Data Granularity and Business Decisions

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Excerpts

VCare Insurance Company (VCare) was a mid-size mutual insurance company with earned premium of US$109 million for 2010. The company operated in the niche product segment of professional liability on the East Coast. It had a dominant market share of over 75% in its primary state of operation in 2006. In two other adjoining states too it had ~ 25% share in its product category. While the company had managed to meet its own growth expectations and performed consistently above the industry levels, the potential for its growth was limited. VCare already had a significant share in its product and geographic area of operations. It was at a point where it had decided to expand into a new state and also enlarge its bouquet of products..

Steve was an MBA from a State University and majored in Marketing. He had over 21 years of experience in the financial services industry, with over 12 years in the insurance industry. He joined VCare in 2008 and had been slightly critical of the underwriting (UW) practices in place in the company. In the previous organization, Steve had led the direct marketing initiatives and had been instrumental in incorporating the internet as a distribution channel.

Debbie on the other hand was struggling with something very fundamental. She asked herself — should the company continue relying on existing performance review tools/processes/reports or should it look for answers beyond these tools? Did the company understand its competitive positioning at the county level? Was it looking for the causes at the right place? Were all the growth opportunities being pursued? Was the company analyzing its data at the lowest available unit or was it not seeing the forest for the trees? ...

Avizare Solutions came up with a two-phase solution. The solution was to leverage on advanced analytics along with technology in phased manner. It set the following objective for the entire exercise:

Both the solutions proffered adopted entirely different approaches to the same problem. While the first solution suggested by Steve presupposed that pricing and underwriting inadequacy were at the root of the company’s ills, the CEO of the VCare refused to pre-judge, preferred to analyze the data at a disaggregated level, and evolve a solution that was centered on counties (the lowest business unit). The CEO’s approach, taking a neutral line, went beyond the existing performance monitoring tools, drilled down the customer data at the lowest level, and attempted to create a scorecard to monitor the performance at that level...

Exhibit I: The Chief Areas of Functions in an Insurance Company
Exhibit II: Financial Summary of VCare
Exhibit III: Summary Proposal by Avizare Solutions

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