MicroStrategy BI solution for Insurance industry

MicroStrategy Business Intelligence: Solutions
for Maximizing Policyholder Profitability
Solutions for Insurance Companies

Introduction: Increasing Underwriting Profits in a Tough Market....................................... 2
Few Customer Touchpoints..................................................................................................... 2
Fragmented Sources of Information..................................................................................... 3
Lack of Focus on the Policyholder .......................................................................................... 3
Business Intelligence Delivers New Revenue Opportunities ................................................. 4
Create a Consolidated View of the Customer........................................................................ 4
Review Trends of Customer Behavior..................................................................................... 4
Create Next-Best-Action Strategies......................................................................................... 5
Distribute Useful Information Efficiently............................................................................... 5
Plan for the Enterprise, Deploy by Department......................................................................7
Conclusion................................................................................................................................ 8
Business Intelligence and Insurance
I.
II.
III.
IV.
V.
VI.
VII.
VIII.
IX.
X.

2
Business Intelligence and InsuranceBusiness Intelligence and Insurance
I. Introduction: Increasing Underwriting Profits in a
Tough Market
Change is inevitable and challenging market conditions make it necessary for companies to change the way they
approach their business. Companies are compelled to revisit their strategies and alter business models to ensure
that they can optimally use their resources to maximize profits. Insurance companies are no exception to this rule.
Trying times force insurers, like other industries, to focus inward and examine the unrealized value of different
sources of revenue.
Typically, the two main sources of revenue for insurers are:
1. Underwriting profits
2. Investment gains
Investments in a barren economic environment will yield minimal, if not negligible, returns. Thus, companies are
forced to maximize their profits from underwriting and ensure that they have optimal strategies to achieve this end.
A critical and high-yielding strategy to exploit returns from writing new business is creating new sales opportunities
for existing customers. Insurers strive to gain access to insightful policyholder information that helps them sell more.
Although it is impossible to know everything about their customers, companies attempt to achieve as much as
possible to segment customers, position products, and target customers most effectively.
Consider the example of customer X, a recent college graduate. Important questions to ask would include: What
would be a significant purchase for him in the next few weeks? Will he buy a new car? Will he rent an apartment,
buy a house, or simply live with his parents? What is his current income? What is his growth potential? What
products seem to be a good fit given his current demographic and buying behavior? What product bundles can be
marketed to him? Is this a profitable customer and, if so, how can the value of this customer be maximized?
The questions are endless and the potential opportunities even more. This paper aims to achieve two objectives
– highlight the typical problems that restrict insurers from gaining an in-depth, single view of the customer, and
establish how MicroStrategy business intelligence solutions will help them gain a thorough understanding of their
customers and provide actionable insight to generate new revenues.
II. Few Customer Touchpoints
Insurance companies have the unique problem of being an industry that is dependent on loyalty, but providing a
product and service that involves little customer or product interaction. The relationship between a consumer and
an insurer is most often initiated at the time of a significant life event, such as anticipation of a new baby or the
purchase of a new car or house. The customer evaluates the insurance market to find a company that offers the
best coverage at the lowest price. The customer has the choice of contacting an agent or communicating directly
with an insurer via the phone or Web. Following this initial communication and purchase interaction, most insurers
rarely receive or create opportunities to interact directly with their policyholders.
Once a customer has purchased a policy, there is customarily little, if any, contact required (or carried out) between
the insurer and the policyholder. Automated policy administration systems take care of billing as well as renewals.

3
Most policyholders communicate that they wish to terminate their policy by not communicating and simply
stopping premium payment. As a result, the interaction between an insurer and policyholder tend to be focused
upon rather mundane activities such as change of address or premium delinquencies. When these rare interactions
do take place, most companies are not equipped with intelligent customer insight to capitalize on the opportunity
to sell new products, improve satisfaction, or ensure stronger customer loyalty.
Fragmented Sources of Information
Business expansion in the insurance industry is most commonly achieved through acquisition or mergers to capture
new markets, channels, or lines of business. Not only do companies acquire capital and human resources, they also
inherit various systems and databases where these companies store information. These systems can range from
departmental systems to enterprise-wide systems. The inconsistent nature of these systems leads to a number of
data sources that are fragmented across the enterprise. Integrating this data is rather difficult but important for
providing proper customer care as well as the basis for any cross- or up-sell opportunity.
Product Type Analysis
Distribution Channels
Region Reports
Auto Life East West Direct Agency
Home
Owner
Access
Figure 1. Typically, insurance companies access information pertaining to sales, customers, or other business areas from
multiple sources, and view this via Microsoft Excel, Microsoft Access, or HTML documents.
III. Lack of Focus on the Policyholder
Today’s reality is that the relationship between an insurer and their customer remains largely undefined. A significant
number of insurance companies continue to perceive the insurance agent as their primary customer. They aim to
keep this relationship mutually beneficial and lure them with incentives to sell their products, as opposed to their
competitors. The agent, on the other hand, understandably, has a primary motivation to sell the policies of those
companies that provide the best commissions and incentives. This sometimes leads to channel conflict and possibly
disadvantages for the insurer and the company does not develop a holistic view of its customers, their needs, and
their buying habits.
3

