Introduction
In the insurance industry, characterized by complex risk assessments, diverse product offerings, and a constant need for customer retention, data-driven decision-making is crucial for success. Insurance companies need to track their performance rigorously to ensure profitability, manage risks, and provide competitive services. Insurance dashboards, fueled by carefully selected Key Performance Indicators (KPIs), serve as vital tools for these institutions. They provide real-time visibility, highlight important trends, and enable informed decisions across the organization. This guide will explore key KPIs relevant to the insurance sector, along with their formulas, examples, and suitable visualizations. Whether you are an insurance executive, an underwriter, a claims manager, or a marketing professional, understanding these metrics and their presentation is vital for navigating the competitive insurance landscape.
1. Executive Dashboard: Strategic Overview for Insurance Companies
- Summary: The Executive Dashboard provides a high-level view of the insurance company’s overall health and strategic performance. It’s designed for top-level management to track key financial metrics, growth, profitability, and risk exposure, enabling informed strategic decisions and alignment with organizational goals.
- Gross Written Premium (GWP)
- Formula: Total premiums written before deductions for reinsurance or ceding commissions.
- Example: An insurance company wrote $500 million in premiums this year.
- Visualization: Line Chart or Bar Chart showing GWP trend over time, comparing against targets and previous periods.
- Net Written Premium (NWP)
- Formula: Gross written premium less ceded reinsurance premium.
- Example: If the company ceded $100 million in reinsurance from the $500 million in GWP, NWP is $400 million.
- Visualization: Line Chart tracking the NWP over time and the impact of reinsurance.
- Loss Ratio
- Formula: (Total Incurred Claims / Earned Premiums) * 100
- Example: A company has incurred $200 million in claims against $400 million in earned premiums. The loss ratio is 50%.
- Visualization: Gauge Chart or Line Chart showing the loss ratio trend, with a benchmark line.
- Combined Ratio
- Formula: (Incurred Losses + Expenses) / Earned Premiums
- Example: Incurred losses are $200 million, expenses are $50 million, and earned premiums are $400 million. The combined ratio is (200+50) / 400 = 62.5%.
- Visualization: Gauge Chart or Line Chart showing the combined ratio, with an ideal benchmark (e.g., 100% or lower).
- Expense Ratio
- Formula: (Operating Expenses / Earned Premiums) * 100
- Example: If Operating Expenses were $100 million and Earned premiums $400 million, the Expense Ratio would be 25%.
- Visualization: Line Chart or Bar Chart showing trends and comparisons over time.
- Retention Rate
- Formula: (Number of Policies Renewed / Total Number of Eligible Policies for Renewal) * 100
- Example: A company renewed 800 out of 1000 eligible policies, a retention rate of 80%.
- Visualization: Gauge Chart or Bar Chart comparing retention rates over different periods or segments.
- Return on Equity (ROE)
- Formula: Net Income / Average Shareholder Equity
- Example: The net income is $30 million and the average shareholder equity is $200 million, resulting in a 15% ROE.
- Visualization: Gauge Chart or Line Chart showing ROE performance against targets and industry benchmarks.
- Investment Yield
- Formula: Investment Income / Average Invested Assets
- Example: If the investment income is $15 million and invested assets are $200 million, the yield is 7.5%.
- Visualization: Line Chart or Bar Chart tracking trends in investment yield.
- Customer Acquisition Cost (CAC)
- Formula: Total Marketing & Sales Expenses / Number of New Customers
- Example: A company spent $1,000,000 on marketing and got 5,000 new customers, resulting in a $200 CAC.
- Visualization: Bar chart comparing CAC across different channels.
- Claims Processing Time
- Formula: Average time between a claim submission and payment or closure.
- Example: The average claim processing time is 5 days.
- Visualization: Line Chart showing trends in processing times over time.
2. Underwriting Dashboard: Risk Assessment and Portfolio Management
- Summary: The Underwriting Dashboard focuses on risk assessment and portfolio management, enabling underwriters to monitor the quality of the insurance portfolio and improve underwriting profitability.
- Policy Count by Line of Business
- Formula: Total number of policies in a specific line of business.
- Example: A company has 200,000 auto policies and 100,000 home insurance policies.
- Visualization: Pie Chart or Bar Chart showing the distribution of policies.
- Average Premium per Policy
- Formula: Total premiums in a given segment / Number of policies.
- Example: Total premiums in auto is $150 million and policies are 200,000 for an average premium of $750.
- Visualization: Bar Chart or Line Chart tracking average premium over time.
- New Business Quote Conversion Rate
- Formula: (Number of Policies Issued / Number of Quotes Provided) * 100
- Example: A company issued 1000 policies from 5000 quotes, a 20% conversion rate.
- Visualization: Gauge Chart or Line Chart tracking trends in conversion rates.
- Policy Rejection Rate
- Formula: (Number of Policies Rejected / Number of Policy Applications) * 100
- Example: Of 1000 policy applications, 50 were rejected, representing a 5% rate.
- Visualization: Gauge Chart or Line Chart showing rejection rates over time, highlighting trends in risk assessment.
- Loss Ratio by Line of Business
- Formula: (Incurred Losses in a Line of Business / Earned Premiums in the same Line of Business) * 100
- Example: The loss ratio for auto is 60%, while for health insurance is 80%.
- Visualization: Bar Chart comparing loss ratios across different lines of business.
- Average Claim Size by Line of Business
- Formula: Total Losses incurred / Number of claims
- Example: A total of $100 million in losses and 50,000 claims gives an average of $2000 in claim size.
