The Complete List of Strategy KPIs for the Insurance Sector

It’s important with any organisation to be strategic and focused with clear goals and targets, and no less so in the Insurance Sector

Your strategy should hold your important objectives and strategic goals and you need to carefully track your progress against your strategy. Let’s take a look at some of your Strategic KPIs / Strategic Metrics or OKR options relevant to the Insurance Sector

Annuity Net Flows: This is relevant to life insurers who sell annuities. It represents the inflows (premiums) and outflows (benefit payments, surrenders, and withdrawals) of cash in the annuity business.

Annuity Surrender Rate: Particularly relevant for life insurers, this is the rate at which policyholders surrender their annuities before the end of the surrender period.

Asset-Liability Duration Gap: This applies to life insurers. It measures the difference between the duration of assets and liabilities. A mismatch could mean the insurer is exposed to interest rate risk.

Average Premium per Policy: This measures the average amount of premium income the company earns per policy. A rising average premium per policy could be indicative of a company successfully upselling or cross-selling its products, or moving into higher value markets.

Benefits Ratio: This ratio compares benefits and claims paid to policyholders to the company’s earnings. It helps assess the profitability of an insurance company.

Catastrophe Loss Ratio: This is the ratio of losses from catastrophic events (like hurricanes or earthquakes) to earned premiums. A high ratio could significantly impact an insurer’s profitability.

Ceded Reinsurance Leverage: The ratio of ceded reinsurance premiums to policyholders’ surplus. This ratio measures the dependence of the company on reinsurance for capacity, stability, and growth.

Change in Cash Surrender Value: This is relevant for life insurance. It is the annual change in the sum of money an insurance company pays to the policyholder or annuity contract holder upon voluntary termination of the contract before it comes into effect or death benefits are paid out.

Change in Insurance Reserves: This is the year-on-year change in an insurer’s reserves. A large increase might suggest higher claims or more conservative management, while a decrease could raise solvency concerns.

Claim Frequency: The number of claims filed per policy issued. High claim frequency can indicate riskier portfolio segments or potentially fraudulent activities.

Claim Severity: The average payout for each claim filed. High claim severity can be an indicator of riskier policies, inflation, or inadequate pricing.

Claims Closure Ratio: This measures the number of claims closed versus the number of new claims received in a given period. A high ratio indicates efficient claims management.

Claims Settlement Ratio: This is the number of claims settled by the insurer to the total claims received. A high ratio suggests the company is reliable in terms of settling claims, which can impact customer retention and reputation.

Combined Ratio: The combined ratio is the sum of the loss ratio and the expense ratio. If it’s over 100%, the company is paying out more in claims and expenses than it’s earning from premiums.

Direct Premiums Written Growth Rate: The year-over-year growth rate of premiums directly written by the insurer. This can give an idea of how quickly the company is expanding its business.

Expense Ratio: This represents the company’s operational costs relative to its earned premium. It shows how much it costs to write each policy. A lower expense ratio generally indicates more efficient operations.

First Notice of Loss (FNOL) to Claims Paid Time: This measures the average time taken from when a claim is first reported to when it is paid. A shorter timeline typically suggests better operational efficiency and higher customer satisfaction.

Growth in Cash Value Life Insurance: This KPI applies to life insurers. It refers to the increase in the amount of money that a policyholder would receive if they surrendered the policy before death or before maturity.

Incurred But Not Reported (IBNR) Reserves Ratio: This ratio measures the reserves set aside for claims that have been incurred but not yet reported. A high ratio may indicate a higher potential for future liabilities.

Insurance Leverage: This is the ratio of net premiums written to policyholder surplus. A higher ratio suggests the insurer is more reliant on underwriting activities for revenue and may be taking on more risk.

Insurance Penetration: This is the ratio of premiums underwritten to the total market potential for the insurer. It is a measure of market share and growth potential.

Investment Yield: Insurers hold significant investment portfolios that generate returns and offset underwriting risks. Higher yields can offset underwriting losses but might indicate higher risk investments.

Life Insurance In-Force: Specific to the life insurance industry, this represents the aggregate value of life insurance policies that a company has underwritten. It indicates the scale of the insurer’s operations.

Loss Adjustment Expense (LAE) Ratio: This is the ratio of LAE to the total losses incurred. It’s a measure of how much it costs an insurer to investigate and settle claims.

Loss Ratio: This ratio indicates the percentage of premiums paid out as claims. A high loss ratio can indicate either underpricing of policies or higher claims frequency. On the other hand, a lower loss ratio suggests better control of claims payout and potentially effective underwriting.

Mortality Rate Variance: Specific to life insurance, this measures the difference between expected and actual mortality rates. A variance can signal issues with pricing or underwriting.

Net Subrogation Recoveries: Subrogation refers to an insurer’s attempt to recover claims it paid to its insured from a third party that caused the loss. Higher recoveries can help improve an insurer’s profitability.

Net Underwriting Income: This is the income an insurer earns from premiums and losses. It’s calculated as earned premiums minus both incurred losses and underwriting expenses. A higher value is generally better as it shows underwriting profitability.

Percentage of Policies Reinsured: This measures the percentage of total policies that an insurance company passes on to a reinsurer. It indicates the level of risk the company is willing to retain.

Persistency Ratio: In life insurance, this ratio measures the number of policies remaining in force at the end of a period compared to the start. It shows customer loyalty and satisfaction.

Policy In-force: This refers to the number of insurance policies currently active or in effect. It provides a clear snapshot of the scale of an insurer’s operations.

Policy Lapse Ratio: Specific to life insurance, this measures the proportion of policies that are terminated because policyholders stop paying premiums. A high ratio could indicate customer dissatisfaction or financial distress among policyholders.

Policy Renewal Rate: The rate at which existing customers renew their policies. Higher renewal rates indicate higher customer satisfaction and lower customer acquisition costs.

Policyholder Surplus: This metric is the difference between an insurance company’s assets and liabilities. It’s an indicator of financial health and the insurer’s ability to take on more risk.

Premiums Written: This is the total amount of premiums a company has underwritten, or agreed to, during a given period. A steady increase in premiums written generally indicates business growth.

Risk-Based Capital (RBC) Ratio: This is a measure of solvency for insurance companies, indicating the amount of capital an insurer needs to offset its risk. A higher ratio implies a financially stable company.

Solvency Ratio: This measures the company’s ability to meet its long-term financial obligations. Regulators typically require insurance companies to maintain a solvency ratio above a certain threshold to ensure they can pay claims in adverse scenarios.

If you’d like to download these in a spreadsheet format you could then use to set value and targets for a two or three year plan then take a look at our Top 50 Insurance Strategy KPIs.

So, there are a bunch of important KPIs to track in Insurance. As we always say with our lists of KPIs, it’s best practice to not have too many metrics on your KPI Dashboard. KPIs are there to keep everyone focused on the most important aspects of performance that you need to get right. If you have too many, then you will be reducing the focus. So pick your winners, add them to your KPI Dashboard, and start tracking them.

Good luck with hitting your targets 🎯