4
IV. Business Intelligence Delivers New Revenue
Simply put, business intelligence solutions (or BI) provide information to businesses that can be translated into
actionable insight and additional revenue opportunities. Historically, insurers have generally regarded BI as synonymous
with “reporting,” with most BI solutions being deployed by IT departments to generate reports from transactional
systems. Today, best-of-breed BI platforms can be cost-effectively deployed to tap into and query a number of different
sources of data to produce useful information based upon historical and real-time data, and predictive models.
Resulting information about customer demographics, product performance, and next-best actions can empower
companies to uncover hidden opportunities and devise strategies to maximize customer value.
V. Create a Consolidated View of the Customer
Creating a reliable single view of the customer has been on the wish lists of insurers for many years. Many insurers
have attempted to justify the investment in consolidating customer data by creating positive ROI based upon
improved transactional efficiencies. The result has been a number of expensive integration projects with minimal
business impact. Rather than establishing a transactional hub, consideration should be given to creating a reliable
source of customer data that will become the backbone of customer-focused, revenue generating strategies.
Establishing a reliable source of consolidated customer data should be far easier with greater potential ROI than a
strategy of complex system integrations purely for transactional purposes. The MicroStrategy BI platform has been
designed to sift through large amounts of data from disparate sources at either the departmental or enterprise level
for the purposes of transforming it into actionable business information. The resulting benefit is around the ability
to consolidate and view data on an automated or ad-hoc basis for the purposes of uncovering specific information
or revenue opportunities, rather than transactional efficiencies.
VI. Review Trends of Customer Behavior
Considering the number of competitive offerings available to most consumers, insurers need to focus some effort
on maintaining a level of continuous customer satisfaction. Insurance companies tend to respond to customer
attrition on a reactive basis, acting only after the customer has initiated the process to terminate their policy. At this
stage, the chances of reversing the customer’s decision are very low. However, proper application of BI can lead to a
more proactive retention strategy.
In such a competitive scenario, insurers need to use creativity as well as their data to locate customers at risk of
churn as well as strategies and tactics to retain those that are identified. MicroStrategy excels at efficiently analyzing
large amounts of historical data to uncover key trends and patterns in customer behavior. The resulting information
can then be used to build analytical models that predict future customer behavior as well as their response to offers.
While there are a number of tools that can perform simple analyses, MicroStrategy provides the unique capability of
making this task much easier for any level of data. The ability to engage in more frequent and substantial analysis of
customer or prospect data will result in better competitive information and bottom line gains.

5
VII. Create Next-Best-Action Strategies
While direct contact between insurers and policyholders is relatively infrequent, each customer interaction provides
a rare opportunity for insurers to communicate unique cross- and up-sell offers to their customers. It is important
for insurers to prepare in advance for these interactions by devising next-best-action strategies. Questions such
as “what do we know about the customer,” “what will maximize the value of this customer,” or “what offer
has the highest propensity of success with this customer” will provide information to create a unique action to
be undertaken with a particular customer at the next touch point. For instance, it is equally pointless to prolong
the relationship with a policyholder that has clearly proven to be unprofitable as it is to attempt a cross-sell of
homeowner’s insurance to a policyholder who does not own a home. A holistic view of a customer’s profile
and in-depth information will allow insurers to optimize the relationship and maximize the value of each and
every customer.
MicroStrategy provides proven solutions that prepare insurers to maximize the customer relationship before the
interaction occurs. Companies can identify hidden patterns in loyalty and buying behavior that had been previously
overlooked. Writers of a diverse set of products or multiple lines of business enjoy the advantage of more data,
flexibility, and unique, targeted offerings from which to choose. This directly leads to higher profitability per
customer and strengthening of the customer relationship. Efficient use of an integrated strategy featuring predictive
analytics can help analyze customers’ spending, usage, and other behavior, and help cross-sell the right product at
the right time.
VIII. Distribute Useful Information Efficiently
Business information, even of the highest quality, is neither useful nor actionable if not made easily available to
all who need it, at the time it is needed. The most popular tool and medium for distributing information amongst
insurers today is a spreadsheet sent via e-mail. Information communicated and presented in simple formats such as
spreadsheets tend to create pockets of enlightenment, which require constant scrutiny and reconciliation in order
to be accepted by the enterprise. While this system is relatively easy, its inherent unreliability, lack of security, and
limited flexibility makes it an inefficient information delivery strategy.
MicroStrategy, on the other hand, provides a tremendous amount of data access and analytical power, while
allowing all users to consume the vast amounts of resulting information in easily communicable formats such
as dashboards and scorecards. Interactive dashboards are visually intuitive displays of data optimized for quick
assessment of performance. Scorecards represent a way for business users to track and improve corporate
performance by optimizing the organization and presentation of key performance indicators (KPIs).

