Now that we have a fair idea on insurance domain, as a consultant we now need to look at what are the KPI which matter to the business users. These KPI will now be easy for you to understand after you have understood the insurance business.

Finance KPI

The finance KPI enables the finance department to look at various aspects related to finance. These KPIs allows finance controllers to monitor financial health of the company. Some of them are mentioned next:

• Revenue analysis-Actual versus Budget (are our revenue as per planned targets)
• Revenue trend (month on month, quarter on quarter, and year on year (YoY)) (are we growing compared to previous periods)
• Revenue trend (current month versus last year same month, current quarter versus last Year same quarter) (how are we performing when compared to same period of last year)
• Portfolio analysis of various funds and customers (are we making right investments)
• Company reserves and solvency margin (do we have enough working capital)
• Cost analysis by each expenditure head
• Cost expenditure by each cost center
• P&L(Profit and loss) account for each branch as separate cost center (understand which branch needs attention and should a poor performing branch be closed down?)
• EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) and profit after Tax (Profit analysis)
• Ratio Analysis (Liquidity Ratio, Asset Ratio, Profitability and debt Ratio)

Underwriting KPI

Underwriting is an important function and they need to look at trends involving claims, loss ratio and few more parameters . This allows them to improve profitability of the insurance company.

Lets now look at the KPI which underwriting looks at.

• Profitability indicator (loss ratio, risk cost per policy)
• Product section analysis (under profitability and liability section)
• Rate monitoring (helps pricing polices for property insurance)
• Client level reporting (analyze profitability at client level)
• Underwriting decision (measuring risk and pricing policies)
• Claim detection on the basis of Underwriting decisions (improves underwriting process)
• Integrating underwriting and claims (helps improve decision making)
• Loss ratio analysis (understand claims versus premium)
• Policy portfolio analysis (helps to work out average premium rates)
• Optimizing approval process (find delays and work on improvements)

Acturial KPI

Actuary looks at the risks involved and some KPIs help them to assess the risks. Let us look at some of them:

• Experience analysis(helps  understanding profitable products,channels, investments)
• Surrender rate (understand cancellations of existing polices)
• Persistency rate(understand retention ratio )
• Withdrawal rate (understand factors influencing withdrawal rate)
• Mortality rate (understand probability of death and risk associated)
• Morbidity rate(risks due to occurrences of diseases)
• Loss ratio (ratio of claims versus premium)
• Repayment rate
• Claim triangulation (helps analyze claims over period of time and plan reserves)
• Product profit analysis (product performance analysis)
• Claim cost analysis (helps analyze cost of claims including processing cost and look for areas of improvement)
• Profiling of risky segment (helps looks at risks and plan mitigation strategies)
• Solvency ratio (measurement of risk which company cannot absorb)
• Asset and liability (understand impact of assets and liability)

Premium KPI

Premium is the revenue stream for a company and one of the most important aspects. The premium details are closely monitored by various functions in insurance and there are lot of KPIs which are specific to premium. Some of them are mentioned as follows:

• Comparison of premium at various levels-current year versus corresponding period last year; Year till date and Budget (at company, line of business, channel, and branch level)(360 degree analysis of premium)
  
• Analysis of new businesses, renewals, cancellations and endorsements, make model type (motor insurance) (understand new customer acquisitions, loss of existing customers)
  
• Branch wise list of proposals pending to be issued, along with status (understand efficiency and find areas of improvement)
• High premium policy; premium per policy above a threshold value (helps understand high revenue customers and also understand risk)
• LOB wise average ticket size (understand performance of LOB)
• Commission, agent name, and premium (agent payout analysis)
• Policy with coverage period of more than one year (helps understand probability of repeat business)
  
• Premium retention ratio(analyze successful customer retention)
• Premium analysis - sum insured report, reinsurance, and net premium
• Premium received in advance (all policies where the start date is from next month), along with commission (helps understand good customer and focus on policies which are no renewed)
• Clients with policies more than a certain premium amount (understand high focus customers and plan retention strategy)
  

Claims KPI

Like premium, claims too matter a lot for an insurance company. The more the claims, the more reduction in profit for an insurance company. Claims help the underwriting and actuary to look at the risks associated. The commonly used KPIs are mentioned as follows:

• Average cost per claim and comparison over time (understand if average claim costs are increasing and important input for underwriters )
• Claim settlement ratio (ratio of rejected claims versus passes claims. Client prefer companies having higher claim settlement ratio)
• Claim settlement time (time required to settle a claim. Clients prefer companies who settle claims quickly)
• Loss ratio (ratio of claims paid versus premium earned and key input for underwriters. The ratio should be less for increased profitability)
• Claim processing costs and comparison over time (help to look for areas of optimization to reduce processing costs)
• Daily high gross claims (example, 1 million) and net claims (example, above 0.5 million) for each policy (understand claims crossing defined thresholds)
• Comparison of operational reserve, total claims paid, and closing claim reserve - old claims (gross and reinsurance) (parameters effecting profitability)
  
• Comparison of operational reserve, total claims paid, and closing claim reserve - new claims (gross & reinsurance) (parameters effecting profitability)
  

Ratio Analysis

Ratio analysis helps insurance companies to quickly analyze the health of the company. Loss ratio, for example, should be very less. These are looked at from various dimensions, such as channels and agents. Let's look at some of them:

• LOB wise Net loss ratio - Net incurred claims/Net earned premium   
• Channel wise Net loss ratio - Net incurred claims/Net earned premium          
• For high premium policy - net loss ratio (outstanding UPR (unearned premium reserve) gross and RI for such policies separately)        
• Agent wise loss ratio and commission (helps cutting down on agent responsible for high loss ratio and reward agents with lesser ratio) 
• Location level drill down (helps understand profitable and loss making  locations)

Expense Analysis

Expense analysis helps the companies to look at all areas where the company is spending. Ideally, the companies look at reducing the expenditure (as the saying goes-every penny saved is a penny earned). The list can be exhaustive, but let's look at areas which are closely monitored:

• Department wise expenses  (analyze expenses across departments)       
• Channel wise expenses (analyze expenses across channels)
• Expense incurred which are more than a certain value (for example, 5 million)    (easily understand high ticket expenses)               
• Month on month expense trend of major expense heads (for example salaries, advertisements) (understand areas to focus on for cost optimization)
• Comparison of expenses with last period (analyze if expenses are increasing over time and plan future budgets and look for areas of optimization)