The secret of the world’s most successful insurance organizations is monitoring the right insurance KPIs and metrics to ensure they strike a balance between risk and reward.
Managing risk and reward with a data-driven culture.
The world’s most successful insurance organizations strike a balance between short-term risks and long-term rewards. Their success is based on offering the right product, having the right people selling that product and managing the risks associated with selling insurance policies. Use these Insurance KPIs and metrics to learn how to balance the risks and rewards that are part and parcel of the insurance business.
The Average Cost per Claim KPI measures how much your organization pays out for each claim filed by your customers. With this KPI (as with other insurance KPIs), it’s important to categorize based on the type of claim, since each type of claim will differ in cost. The purpose of this KPI is to help your organization to properly assess the risk associated with each type of policy and adjust policy pricing accordingly.
Customer service metrics measure how satisfied your customers are with the products and services your organization provides. For an insurance business that relies on recurring revenue from existing customers, delivering high quality customer service is essential, especially during sensitive times such as when a customer is submitting a claim. If customers are unhappy with the way they are treated, they may start shopping around for new coverage, which provides your competitors an opportunity to lure them away with a special offer.
The Claims Ratio KPI measures the number of claims in a period and divides that by the earned premium for the same period. It’s important to note that insurance is the business of managing risks and, to do that well, the insurer needs a thorough understanding of the incurred claims ratio. If the value is higher than expected or established norms, then further investigation is required to figure out why that is (eg: fraud). If it is lower than expected, it could indicate irrelevant products or difficulties in claiming, possibly affecting customer satisfaction.
The Top Brokers in Sales Revenue KPI measures and ranks the top performing brokers based on sales revenue. By spotting who your top performing brokers are, you can ensure that tentative leads are sent to the experts to be converted. There are two views to this KPI: one is strategic and takes a look at top sellers over a longer time period (annual), and the other is tactical and looks at short-term performance. Sharing tactical information about this KPI can foster healthy-competition among brokers.
The Average Time to Settle a Claim KPI measures how long it takes – on average – to settle insurance claims for each type of policy your organization offers. Each insurance policy will have different claim periods, and may vary quite a bit in terms of how long it takes to settle that particular claim. A common example is the difference between medical and auto insurance claims where, typically, medical claims take longer to settle.
The Quotas vs. Production KPI measures the effectiveness of sales agents at meeting sales targets. Within the insurance world, there are typically two types of insurance sellers. The first group work exclusively for your organization, and only sell your products (often called captive agents). The second group works for a third-party and sell policies for a number of companies, ostensibly finding the best rate for clients (non-captive). Setting realistic quotas that challenge your team and don’t discourage them is essential for achieving a high quota to production ratio.
The Percentage of Sales Growth KPI measures the amount of policy renewals and new policy sales over a set period of time. The renewal ratio measures the number of insured clients that stay enrolled in a program after the initial coverage period expires. New policies include any clients purchasing coverage for the first time, or returning after an extended period.
The Policy Sales Growth KPI measures how many new policies your organization has sold over a set period of time and compares that to a target value. This KPI is designed to provide you with a view of the big picture, and even if you use this insurance KPI to monitor a shorter time-frame, it’s important to compare current values to historical norms. The policy sales growth can be defined based on the number of new clients, a measure of number of new policies sold, or a combination of the two. Use this insurance KPI to determine if you’re hitting sales targets.
The Net Income Ratio measures how effective your organization is at generating profit on each dollar of earned premium. This KPI is used to measure the profitability of your organization and is primarily used for internal comparison.