6
Figure 2. MicroStrategy dashboards present vast amounts of data in an interactive and easy consumable format.
Dashboards, such as the one displayed above, provide highly intuitive ways to understand and isolate key business
indicators. With a quick look, C-level officers of an insurance company can establish a macro view of policyholder
acquisition, attrition, and retention, then drill down and across to assess contributing factors. This analysis can
help direct corrective actions, such as budget allocations to marketing teams for customer loyalty initiatives,
as well as drive the direction for new product bundle creation. Regional Directors can further investigate the
same dashboard containing information which is limited to their geography. They can answer questions around
policyholder demographics, then drill in to analyze underlying data which may provide guidance on changes in age
segmentation and subsequent purchasing habits. Business users such as District Managers or Agents can also view
their specific data within this dashboard format to visualize performance characteristics of their book of business
and drill down to the individual policyholder record. Every business user thus operates upon the same (accepted)
sources of data that establish a consistent representation of a customer, whether from a macro or micro perspective.
Customer Analysis Customer Segmentation and Profitability Cross-sell Analysis
Quarterly Customer Analysis for Q4 2008
Acquisition, Attrition, and Retention
Performance Summary: 3.01% Acquisition Rate, 0.62% Attrition Rate, and 96.99% Retention Rate
Customer Analysis by Age Range and Income Range
Age Range Income Range Revenue $
Avg Transaction
Size $
Revenue per
Customer $ Profit $
21
21-40
41-60
0 - 20K
20K - 40K
40K - 60K
60K - 80K
80K
0 - 20K
20K - 40K
40K - 60K
60K - 80K
80K
0 - 20K
20K - 40K
40K - 60K
60K - 80K
80K
$41,183.10 $298.43 $686.39 $2,428.18
$54,498.44 $465.80 $1,028.27 $3,538.64
$23,178.17 $246.58 $551.86 $1,406.37
$51,844.68 $518.45 $1,205.69 $3,091.98
$23,783.53 $247.75 $540.53 $1,479.12
$46,635.75 $376.09 $790.44 $2,960.92
$33,312.13 $350.65 $812.49 $1,717.86
$49,186.10 $341.57 $768.53 $2,762.07
$37,477.31 $312.31 $749.55 $2,324.83
$23,826.98 $187.61 $458.21 $1,375.57
$44,158.71 $304.54 $679.36 $3,219.34
$55,093.39 $326.00 $734.58 $3,345.29
$43,422.04 $269.70 $578.96 $2,455.90
$43,336.86 $390.42 $866.74 $2,736.80
$33,851.87 $266.55 $573.76 $2,136.33
20.6%
22.1%
16.0%
18.4%
23.0%
0 - 20K
20K - 40K
40K - 60K
60K - 80K
80K
Customer Distribution by Income Range
Document Execution Time: 12/29/2008 9:48:25 AM Document Author: John Smith
New
Customers
Active
Customers
Acquisition
Rate
% New to
All New
Oct 2007
Nov 2007
Dec 2007
39 1,299 3.00% 32.23%
42 1,333 3.15% 34.71%
40 1,363 2.93% 33.06%
Lost Active
Customers
Attrition
Rate
% Lost to
All Lost
7 1,299 0.54% 28.00%
8 1,333 0.60% 32.00%
10 1,363 0.73% 40.00%
AttritionAcquisition
Retained
Customers
Active
Customers Retention Rate
1,260 1,299 97.00%
1,291 1,333 96.85%
1,323 1,363 97.07%
Retention
0
4
8
12
16
20
24
28
0%
0%
1%
1%
2%
2%
2008 Q1 2008 Q2 2008 Q3 2008 Q4
Lost
Customers
Attrition
Rate
0
200
400
600
800
1000
1200
1400
0%
20%
40%
60%
80%
100%
2008 Q1 2008 Q2 2008 Q3 2008 Q4
Retained
Customers
Retention
Rate
Note: % Lost to All Lost is calculated as # Lost Customers at the month level
divided by # Lost Customers in the analyzed period.
0
20
40
60
80
100
120
140
0%
2%
4%
6%
8%
10%
12%
2008 Q1 2008 Q2 2008 Q3 2008 Q4
New
Customers
Acquisition
Rate
Quarterly Acquisition Trend Quarterly Attrition Trend Quarterly Retention Plan
Note: % New to All New is calculated as # New Customers at the month level
divided by # New Customers in the analyzed period.
Customers
Q4 2008Select a Quarter
Quarterly Analysis Year-to-date Analysis

