis

customer analysis

Improving Analytics

Traditional Approach

BI Approach

Prepare Model / Calcs

Apply Data Report

Prepare Data Model / Calcs Analysis

Improving Analytics: Real Life Example

Medicare Supplement rate increases

$1bn premium income

~80% of business applied for increases

Assuming 6% increase

80% x $1bn x 0.06 x 1/12 = $4m

20% x $1bn x 0.06 = $12m

Improving Analytics

New frontiers

Hard to justify ROI Potentially highest ROI

Marketing Understanding your agents and customers…

Coverage

Agent

Policy

Claim

Group

Customer

Sales Team

Office

Coverage

Agent

Policy

Claim

Group

CustomerSales

Service

Underwriting – Predictive Modeling

Automate for faster, more consistent

decisions

• Reduce cost, NTU’s

• Process to improve

• over time

Claim Analysis

Meaningful attributes (ICD codes)

Alerts

Claim transition (LTC)

Testing new procedures such Wiley Protocol

Extend with Collaboration

Analytical Competitors

1. Senior executives strongly advocate analytics and fact-based decision making

2. Widespread use of descriptive statistics, predictive modeling, and complex optimization techniques

3. Analytics used across multiple business functions

4. Enterprise-wide approach to analytical tools, data, and process

Is there really a magic recipe?

Management Support

Widespread and in multiple business areas

But…

Does not need to be complex

Coordinated, not centralize control

Opportunities for Actuaries in Business Analytics

As part of the SOA's strategic objective to create and promote new areas of practice, this initiative will determine whether significant opportunities exist for actuaries in business analytics and, if so, identify projects the SOA should undertake to explore and develop these opportunities.

Session tomorrow Actuaries in Advanced Business Analytics

Summary

• Consistent cleansed data

• Improve analytics

– Accelerated

– More depth

– Lower cost

• Extend analytical decision making

Thank You

Kevin Pledge

kpledge@insightdecision.com

416 949 8920

@kevinpledge

http://ca.linkedin.com/in/kevinpledge