Insurance KPIs are not numbers that you report daily, weekly, or monthly. In general, many companies in all sectors struggle to define their KPIs to rethink strategic decisions for growth constantly. KPIs are the best directives to measure the impact of your business decisions – good or bad too. You can drill down to more details about the departments, functions with impactful dashboards as an organization.
KPIs are the best navigational tools for business leaders if crafted with compelling dashboards. With the emerging updated BI software tools, the need for prudent reporting is evolving too. Most decision-makers do a lot of research on the best KPIs that suit their business needs. But every business may not succeed with the same KPIs; the best KPIs are unique for your business. Insurers continuously face challenges related to trust and mismanagement with customers. In recent times, visualizing the right insurance KPIs and leveraging data for customer experience has proven to be a competitive advantage for insurers. What are the most common challenges in defining insurance KPIs?
- Identifying the right KPIs that indicate the business performance – Picking the best KPI for your insurance business may not be simple; it needs a lot of knowledge, analysis, and understanding of the business processes and key drivers for each of them. It may involve a lot of trials and experimentation before you choose the right insurance KPIs.
- Creating and visualizing the insurance KPIs – BI software tools evolved rapidly. Still, it takes a lot of effort to access all your data formats and create compelling visualizations for the KPIs analyzed.
- Differentiating KPIs and Metrics – The best KPI for any business may not be the common KPI used across the industry, and it needs to be customized as per your business needs. Sometimes leaders confuse KPIs with metrics when defining, which can be the biggest pitfall of business performance analysis.
After all this, businesses still need to consider the best industry KPIs while customizing their needs. Let’s look at some typical insurance KPIs that can speed up your business decisions.
A few Sales KPIs for Insurers
It is essential to understand the top-line better to streamline the backend operations. Insurance KPIs start with sales performance.
- Quote Rate – The most critical indicator of business performance that can be tracked daily, weekly, and monthly. It indicates the agents/staff performance while providing the number of quotes offered against the contacted leads. Insurers can further inspect at a granular level to analyze individual performance.
- Bind Rate – Another vital measure to know about the successful policy conversion rate against the quotes generated. The percentage of bound policies can further be evaluated monthly, and individuals bind rate per month.
- Contact Rate – The agents may not get in touch with every business lead; there may be a few unattended calls as well. Contact Rate is the number of leads contacted vs. the actual leads that are reachable.
- Referral Rate – Word of mouth is the most powerful sales asset for any insurer. This KPI measures the number of clients that existing customers referred against the new policy conversions during the defined period.
- New Policies per Agent – A straightforward measure to understand the new policy premiums and sales per agent and per vertical.
- Customer Satisfaction – Understanding customer satisfaction is vital for insurers as they rely on trust and empathy to show to the clients when in need. Multiple metrics need to be combined to get an overall view of the satisfaction levels. The metrics may include call duration, feedback surveys, referral rates, and a few more.
- Sales Growth – Emphasis on growth factors is essential for any business, and insurers are not different too. Sales growth draws the attention of all stakeholders to common business objectives.
- Retention Rate – The insurance industry is competitive, and customer touchpoints are limited. Selling new policies involves many costs while retaining existing customers needs a few areas to be considered in the customer journey. Customer retention rate dwells more details about it.
- Agents call rates vs. target – Agents’ performance may not be holistically measured with policy sales but can be done by understanding their efforts. The calls made to connect with the leads against the productive calls give more hindsight to their performance.
How to define the Best Insurance KPIs?
Crafting the best insurance KPIs needs a lot of understanding about every process and the dependencies across departments. Insurance departments tend to be more isolated, and consolidating data is a daunting task. Let us look at a few pointers to consider in defining the best insurance KPIs:
- Identify the goals – Though it looks basic, defining a goal and measuring it by understanding it is the core to creating the best insurance KPIs.
- Consider a holistic approach – The KPIs may not impact a single business unit or department; consider the factors that influence the metric from an organizational purview and are not specific to the business process or controls. Data controls can then be established as per the approach.
