ACC508: Decision Support and Cloud Computing in the Insurance Sector

This report, prepared for ACC508: Informatics and Financial Applications, examines the application of Decision Support Systems (DSS) and cloud computing within the insurance industry. It begins with an executive summary highlighting the significance of data-driven decision-making in modern business, particularly within insurance. The report delves into how DSS tools, including data mining and cloud computing, can transform raw data into actionable insights, focusing on fraud detection, premium pricing, and product development. The analysis includes how cloud computing offers insurance companies efficient IT resource management and real-time data access. The report also presents statistical data on cloud computing adoption within the insurance sector, acknowledging compliance challenges and the potential for private cloud solutions. The report concludes by emphasizing the growing importance of DSS and cloud computing in the insurance industry, highlighting their role in enhancing business performance and competitive advantage. It includes references and an appendix with student details.

ACC 508 Informatics and Financial Applications
Assignment 1: Information Systems, Decision Support
Systems and Cloud Computing
By
Jaspreet Singh
Student Number: 1107011

ACC508: Informatics and Financial Applications
Assignment One: Decision Support and Cloud Computing
EXECUTIVE SUMMARY
Today every business is built and run from data. However, the key to success is how
these businesses use their data to make strategic decisions. One of the ways a
business can achieve this goal is through the use of Decision Support Systems.
Decision Support Systems (DSS) are a set of tools and software that transform multiple
levels of data into useful information. This information can then be used by
management to make strategic business decisions.
DSS tools have increased in popularity since their introduction in the 1960s. Today,
there are more than 100 software companies offering a variety of DSS tools, ranging
from data mining, OLAP, reporting, cloud computing etc. The aim of these tools is to
optimize business performance.
One of the industry’s that would greatly benefit from DSS tools is the insurance industry.
Insurance companies have been operating for many years. Furthermore, they collect a
lot of data in regards to their policies and claims. A DSS tool would, therefore, allow an
insurer to transform the collected data into valuable analyses which the company may
use to improve their pricing, product development, fraud detection and other strategies.
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ACC508: Informatics and Financial Applications
Assignment One: Decision Support and Cloud Computing
TABLE OF CONTENTS
EXECUTIVE SUMMARY.................................................................................................................... i
TABLE OF CONTENTS......................................................................................................................ii
TABLE OF FIGURES........................................................................................................................ iii
CHAPTER 1 : INTRODUCTION.........................................................................................................1
CHAPTER 2 : DECISION SUPPORT SYSTEMS AND INSURANCE........................................................2
CHAPTER 3 : CLOUD COMPUTING AND INSURANCE INDUSTRY....................................................4
CHAPTER 4 : CONCLUSION.............................................................................................................6
REFERENCES...................................................................................................................................7
APPENDIX A................................................................................................................................... 8
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ACC508: Informatics and Financial Applications
Assignment One: Decision Support and Cloud Computing
TABLE OF FIGURES
FIGURE 2-1: INSURANCE FRAUD DETECTION SYSTEM...................................................................3
FIGURE 3-1: INSURANCE COMPANIES RESPONSE TO CLOUD COMPUTING...................................5
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ACC508: Informatics and Financial Applications
Assignment One: Decision Support and Cloud Computing
CHAPTER 1: INTRODUCTION
The purpose of this report is to provide knowledge on information systems, decision
support systems, and cloud computing. The industry I have chosen in this report is the
insurance industry. I have chosen insurance because research shows that many
insurance companies rely on data analytics to make key decisions.
The report is divided six sections as follows. In chapter one, I discuss the contents of
the report.
In chapter two, I discuss what Decision Support Systems are and how these tools can
be used within the insurance industry to fix some of the challenges they face such as
product development and insurance fraud detection.
In chapter three, I discuss cloud computing and the opportunities it brings to the
insurance industry. I also provide statistical evidence on the uptake of cloud computing
services by insurance companies.
In chapter four, which is the final section, I conclude my analysis by providing a brief
summary of information systems and insurance. The references and appendix is
included in section five and six respectively.
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ACC508: Informatics and Financial Applications
Assignment One: Decision Support and Cloud Computing
CHAPTER 2: DECISION SUPPORT SYSTEMS AND INSURANCE
Decision Support Systems (DSS) are a set of tools and software used to collect and
analyze data into useful information. Most DSS tools are able to perform a wide variety
of functions including collection and organization of data, data analysis, and production
of custom reports (Castellanos, Dayal, Simitsis, & Wilkinson, 2009).
Insurance fraud is a growing concern for many insurance companies because it
increases the cost of insurance. Fraud can occur at different stages of the insurance
cycle. Some common examples of fraud include staged accidents, data theft and
application fraud (Insurance Nexus, 2016).
DSS tools, based on historical fraud data, can be used by insurance companies to
assist in the prevention, reduction, and detection of fraud. Below are examples of these
tools may be used by the insurance industry to combat fraud.
Decision Support Systems for Prevention of Insurance Fraud
A DSS tool can be used to screen applicants at the application stage. The tool will then
score the applicants by flagging their likelihood for potential fraud. Based on this
information, an insurance company can either reject a customer with a high score from
