Defining a solution: integrating the various elements of a performance management solution as part of an insurer's process can eventually provide a way to help better manage a business.

What today is sometimes known as business performance management, corporate performance management or enterprise performance management is--not surprisingly--focused on helping insurance executive management teams better manage their businesses. Performance management can therefore be defined as "using a holistic view of business data, presented as a single source of truth, aggregated from multiple data sources, to better measure and manage." In this definition, data sources need not be databases, since the business data comprising performance management could be business processes, for example real-time event streams, including those externally driven, and may not actually reside in a database.

Key concepts in this definition include "holistic view," "business data" and "single source of truth." A holistic view is the ultimate objective of performance management, where the executive information being presented is arrived at based upon multiple data sources, primarily inside an insurance company, but is also aggregated with external data. For a multiline insurer, a performance management view could provide correlation of which cross-selling initiatives have been most effective or which actuarial practices have supported, or stymied, new product creation.

The key business benefit provided to insurers by this holistic view is that it should help overcome siloed business perspectives and differing interpretations of what constitutes positive or negative impacts to the overall business. Applying external data to this view allows simplified and more automated best-practice comparison, along with subsequent adoption of these by an insurer's management.

The business data portion of the performance management definition refers to structured data, such as that found within corporate data warehouses, as well as unstructured data such as business processes. Providing a holistic view into this data converts the data into actionable information, often provided to management via graphical interfaces such as executive dashboards.

By incorporating as near real-time data as possible, performance management helps insurers quantify more quickly the financial impact of external events, such as natural disasters. Most evident of benefit in this area would be the claims process, but similar impact could be achieved in investment, product development and sales. One example of this would be in the area of cyber-insurance, where a perspective on the impact of a natural disaster in one geographical location could have significant repercussions on indirectly related events, such as Internet availability, in other geographical locations. Another example would be an improved ability to observe the impact-to-client needs, including emerging, new requirements across geographic regions.

The "single source of truth" portion of the definition implies a broader, more consistent interpretation of business data across different insurance departments and business units. Only by having an agreed-upon and consistent understanding of what truly is important to an insurer's business will performance management live up to its promise of business value.

Performance management has its roots in data warehousing and business intelligence, which can sometimes be thought of as a form of performance management, but typically it has a more narrow focus. Both data warehousing and BI are key foundational elements of performance management, where data warehousing provides the requisite consolidation of corporate data and BI uses that consolidation to provide more detailed analysis capabilities. A well-established example of BI would be budgeting and forecasting.

Unlike data warehousing, which may not initially have easily quantifiable benefits as a stand-alone technology--although it definitely does have Financial benefit--and BI, which by itself can provide a solid return on investment but without the mandate to be a cross-company tool, performance management is used solely based upon its return on investment and its broad-bush perspective.

In the insurance industry, specific areas of opportunities for insurers to use performance management could include overall premium change, loss activity such as ratios and claims, policy in-force status, etc. Each of these could be viewed by product line or by geography to help senior management identify trends. With real-time integration of performance management, these trends could be viewed as soon as data is available and captured to be analyzed by the performance management system.

With the industry's experience in process, there's no reason to believe integrating a performance management solution as part of an insurer's process won't ultimately provide corporatewide business benefits in the not-too-distant future.

Gates Ouimette is a Best's Review columnist from Massachusetts. He can be reached at insight@ Bestreview.com.