Thursday, February 18, 2016

Dimensional Modelling for Insurance Industry


Insurance industry is an important and growing sector for business intelligence market. Insurance companies generate several complicated transactions that must be analyzed in many different ways. Insurance companies like GEICO help customers manage their risks by charging a fixed premium amount and providing a sum of money in case of unexpected events such as a car accident or medical emergency.

Insurance Industry base their business models around assuming and diversifying risk. Most insurance companies make revenues in two ways:  charging premium amounts in exchange of insurance coverage and subsequently investing those premium into markets to earn interest.


Within Insurance Industry, I have chosen GEICO and will be applying concepts of dimensional modelling concepts to evaluate the performance metrics for evaluating an insurance company.  GEICO which stands for Government Employees Insurance Company is an automobile insurance company based out of Chevy Chase, Maryland. It is the second largest insurance company in United States of America. It is wholly owned subsidiary of Berkshire Hathaway. Today, there are more than 22 million automobiles insured by GEICO which are owned by more than 13 million policy holders. GEICO follows a direct-to-customer sales model.

From the perspective of GEICO’s CEO there are certain KPIS(Key Performance Indicators). Few of them are listed below

  • Average Insurance Policy Size - Average insurance policy size of policies closed within measurement period. This KPI is most used for: Operational Excellence
  • Loss Ratio % - The ratio of claims to premiums. It may be calculated in several different ways, using paid premiums or earned premiums, and using paid claims with or without changes in claim reserves and with or without changes in active life reserves.
  • Claims Solvency %  - Insurance companies’ ability to pay the claims of policyholders.
  • % of Overdue Claims - Percentage of overdue claims.
  • Percentage of Sales Growth - Measures the amount of policy renewals and new policy sales over a set period of time
  • Net Income Ratio - Measures how effective organization is at generating profit on each of dollar of earned premium.


Based on the above KPIs, I have picked Claims Solvency % as the one on which we will proceed with our case study. Claims Solvency % refers to an insurance company’s capacity to compensate its customers in case of unexpected calamities i.e. in GEICO case can be car collision.

Performance Metrics that are important to evaluate GEICO’s performance can be

  • Total Revenues – Total amount collected from customers in exchange of insuring their     automobiles
  • Total no of Customers – Total Number of Customers insured by GEICO
  • Total Settlements – Sum of amount paid to customers in lieu of insurance bought by customers in case of car collisions
  • Total Insured Amount – Sum of amount which GEICO is liable to pay in case all customers are need to be paid


Dimensional Model can play a crucial role in helping GEICO’s higher management getting answers to specific questions. Such as how many customers were insured on a monthly, Yearly or daily basis. The level of granularity to be queried can be handled by using Dimensional Models. Similarly, Dimensional Models can help them query and evaluate the performance of specific insurance products or a group of similar insurance products clubbed together.

Given the surplus amount of data collected during the operations of a large insurance company like GEICO, Dimension Model can help in ensuring simplicity and optimized query platform for business users like the CEO. Dimension Model denormalizes the highly complex transactional database tables and clubs them into dimensions, hence ensuring simpler and speedy query of data.
Dimensional Modelling maximizes flexibility and scalability depending on changing user activities. Given the notion, GEICO’s CEO can track real time changes occurring to the customer data and base their evaluation on that.

Transaction-level star join schema  would provide an extremely powerful way for GEICO to analyze insurance claims. The number of claimants, the timing of claims, the timing of payments made, etc can be easily derived from this view of the data.

Below is a sample dimensional model which GEICO can adopt in order to evaluate their performance.

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