the onset or offer them an insurance policy subject to close monitoring by the insurance
company (See Figure 2-1).
Decision Support Systems for Reduction and Detection of Insurance Fraud
DSS tools can also be used for detection and reduction of fraudulent claims. In this
scenario, the tool works by identifying claim applications that are potentially fraudulent.
Furthermore, the costs of various actions by the company from settling the claim to
rejection or investigation of the claims are analyzed concurrently. Based on the output,
the insurance companies can make the appropriate decisions (Power, 2017).
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ACC508: Informatics and Financial Applications
Assignment One: Decision Support and Cloud Computing
Decision Support Systems in other Areas of Insurance
Apart from fraud management, Insurance companies are also using DSS tools in other
critical areas of the business. These areas include premium pricing, product
development, agent selection, customer service, claims settlement etc.
Figure 2-1: Insurance Fraud Detection System
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ACC508: Informatics and Financial Applications
Assignment One: Decision Support and Cloud Computing
CHAPTER 3: CLOUD COMPUTING AND INSURANCE INDUSTRY
Gone are the days of companies purchasing expensive data warehouses and servers.
With the advancement of the internet, cloud computing services have allowed
companies to efficiently reuse their IT resources while having quick access to real time
data (Accenture, 2010).
Cloud computing, which is an area of DSS, was initially developed for storage solutions
and servers infrastructure. With time, their capabilities have increased to include
business support applications like email and office suites, customer service, web
conferencing facilities, enterprise applications and project planning (Edara &
Kandagatla, 2012).
With regards to the insurance industry, cloud computing provides many benefits to
insurance companies. In addition to the functions mentioned above, they can also be
used by insurance companies to build potential underwriting tool applications for their
customers (Edara & Kandagatla, 2012).
Despite the opportunities above, investment in cloud computing services within the
insurance industry is still low. The main reason cited is compliance issues such as data
privacy and restrictions. Insurance companies collect a lot of personal data and they
fear that any data leak in the cloud may have a significant reputational risk to the
company.
A study was done on 53 insurance companies in North America to gather their
responses on clouds computing (Accenture, 2010). Figure 3-2below shows that out of the
responses, 51% of the insurance companies were keen on cloud storage. However,
when it comes to implementation, their responses were of strong interest but no
commitment, possibly due to the data privacy concerns.
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ACC508: Informatics and Financial Applications
Assignment One: Decision Support and Cloud Computing
To overcome this challenge, software companies are focusing on the creation of private
clouds to encourage insurance companies to host their core business specifics. Private
clouds are considered more secure than public clouds.
2%
45%
51%
2%
Insurance Companies Response to Cloud Computing
Not interested
Interested but no plans
Planning to implement
in the next 12 months
Don’t know
Figure 3-2: Insurance Companies Response to Cloud Computing
.
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ACC508: Informatics and Financial Applications
Assignment One: Decision Support and Cloud Computing
CHAPTER 4: CONCLUSION
We live in a world where data is becoming a critical component of a company’s decision
making process. Consequently, Decision Support Systems have become a common
feature in many businesses due to their ability to analyze data into useful information.
When it comes to the insurance industry, DSS tools play a vital role. We have observed
that insurance companies have a history of collecting a lot of data on both claims and
policies. DSS tools can then be applied on this data to extract useful information. We
observed in chapter two an example of a DSS tool used by insurance companies for
fraud detection and prevention. Furthermore, DSS tools can also be used in other parts
of the industry such as product development and pricing.
Cloud computing is an area of DSS. Cloud computing services provide storage and
infrastructure solutions to companies which results in cost savings in regards to their IT
resources and enhanced business performance. In respect to the insurance industry,
cloud computing also offers companies opportunities to develop business models such
as underwriting tool packages.
Despite these opportunities, the uptake of cloud computing within the insurance sector
is still low at its infant stage. However, it is expected that this area will expand in the
near future as DSS tools evolve to meet the needs of the industry. Studies are showing
that insurance companies that have begun to develop strategies surrounding cloud
computing services are already indicating signs of a competitive advantage.
REFERENCES
Accenture. (2010). How Cloud Computing will Transform Insurance. Retrieved from
Accenture:
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ACC508: Informatics and Financial Applications
Assignment One: Decision Support and Cloud Computing
http://insuranceblog.accenture.com/wp-content/uploads/2013/07/Cloud_for_Insur
ance_POV_Final.pdf
Castellanos, M., Dayal, U., Simitsis, A., & Wilkinson, K. (2009). Proceedings of the 12th
International Conference on Extending Database Technology: Advaces in
Database Technology. Retrieved from
http://icdt.tu-dortmund.de/proceedings/edbticdt2009proc/edbt/papers/p0001-
Dayal.pdf
Edara, S., & Kandagatla, R. (2012). Cloud Computing in the Property &. Retrieved from
Capgemini:
https://www.cn.capgemini.com/resource-file-access/resource/pdf/Cloud_Computi
ng_in_the_Property___Casualty_Insurance_Industry.pdf
Insurance Nexus. (2016, March 9). Analytics in Insurance Fraud: The Fight Before the
Claim . Retrieved from Insurance Nexus:
http://www.insurancenexus.com/fraud/analytics-insurance-fraud-fight-claim
Power, D. (2017). How can analytics and decision support reduce insurance fraud?
Retrieved from http://dssresources.com/faq/index.php?
action=artikel&cat=&id=292&artlang=en
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ACC508: Informatics and Financial Applications
Assignment One: Decision Support and Cloud Computing
APPENDIX A
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ACC508: Informatics and Financial Applications
Assignment One: Decision Support and Cloud Computing
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ACC508: Informatics and Financial Applications
Assignment One: Decision Support and Cloud Computing
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