- Centralize data- Insurers face challenges with siloed data to generate much-needed insights. Before anything else, consider analyzing your data sources and creating a centralized data source to ease the decision-making process.
- Pre-built templates – In general, most businesses today are looking to accelerate their time to market and improve the time for insights. Insurers are not an exception too. Pre-built templates for visualization can fast-track your insights and reduce your efforts.
Insurance Claims Analytics and Operational KPIs
Claims processing is vital for insurers; insurance claims analytics is gaining widespread adoption. Without understanding the core process and other operational KPIs, insurers may not optimize their operations.
- Claims Ratio – An important metric to identify fraud and customer claims issues. The claims ratio is the number of claims against the premiums received during the specific period. A higher ratio indicates the possibility of fraud, and a lower ratio points to customers having issues with claims processing.
- Average Claim Settlement Time – Claims settlement times have a lasting impact on the customers’ trust. It is vital for insurers to periodically analyze claim settlement time and take any corrective measures as needed.
- Claims Frequency – The most important aspect of insurance claims analytics is predicting future claims based on the outstanding claims. Cash flow management, risk exposure and future transactions depend on the frequency of claims.
- Average cost per Claim – Understanding drivers in the bottom line is also equally important while analyzing efficiencies and operations. The total cost incurred for each claim varies, and the average in a specific period let insurers keep an eye on the expenses.
- Administrative costs per Claim – Breaking down profitability to a more granular level and understanding the performance of each policy is possible with this insurance KPI.
- Cost Components per Claim – There are many costs involved in customer acquisition, sales, claims processing, issue resolution, and agent performance for each policy. Similarly, understanding all the costs involved in the claims process can help in automation and optimization.
- Claims Issues Resolution Time – When a customer claims for the insurance, a lot of validations need to be performed by insurers. In this process, customers may face a few hassles and raise an incident. Understanding process boundaries with this metric helps insurers perform a detailed process assessment.
- Underwriting Cycle Time – This performance indicator provides the number of days it takes for the underwriting department to process the policy application. It may directly impact the customer satisfaction rate; hence it is vital to understand the details.
Financial KPIs for Insurers
A business performance analysis may remain incomplete without financial KPIs for insurers. An analysis of expenses, benefits and policy details serves more to establish the plan for insurers.
- Expense Ratio – Planning operational activities for efficiencies and effectiveness is vital for insurers. The expense ratio provides the total expenses to the policy premium insurer generates in a specific period.
- Loss Ratio – Not all policies may be profitable in a given time; it is important to understand the percentage of losses against the income for every policy to plan better for the future.
- Average Policy Size – Policy size refers to the risk appetite for insurers. A few smaller policies may not be as risky as one large insurance policy. So insurers need to understand their average policy premiums in a given time and compare it with the past for more insights about risk.
- Average Revenue per Client – Do you think average policy size gives you the best insights? Yes, it does, but when you can club it with the revenue vs. acquisition cost for each policy premium generated. At times, it may not be worth spending hefty amounts to gain a new customer.
- Cost per Bind – The incremental cost involved in binding a new policy is detailed with this indicator. Often insurers overlook this, but it relates to the related costs the insurer incurs to add a new client.
- Cost per Bind by Vertical – Insurers operate in different verticals – auto, home, life, health, and many more. A detailed analysis of the costs incurred per bind per vertical provides more insights for decision-makers.
- Cost per Quote – This performance indicator is about all the costs that the insurer incurs to place a quote for a potential client. The cost may be one step ahead to understand the detailed performance of the insurance agents.
- Net Profit Margin – A complete picture of all the operational performance, sales performance, and claims processing is depicted in the net profit margin for all the business functions.
Do you have questions about compelling dashboards for these insurance KPIs? Our in-house solution, InsightBox can bring your data to life with around 50% lower costs. Talk to our experts for more information.