7
IX. Plan for the Enterprise, Deploy by Department
A customer-focused data architecture that spans the enterprise is ideal for business intelligence since it can access
a single and cohesive model of the business. This provides a business-oriented view of all of the data available to
the enterprise, and gives every business user the building blocks to conduct investigative analyses and assemble
information in formats easily understood by their peers and associates. This ensures that a single version of any
information will exist across the enterprise.
Another benefit of an enterprise BI architecture is the highly efficient use of administrative resources. Compared to
supporting numerous disparate islands of BI, the enterprise BI model minimizes the personnel needed to manage
and maintain the software as well as hardware and training expenses. While BI strategy is best planned at the
enterprise level, tactical deployment by department is the reality. Enterprise BI is often best achieved in stages and
should be planned and built incrementally. This allows organizations to consider their most immediate needs and
build enterprise momentum through realizing near-term benefits at the departmental level.
Build departmental BI applications using MicroStrategy
BI platform.
Enables smooth and gradual evolution from islands of BI
to enterprise BI.
Consolidate data from multiple databases into the
enterprise data warehouse.
Enterprise DW
HR Dept Sales Dept
HR Sales
Enterprise
Finance Dept
Fin
HR Dept Sales Dept
Enterprise HR Sales
Finance Dept HR Dept Sales Dept
Enterprise DWEnterprise DW
HR Dept Sales DeptFinance Dept
Fin
Finance DeptFinance Dept
Fin
Finance Dept
Enterprise
Stage 1
Disparate Islands of BI
Stage 2
Merging Islands of BI
Stage 3
Consolidating Data
HR Sales
Figure 3. MicroStrategy enables smooth and gradual evolution from islands of BI to enterprise BI.

8
Business Intelligence and Insurance
MicroStrategy accommodates departmental BI requirements as well as a cohesive and consistent enterprise-wide
framework. The MicroStrategy platform provides the flexibility for departmental users to access different sources of
data quickly and efficiently without significant effort and support by IT resources.
X. Conclusion
While market conditions may erode investment gains and prevent insurers from realizing record earnings, smart use
of business intelligence solutions provides an opportunity to improve underwriting profits and operational results in
the short term. Innovations in BI technology along with strategic planning and execution can create a cost-effective
path to a consolidated customer view, which then enables business users to better understand the needs, buying
habits, and profit potential of the policyholder. The result is actionable business information that may be deployed
in a variety of uses, such as next-best-action strategies, which provide both enhanced profitability in the short term
as well as greater competitiveness and maximization of customer value in the long term.

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Patent Information
This product is patented. One or more of the following patents may apply to the product sold herein: U.S. Patent Nos. 6,154,766, 6,173,310, 6,260,050, 6,263,051, 6,269,393, 6,279,033,
6,501,832, 6,567,796, 6,587,547, 6,606,596, 6,658,093, 6,658,432, 6,662,195, 6,671,715, 6,691,100, 6,694,316, 6,697,808, 6,704,723, 6,707,889, 6,741,980, 6,765,997, 6,768,788,
6,772,137, 6,788,768, 6,792,086, 6,798,867, 6,801,910, 6,820,073, 6,829,334, 6,836,537, 6,850,603, 6,859,798, 6,873,693, 6,885,734, 6,888,929, 6,895,084, 6,940,953, 6,964,012,
6,977,992, 6,996,568, 6,996,569, 7,003,512, 7,010,518, 7,016,480, 7,020,251, 7,039,165, 7,082,422, 7,113,993, 7,181,417, 7,127,403, 7,174,349, 7,194,457, 7,197,461, 7,228,303,
7,260,577, 7,266,181, 7,272,212, 7,302,639, 7,324,942, 7,330,847, 7,340,040, 7,356,758, 7,356,840, 7,415,438, 7,428,302, 7,430,562, 7,440,898, 7,457,397, 7,486,780, 7,509,671 and
7,516,181. Other patent applications are pending
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MicroStrategy BI solution for Insurance industry

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