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42 Cards in this Set
- Front
- Back
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Importance of information technology |
Insurers are more likely to meet challenges if business and IT professionals understand each other's capabilities and limitations. Using IT to support insurer business goals: Gaining competitive advantage. Increasing operational efficiency. Supporting strategy and decision-making. Facilitating governance, risk and compliance initiatives. The NAIC requires insurers to hace adequate top-level controls, established structures and communications. Governance, risk and compliance programs create transparency that offers the insurer's management and stakeholders a macro view of all of the organization's daily activities. They help insurers identify any potential credit, market, or operational risk exposures so that they can react quickly and appropriately. |
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Gaining competitive advantage |
IT capabilities that deliver the right data provide insurer with competitive advantage. Insurer are major consumers of information. Information is necessary to underwrite a policy. IT capabilities enable insurers to collect and validate data from outside sources. Basis for better business decisions. |
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Gaining competitive advantage pt.2 |
IT intelligence gives insurer better insight for underwriting, pricing and product development. Apps and websites could improve collaboration and communication with producers and customers. Web portals could aggregate information to suggest policy endorsements and features. Business intelligence can be combined with technology to develop marketing programs and new products. Business intelligence refers to the skills, technology, applications and practices used to improve decision-making insights and reinforce information integrity. |
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Gaining competitive advantage pt.3 |
Accurate, current customer data can create opportunities for insurer's and producers. Insurers may discover niche markets. Niche market is a small segment of a total market. Insurers increasingly use analytical engines with predictive modeling to help underwriters examine and price insurance products. Insurers use predictive modeling to simulate market conditions to estimate future loss patterns and develop appropriate pricing structures for new products. Insurers can partner with credit rating agencies and motor vehicle departments. Reduces customer data entry and provides accurate online quotes. |
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Increasing operational efficiency |
IT capabilities can increase efficiency of all functional areas of an insurer. Accounting, finance, human resources, etc. In determining whether to develop or purchase technology, insurers can use cost/benefit approach or transformational approach. |
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Increasing operational efficiency pt.2 |
Cost/benefit approach: Costs of enhancements should be balanced against savings/benefits provided by new IT. Costs of installing new technology and training costs should be factored into ROI (return on investment). When determining the ROI that new IT would produce insurers should consider cost of the value of the staff's time for training, costs of maintaining the technology, and value of time lost until staff become proficient using the new technology. The salary and benefit costs eliminated through staff reduction is considered a savings (not cost reduction) that the new IT would produce. Transformational approach: Insurers focus on future state of organization. If IT initiatives align with organizational goals they are worthy pursuit. |
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Increasing operational efficiency pt.3 |
Adoption of portable IT enhancements are imperative for operational efficiency. Mobile technology has improved. Overall costs of technology has declined. IT features enable claim representatives to settle losses or make partial payments immediately. Claim reps can access and verify policy information while at location of loss. |
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Increasing operational efficiency pt.4 |
Insurers might use cloud computing/storage to eliminate costs of purchasing new equipment. However, cloud computing may result in data that is unprotected. Insurers may benefit from external IT services. Pay-per-use services and leasing of computer software. Business professionals should collaborate with IT professionals to determine user needs and current system capabilities. Before considering any new technology purchase business professionals and IT should collaborate to determine if the technology satisfies the company's objectives and is compatible with the company's existing system. |
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Supporting strategy and decision-making |
Limitations of human decision markers: Volume of information available increases time required to make decisions. Pace of change is increasing, making timely business decisions essential. Personal biases may negatively influence decisions. IT decision-support capabilities can help overcome these limitations. |
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Supporting strategy and decision-making |
Decision-support systems analyze large databases to supply managers with suggestions. A database is a collection of information stored in discreet units for ease of retrieval, manipulation, combination or other computer processing. Decision support systems aid managers in making informed business decision. Technology improves speed and quality of manager decisions. Results in more consistent, rational decisions. Manager must still exercise good judgement. Decision-making software often increases the speed and quality of decisions. May help a manager recognize the flaws in his or her thinking. |
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Facilitating governance |
Insurer's governance and risk programs create rules and controls that support the insurer's operation policies and strategic goals. IT controls help insurers understand financial market risks and law changes, as well as environmental and political threats. IT provides insurers with a means to integrate risk assessment into their financial processes these features reduce the insurer's administrative burden and provide ongoing compliance and risk-monitoring. IT capabilities can assist with auditing by preventing unauthorized entries. |
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Facilitating governance pt.2 |
Accurate data reporting is crucial for government oversight, the industry and stakeholders. State regulators require the use of statutory accounting principles. Financial statements are also required under generally accepted accounting principles. Technology can simplify creation and maintenance of required reports. |
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Quality data |
Quality data should be appropriate, reasonable and comprehensive for a given use. Appropriate (timely and suitable). Reasonable (similar to other data, compare apples to apples). Comprehensive (contains information needed to produce reliable result). Quality data should be free of any material limitations. |