- Visualization: Bar Chart comparing average claim size over different segments.
- Risk Score Distribution
- Formula: Frequency of policies associated with particular risk scores
- Example: 10% of our policies have risk score A, 30% have B, 40% C, 20% D.
- Visualization: Histogram or Bar Chart showing risk score distribution across the portfolio.
- Reinsurance Ceded Premium Ratio
- Formula: Ceded Reinsurance Premium / Gross Written Premium
- Example: Reinsurance ceded $100 million from a $500 GWP gives a ratio of 20%.
- Visualization: Line Chart or Bar Chart showing trends in reinsurance costs.
3. Claims Management Dashboard: Operational Efficiency and Claims Accuracy
- Summary: The Claims Management Dashboard helps claims managers monitor operational efficiency, accuracy, and customer satisfaction by tracking key metrics related to claims processing.
- Claim Frequency
- Formula: Total number of claims registered within a period.
- Example: A company had 5,000 claims registered this month.
- Visualization: Line Chart showing trends in claim frequencies over time.
- Claim Severity
- Formula: Average value or payout of claims within a period.
- Example: The average payout is $3,000.
- Visualization: Line Chart showing trends in claims payout over time.
- Average Claims Processing Time
- Formula: Average time from claim submission to settlement/closure.
- Example: Claims are processed in 3 days.
- Visualization: Line Chart or Bar Chart showing trends in processing times.
- First Notice of Loss (FNOL) to Settlement Time
- Formula: Average time it takes from when a customer files a claim, to when it’s settled/closed
- Example: The average time is 7 days
- Visualization: Line Chart or Bar Chart tracking FNOL to settlement times.
- Claims Settlement Ratio
- Formula: (Number of claims successfully settled / Total claims submitted) * 100
- Example: From 100 claims, 95 were successfully settled, a 95% settlement ratio.
- Visualization: Gauge Chart showing settlement ratio against benchmark.
- Claims Rejection Ratio
- Formula: (Number of Claims Rejected / Total Claims Registered) * 100
- Example: Of 1,000 claims, 50 were rejected, for a rejection ratio of 5%.
- Visualization: Gauge Chart or Line Chart showing trends in claims rejection.
- Customer Satisfaction with Claims Process
- Formula: Measured by surveys and scales
- Example: Customer satisfaction with our claims process is 4.5 out of 5.
- Visualization: Gauge Chart or Star Rating Display showing CSAT score, or a Line Chart tracking the score over time.
- Claims Litigation Rate
- Formula: (Number of Claims Litigated / Total Claims Registered) * 100
- Example: 10 out of 1000 claims were litigated, resulting in a 1% rate.
- Visualization: Line Chart or Bar Chart tracking litigation rate trends.
4. Sales and Marketing Dashboard: Customer Acquisition and Retention
- Summary: The Sales and Marketing Dashboard provides insights into customer acquisition and retention efforts, enabling marketing and sales teams to optimize their strategies and boost overall business growth.
- New Policy Sales Volume
- Formula: Number of new policies sold within a specific period.
- Example: A company sold 2,000 new policies this month.
- Visualization: Line Chart showing sales trends over time, by product type.
- Lead Conversion Rate
- Formula: (Number of Policies Sold / Number of Leads) * 100
- Example: 100 policies were sold from 1,000 leads, a 10% conversion rate.
- Visualization: Gauge Chart or Line Chart showing trends in conversion rate, also by source.
- Customer Acquisition Cost (CAC)
- Formula: Total Marketing & Sales Expenses / Number of New Customers
- Example: A company spent $500,000 on marketing and got 1,000 new customers, with a CAC of $500.
- Visualization: Bar Chart showing CAC across different channels.
- Policy Renewal Rate
- Formula: (Number of Policies Renewed / Total Policies Eligible for Renewal) * 100
- Example: 900 out of 1000 eligible policies were renewed, for a renewal rate of 90%.
- Visualization: Gauge Chart or Line Chart displaying renewal rates over time.
- Cross-Selling Ratio
- Formula: Number of Customers with Multiple Policies / Total Number of Customers
- Example: 200 out of 1000 customers have multiple policies, giving a 20% cross-sell ratio.
- Visualization: Gauge Chart or Bar Chart showing cross selling ratios.
- Customer Retention Rate
- Formula: (Number of Customers Retained / Total Customers at the Start of Period) * 100
- Example: A company retained 950 of 1000 customers, a retention rate of 95%.
- Visualization: Line Chart showing customer retention rate trend over time.
- Marketing Campaign ROI
- Formula: (Gain from campaign – Cost of campaign) / Cost of campaign (expressed as a percentage)
- Example: A marketing campaign that cost $50,000 generated $150,000 in new business. Its ROI is (150,000 – 50,000)/50,000 = 200%
- Visualization: Bar Chart comparing ROI across different campaigns.
- Website Traffic and Lead Generation
- Formula: Track metrics of website traffic and the resulting leads generated.
- Example: 500,000 visitors to the website per month, and 10,000 leads generated.
- Visualization: Line Chart tracking trends over time.
Conclusion
In conclusion, effective management in the insurance industry depends heavily on the ability to measure, analyze, and act on key performance indicators. This guide has explored the crucial KPIs across different functions of an insurance company, from the strategic insights provided by the executive dashboard to the operational metrics tracked in underwriting, claims management, and sales & marketing. By understanding and visualizing these KPIs, insurance companies can optimize their operations, manage risks effectively, boost customer satisfaction, and achieve sustained growth. Utilizing dashboards to track and act on these insights is crucial for success in the insurance industry.
