Key performance Indicators or KPI's in insurance
Key Performance indicators are the beating pulse of an insurance entity. The operational flows of insurance allow you to navigate the peaks and troughs of the areas in the business to refine, improve or revamp.
What are Insurance KPI's that should be monitored?
Before we get into the specific KPIs, what I like to encourage is getting a view of the operational flow of the business, these must have data points that allow you to view the activities. Manual or paper based does not cut it.
Ratio's in Insurance are all important remember to take out or add elements that are not part of the reinsurance or risk/profit model eg: Catastrophe or Excess Of Loss, salvages, recoveries etc.
KPIs for Different Business Areas
Marketing and Sales: Track leads, conversions, and sales performance.
Claims: Monitor claim frequency, severity, and handling efficiency.
Operations: Measure turn-around times for key processes, such as policy issuance and claim settlement.
Financial: Monitor solvency, asset management, and operational costs.
Top KPI's measured and actively monitored - add in your product lines here
Loss Ratios measure the profitability of insurance products. Calculated as:
Claims amount / Premium X 100 = Loss Ratio
Motor
Non-Motor
Product lines
Average policy Age - Indicates customer Loyalty (months & years)
Average Policy Amount - Provides policy and underwriting risk (Gross)
Product
Package
Average Discounts applied to policy holders
Insurance product packages or standalone products
Debit order success Rate to measure efficiency of premium collection
Refunds outflows of money need to be monitored
Cancellations are indicative of competitors and service levels
New customer Churn - customers on the books for less than 30 days is
Marketing and Sales Funnel
Marketing prospects
Leads
Conversions
Sales
Retention Ratio - Number clients that wanted to cancel and were retained
Average cost of Repairs (Motor)
Accident Damage
Glass
Other
Average cost of claim (Non-Motor)
Building and structure
All Risks
Household
Operational Costs (FTE/Staff)
Salvages/Recoveries
Operational Measures
average call time
number of calls
average wait time
top enquiry
Turn-around time for operations flows
assessing/loss adjuster submissions
quotes/repairs/waiting time
customer service enquiries
Ombudsman claims
Complaints
Note: Exception and Key Fraud measures will need to be closely monitored against baseline measures and common activities in the outflow of services and or funds from the business. Controls and segregation of duty monitoring to be established.
KPI Meeting Best Practices
Schedule regular KPI meetings to review and analyze performance - Monthly is good
Invite key stakeholders from relevant departments (e.g., underwriting, claims, operations).
Review KPIs against targets and identify areas for improvement.
Discuss root causes of underperformance and develop action plans to address them with owners.
Implement corrective measures and track progress regularly.
Additional Questions and Answers
Q: How often should KPIs be monitored? A: The frequency of KPI monitoring depends on the nature of the KPI and the business's reporting cycle. Some KPIs may be monitored daily (e.g., loss ratios), while others may be reviewed quarterly (e.g., retention ratio).
Q: Who should be involved in setting KPIs? A: KPIs should be established collaboratively by key stakeholders, including senior management, operational teams, and data analysts.
Q: How can KPIs be used to improve business performance? A: KPIs can be used to identify trends, pinpoint areas of concern, and develop strategies to improve profitability, customer satisfaction, and operational efficiency
1stForData.com provides expert advice and consulting to insurance entities looking to optimise their insurance data management and projects.
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