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Quality data pt.2 |
Insurers have traditionally used a two-level approach to managing data: Organization-level group of senior managers. Group of data stewards appointed to provide governance at line-of-business level. Many insurers have also added a data manager. Creates and documents data definitions and metadata and ensures data quality. Data managers must understand three levels of information needs. Data manager is responsible for achieving data governance by creating and documenting data definitions and metadata. Goal of data manager is to manage data supplies to business processes and use if in the best way possible. The data manager acts as an intermediary between business and IT personnel, striving to increase both groups understanding of the capabilities and weaknesses of the data. |
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Operation-level information needs |
Operation-level needs derive from basic insurer activities such as rate determination, paying claims and supporting producers. Insurers analyze their policy and financial data to determine the volume and profitability of business provided by each producer. Insurers need tremendous amounts of data to deal with ongoing activities. Customer information is critical to understand customer needs and preferences. Names, ID Numbers, employment information, phone numbers, current and past insurance information and detailed exposure information. |
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Operation-level information needs pt.2 |
Underwriting information helps underwriters select profitable exposures and develop rates. Detailed data on coverage requested, claims history, underwriting rules and guidelines, unique rating formulas, reinsurance guidelines and criteria, and ISO loss costs. Structured data (can be defined like driver records, medical records). Unstructured data (includes photos, claim rep's notes). |
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Operation-level information needs pt.3 |
Claims reps need a tremendous amount of information to handle claims. Policy information, investigation details, claimant information, salvage information, photos and videos, legal counsel, claim rep notes and correspondence. Claim function provides documentation to avoid or defend bad faith claims. Accounting staff also need insurer information. Accounting and financial information includes systems for tracking depreciation on business property and state statistical and rating info. |
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Managerial-level information needs |
Managers need accurate information to monitor and control the performance of the organization. Information should show insurer's progress towards achieving goals. Managers use financial reports to analyze insurer profitability and prepare budgets based on expected premiums, losses and expenses. Actuaries need premium and loss information to assist in rate making. Underwriters select profitable exposures and develop rates that cover losses and expenses. Underwriters and actuaries may use sales trends and profit margins to identify markers the insurer can leverage its market advantage. Quality historical data is used to form the foundation of new product prices and ensures their profitable market introduction. Managerial level information indicates insurer's progress toward meeting objectives and suggest changes to improve performance and achieve profitability. |
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Strategic-level information needs |
Quality information is needed to determine the insurer's strategic path. Helps determine what products to produce and what customers to serve. Strategic use of data, combined with IT tools, enhances customers' experiences. Use of faulty data for customer-facing tools can alienate customer. Used to determine what products to produce, what processes to adapts, what customers to serve and the optimum size and character of the organization. |
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Business information systems |
A business information system encompasses information and technology tools. Transaction processing systems. Decision support systems. Expert system. Customer-focused collection and safety systems. Electronic and mobile commerce. |
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Transaction processing systems |
TPS performs high-volume routine tasks. Useful for policy and claim processing, managing inventory and general accounting. Different functions access the same database. Types of TPS: database management systems, document management systems and automated workflow systems. TPS is a collection of software, databases, procedures and devices that perform high volume, routine and repetitive business transactions. |
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Transaction processing systems pt.2 |
A database management system is a group of programs that organizes data. Provides a user interface for retrieving information. Manages information form each functional TPS and stores it in central repository. Ensures that crucial information is accurate and consistent among each TPS. Database can be used to access structured and unstructured data. |
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Transaction processing systems pt.3 |
A document management system stores, organizes and retrieves image files that were created electronically or on paper and converted into digital image. Files are indexed for later identification, location and retrieval. Saves time and expense of creating and managing paper files. An automated workflow system is used to distribute documents according to a process. Workflows deliver the transaction and files to a work queue for the next performer. |
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Decision support systems |
A DSS is an organized collection of hardware, software, databases and procedures. Supports decision making. Typically uses information collected in a TPS. Typically applied to specific problems. A DSS can be used to help predict ROI from various strategic changes. Can also help identify declining markets. DSS can perform what-if analysis, sensitivity analysis and goal seeking. |
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Expert systems |
An expert system stores knowledge and makes inferences. Uses artificial intelligence to recommend solutions and make decisions. Benefits of an expert system: Speed and consistency. Use of knowledge of multiple experts. Does not suffer from human limitations. One drawback of an expert system is that it only addresses certain subjects in a limited domain. Doesn't learn from its mistakes, may make the same mistake over again if not programmed correctly. |
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Customer-focused systems |
Customer focused systems allows insurers to collaborate with their customers. Provides individualized pricing and discounts. Telematics enables insurers to rate drivers based on their driving performance rather than other factors such as age, gender and marital status. Pay-how-you-drive insurance. Safe drivers are attracted to telematics. Insurers can offer attractive prices to these profitable prospects. |
