In its April cover story, InsuranceTech spoke with AIG's Claim Services about business intelligence. Following is a sample of the article:

As insurance companies respond to the combined demands of demutualization, convergence and globalization, their success is going to depend on how well they turn their masses of information into working knowledge. Only the smart will survive. The job IT faces in making a company a truly intelligent business is that of getting the right data to the people who can use it-and in a form they can understand.

According to Joseph Prunty, president of customer profitability specialist Core-PROFIT Solutions (West Chester, PA), a variety of tools and approaches-data marts, data warehouses, business intelligence (BI) tools and data-mining solutions-can be worked together to supply intelligence. "What really matters is that [the solution] puts you in a direction that makes sense to you as the organization you are, and want to be," he says. "It might be line-of-business based, product based, fee based or customer based. The one thing it can't be is everything to all people." This is not to say that companies should not aspire to the goal of enterprise-wide business intelligence, Prunty explains, but rather, that to get the right answers, you first have to know how to ask the right questions.

American International Group's (AIG, New York, $268 billion in assets) Claim Services (AIGCS) division used business intelligence tools to create an executive information system. "The goal," says Kevin Murray, the division's CIO, "was to supply a snapshot of the very decentralized AIGCS financial services environment on a monthly basis."

The reporting function was traditionally provided through the division's claims reporting group, which churned out 1,350 hardcopy reports, says Marc Egle, assistant vice president, senior business systems officer, AIGCS, who is responsible for the group and oversaw the executive information system implementation. "The reports came from many disparate sources, and similar reports were often run at different times of the month," Egle says. "We had about 30 resources at that point just running reports and trying to speak to the integrity of the data," he adds. "Data center costs were through the roof."

Having considered a variety of vendors and products, AIGCS decided on an integrated BI solution consisting of Cognos' (Ottawa, ON) Power-Play business process measurement tool and Impromptu enterprise reporting product. PowerPlay uses online analytical processing (OLAP) to store and access data as dimensions and measures representing key business factors. Because this technology breaks free of the traditional X and Y "box" dimensions of static reports to allow multidimensional reports, the bodies of data it organizes are referred to as "cubes."

AIGCS used the OLAP processing to read through claims workflow to identify commonalties through which to consolidate claims information. "We were able to take approximately 1,000 reports and consolidate them to 88 templates composed of either PowerPlay cubes or Impromptu reports," Egle says.

By streamlining and consolidating the data into one data warehouse and by setting up a Q and A process to ensure that the warehouse was synchronized with the transactional systems, AIGCS drastically reduced costs and hard-copy reporting, Egle says. "We were also able to reduce the headcount from about 30 to seven people-just by reengineering, rearchitecting and using the Cognos cube."

Executives-both at AIG's New York headquarters and at operational service centers across the country-are now able to work from an online graphic interface "dashboard" that shows a view of the US broken into regions. Based on business rules built into the cube, the regions will appear in different colors to indicate location, type and intensity of operational issues. Users are able to click on regions and drill down by dimensions such as state, time period, class of coverage, etc., and combine dimensions for a variety of views.

"From the perspective of an underwriter, adjuster or upper-level executive, you can manipulate the information, juxtapose it and change it any way you want," says Murray. "From a workflow perspective it saves time on both the business and IT end."

As a side benefit, Murray adds, "It fosters a competitive atmosphere among the regional vice presidents," since the operational data is now public. But the greatest gain is simply the timeliness and consistency of the data shared by executives. "The RVPs running the reports used to find out weeks or months after an operational issue had first arisen, by digging through some of the existing mainframe reports," Murray says. "Now all users are able to see their information the morning of the third business day of every single month."

From an IT point of view, the gain is on a whole different order. "It takes us out of being the data broker and puts the data directly into the hands of the business user," says Murray.

In the past, IT people had to understand not only the technology, but also the underlying data model of the business person's job, according to Chris Wood, a Boston-based partner, business intelligence practice, PricewaterhouseCoopers. "The shift is that the research capability analytical responsibility now rests with the requestor of the information. Historically there was friction between an IT user and, say, a vice president of marketing saying, 'I want this, by this, this and this. Of course they'd use the wrong parameter or criterion, so what they got back was not what they thought they had requested," Wood says. "Now that whole model goes away."

That a more successful model is emerging is due more to real-world pressures than internal initiative, according to META Group's Johnson. "What's pushing insurance companies to start to deal with these issues is the changing economics of dealing in a convergence-and-globalization economy," she says. "The world is not ours to play with anymore. The customer is not ours to play with anymore. They don't have to buy what we have to sell them anymore, they've got other things they can do to protect themselves against the various kinds of risks."