No insurance carrier executes every aspect of technology flawlessly. Rather, every carrier executes one or two aspects of technology well, sometimes very well.
But if there were a company that executed flawlessly, just what would this "model carrier" look like? It would be a composite of some three dozen carriers, according to a new report published by Celent Communications Inc.
Some of the technology began with commercial lines, and has migrated to personal lines. In other cases just the opposite. So, which commercial carriers are worthy of note? It depends on what aspect of the technology we're talking about.
In product design in the property/casualty sector, the ability to segment risk into very small groups to provide the most effective pricing is considered a "best practice." And just who excels at that? None other than an Illinois-based midsize carrier by the name of Pekin Insurance, that serves 618,000 policyholders in five Midwestern states.
What's the secret to Pekin's success? It's the use of vendor CGI's Ratabase software as a "common calculation engine," according to the report. Ratabase uses algorithms, tables and rating logic to properly price a policy. Better yet, the carrier has been able to execute using only one installation of the software. "The company uses a single installation of CGI's Ratabase rating engine to power multiple quote-rate-issue applications for nine policy types," the authors of the report write.
Moving on to the distribution of policies through an insurance agency's Internet portal, the Celent report deems the regional New England agency Arbella Insurance Group worthy of note for using "a single interface layer" to power its portal and connect with agency management systems.
Arbella, which reported net earned premiums in 2005 of more than $630 million, launched its e-SUITE portal initiative last year as part of a three-year improvement program relying on Agency Portal, a software brand marketed by Boston-based AgencyPort, a seven-year-old vendor of Web-based products for property/casualty insurers.
Electronic volume now accounts for between 10 percent and 40 percent of applications depending on the line of business, and expects volume to "grow dramatically," according to the report. "Applications submitted through the electronic applications process are fulfilled up to 40 percent faster than paper applications," the authors of the report state.
The Celent report, co-authored by analysts Matthew Josefowicz, Chad Hersh, Donald Light, Craig Weber, Catherine Stagg-Macey and Ashley Evans, also highlights the Wilkes-Barre, Pa.,-based GUARD Insurance Group, a workers' compensation specialist for small and midsize business writing policies in 22 states and Washington, D.C. Developing a proprietary Internet-based portal with the help of a Microsoft platform, the agency has cut turnaround times on submissions from three days to less than four hours, according to the Celent research. Sending information to agents electronically has cut policy processing costs by 24 percent.
But it's the use of technology in underwriting where some of the big names show up. Warren, N.J.-based Chubb, who recently centralized its commercial lines underwriting procedures from more than 40 field offices to three processing centers, was chosen for the transparency it now brings to field underwriting offices.
Agents can now track the progress and status of the work sent to the processing centers thanks to inventory and tracking management capabilities integrated into the carrier's legacy underwriting workstations.
"The system allows both operational transparency on the status of rate/book/issue transactions as well as creating a rich set of historical and real time data for analysis and optimization," the authors of the report write.
Celent researchers also singled out Harrisburg-Pa.-based Penn National Insurance, for developing a mobile loss control survey application for commercial lines safety inspectors built on Microsoft's .Net architecture. The initiative has allowed loss control experts in the field to enter photos and handwritten notes on tablet-based applications, and then send the data through a wired or wireless virtual private network to underwriters in the home office.
Penn National, which wrote $436 million in premium in 2006 in nine states, reports an increase in loss control representative productivity, a 20 percent reduction in costs, and better reporting capabilities, the report says.
Switch gears and jump into policy administration and here's where Fairfield, Ohio-based Ohio Casualty shines. With $1.45 billion in written premiums at the end of December 2005, Ohio Casualty was cited for expanding its policy administration system from commercial lines to personal and specialty lines because of an "ultraconfigurable" system.
Its "Product Builder" and "Product Modeler" software, built on an IBM architecture, allows the carrier to manage 14 different lines, and was flexible enough to let the firm expand into an entirely new line of business in seven months. The upshot: the carrier's underwriting ratio has dropped two points since the system was launched for commercial lines in 2001, according to Celent.
In this category Aviva Canada Inc., with more than three million customers, is a standout particularly with the retooling of its first-notice-of-loss process to improve claims routing and tracking, Celent researchers note.
The introduction of a Web-based first-notice-of-loss application "improved the quantity and quality of information gathered by customer service representatives in the first call," the authors of the report write. Not only is the data stored in a repository and accessible to adjusters in different locations, but adjusters "also have access to online mapping tools that let them route non-injury claims to the nearest repair partner location," according to the report.
Celent also noted the Connecticut Healthcare Workers' Compensation Trust and the strides it's made at automating medical bill review procedures to streamline claims handling. Using a Windows-based platform from vendor Insurity, medical bills are entered into the claims handling system and compared against three data sources--two offline databases that are updated periodically by Insurity and one online provider accessed via a Web service--to double-check expenses.
Connecticut Healthcare processes more than 40,000 medical bills annually, but now more than 90 percent of them require little or no staff review time. "Since implementing the system in 2005, Trust has reduced its medical claims expenses by 36 percent," the authors of the report note.
Next up: the Sarasota, Fla.-based FCCI Insurance Group, a regional commercial lines property/casualty insurer which does business in 13 Midwestern and Southeastern states, and booked $550 million in premiums in 2005.
Five years ago, FCCI installed document management software from vendor ImageRight. Paper documents are scanned, indexed and stored digitally in a database. The improvements have allowed FCCI to cut its support staff. In addition, the documents are available in less than a day and can be viewed by more than one person at once.
Hastings Mutual Insurance Co., of Hastings, Mich., also warranted a mention thanks to a new claims environment that "combines a modern, rules-driven claims workstation with a document management and workflow system," the authors of report write.
The improvements have increased the consistency of claims handling while keeping a lid on costs. "Because new claims are reported centrally and automatically segmented and assigned, adjusters can begin the claim process more quickly," the report's authors write. "New claims are now processed and assigned in less than one business day, often less than an hour after arrival by e-mail or fax."
Hastings, which underwrites personal, commercial and farm property/casualty risks in five states, uses software from vendors Guidewire and Hyland Software.
And finally, if you're an appraiser with the Indiana Farm Bureau with a hankering for the latest hardware, you're in luck . . . and presumably in good stead. Field appraisers are trooping around barns and stables with mobile handheld units and laptops armed with wireless Internet access.
Thanks to the technology the Indiana appraisers never have go into the head office and face down their bosses, not that they would need to since their productivity has improved.
"Eliminating drive-time to the office and giving appraisers the ability to check assignments in the field makes them more efficient, and getting information back to claims adjusters rapidly lets them not only provide better service to the claimant but also lets them gauge severity faster and forward that information to reinsurers more quickly," the Celent researchers wrote.
With more efficient appraisers, Indiana Farm Bureau has also been able to keep a closer eye on losses by closing repair programs in dozens of counties in which body shops, not appraisers, write estimates.
CYRIL TUOHY is managing editor of
Risk & Insurance®.
April 15, 2007
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