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Electronic and mobile commerce |
E-commerce allows insurers to conduct business over the internet. Mobile commerce is e-commerce conducted using mobile devices. Advantages of e-commerce: insurer can advertise through website, applications can be completed online, premium and renewal reminders can be sent, customer browsing info can be obtained and seamless transmission of claim information. Retention is the percentage of policies in force that are renewed at the policy anniversary. |
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Security threats |
Data security can be threatened by both internal and external sources. Risks can come from destruction of data (intentional and accidental), espionage, invasion of privacy, fraud, error and cloud computing. All organizations are vulnerable to security attacks. |
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Sources of risk |
Internal sources are employees at all levels who may exploit security weaknesses. Segregation of duties helps minimize risk. External sources include customers, vendors, former employees and criminals. Collusive sources of risk exist when two or more individuals conspire (could be internal sources or internal working with external). Managers and collusive sources of risk are main risks for company with sound control policies. |
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Risks and responses |
Typed of security risks include: Destruction of data (intentional viruses or accidents can destroy important data, Trained and responsible employees should be hired and data should be backed up, back up should be off sight, restoration program should be tested periodically). Espionage (spying may be legal in a foreign country where an insurer operates, Primarily external threat but employee may also provide information to a competitor, Data should be encrypted by employer). |
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Risks and responses pt.2 |
Invasion of privacy (insurer data typically contains person information related to customers and employees, Network security can stop hacker from accessing private data). Social network (employees sharing company plans on these sites can leave employers vulnerable to information leaks, social media policies should be developed) |
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Risks and responses pt.3 |
Employee fraud (risk that most often affects accuracy of accounting records, auditors may help detect fraud). Human error (generally considered the most frequent cause of security lapses, uneducated employees may put businesses at risk because of phishing, can be mitigated by hiring experienced IT employees and providing training) |
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Risks and responses pt.4 |
Cloud computing (allows employer to access and run many programs without purchasing the for each employee, cloud also provides for data backup which can be compromised, company must carefully scrutinize contract entered into with a provider). Mobile devices (security breach can occur if device is lost). A "bring your own device" plan allows employees to access business emails and files from their personal devices, this leads to more risk than keeping business and personal mobile devices separate. External controls to protect against security breaches include access control lists. An access control list is a set of permissions linking a user with specific information system object and specifying the level of access to that object, such as read, write, execute or delete. |
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Security and control measures |
A company should have a security team in place that understands senior management's goals, team can identify and respond to risks. Training program is especially important for organizations such as insurers, have a trusted relationship with customers. Technology usage statement identifies levels, responsibilities and roles for all internal and external parties. |
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Importance of alignement |
Aligning technology and business objectives can result in more efficient operations. Essential to success of insurer. Not consulting business and technology can cause a failure of adequately aligning the IT and business objectives with a new business purchase. Technology can create competitive advantage as dependencies on information increase. A insurers become more transaction-focused the value of IT investments increases. IT no longer a stand-alone cost center (integral part of business itself). |
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Benefits |
Benefits of increasing alignment: Improvements in service and reduced costs. Compliance with state regulations. Protection of information. Standardization best practices. Increased productivity. Enhanced communications. Production workflows expedited. Competitive advantage. |
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Challenges |
Challenges that can affect IT: Controlling expenses (often primary concern). Changing metrics (changes may cause current metrics to become obsolete). Understanding customer needs. Management financial support. Lack of prioritization (projects must be prioritized to ensure resources available). |
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Challenges pt.2 |
Lack of trust (job insecurity may cause IT employees to loos elsewhere, rather than focus on current job). Overly complex IT infrastructure (old infrastructure (legacy system) may be difficult to modify to current needs, need to do cost benefit analysis). IT as a separate unit (IT personnel often see themselves as a separate unit from the rest of the organization). |
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Challenges pt.3 |
Lack of understanding of insurer (some IT personnel need to better understand the insurance business). Lack of understanding of IT (business professionals need to understand the technology and its capabilities). Business and IT professionals need to understand each other better. |
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Plan for alignment |
IT management must be include int he insurer's strategic planning. Insurers making a significant investment in planning process will likely save time and lower costs as alignment continues. Insurer will be able to respond to challenges more quickly. |
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Plan for alignment pt.2 |
Planning process should focus on business needs, start with business then focus on IT. Business objectives should then be mapped with measurable IT services. Key resources should be identified. Functionality of each project should be determined. Baseline measurements should be taken so significant changes can be detected and reported to management. |
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Metrics of successful alignment |
Start with business goals and use metrics to determine if IT is working (if goals are being met). Some insurers use an internal baseline to determine improvement. Other insurers use industry benchmarks. Key issue is whether IT enables business goals to be met. Potential metrics to measure success: Percentage of uptime. Functionality. Problem resolution. |
