Insurance business intelligence

Insurance business intelligence refers to all general functionalities business intelligence but is focused on the informational needs of insurance (P&C and life) companies. Therefore, solutions are designed largely with a focus on the unique needs required by the insurance industry.
What business intelligence is designed to do for insurance is to allow the decision makers within the insurance industry make the best decisions or take the best actions based on the most accurate, complete and understandable statistical information.
Key Concepts
Earned premiums
Earned premium is the portion of an insurance written premium which is considered "earned" by the insurer, based on the part of the policy period that the insurance has been in effect, and during which the insurer has been exposed to loss. For instance, if a 365-day policy with a full premium payment at the beginning of the term has been in effect for 120 days, 120/365 of the premium is considered earned. Conversely, 245/365 of the premium is considered unearned. The calculations differ for policies where premiums are monthly, quarterly, or based on some other schedule besides full initial payment.
In insurance business intelligence, great care has to be taken in order to make earned premiums calculation correct and relevant to the controlling time of the report. In an underwriting report, for example, one would need to add the latest earned premiums as of today or as of the date a report has run, while in a financial report, the earned premiums for each financial period will be calculated as the written premium + the difference in unearned values.
Outstanding claims
When a claim is filed, an insurer must make an estimation on the amount that will be eventually paid to the client. This is both needed for regulatory reasons and for financial reasons. When the claim goes along and payments are made, the outstanding estimate shows the difference between the amount paid and the eventual amount that will be paid. Together, outstanding estimates and claim payments are called incurred claims.
In business intelligence, the profitability report will always include the outstanding estimates, as the claims paid only show a partial picture. Again, the time definitions reflect on the type of calculation for outstanding claims. On a report by accident date, latest outstanding estimates will be shown by the accident month/quarter/year, while in a financial report, each period will show the change in outstanding in that period.
IBNR
IBNR (Incurred but not reported) is a term in common use in insurance. When a policy of insurance is written it will typically cover a defined (often 12 month) period from inception of the policy. When the policy is sold, a premium is paid by the insured party to the insurer. The number and cost of claims that will arise from the policy are unknown and unknowable amounts at inception. Indeed, at expiry of the policy there can be a high degree of uncertainty as to what the cost of claims will ultimately be. There might be some information available on incurred claims amounts but this can often be zero.
The insurer will conduct a reserving exercise with a view to assessing what this ultimate cost will be. This enables them to assess the profitability of the business that they have written and are planning to write in the future.
This makes reporting and business intelligence far more complicated. For each coverage, one needs to decide on the claims development scale, according to the nature of the policy coverage (for example, casualty policies tend to have a very long "tail", while property policies tend to have a short "tail"). After deciding on the development scale, one needs to estimate the number and height of claims that have not been reported yet and attach those figures to the profitability report in the BI system. As time goes by, IBNR values should go down while incurred claims values go up.

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