Some of the best practices that have made auto insurers Geico and Progressive so successful are beginning to penetrate into the commercial-lines segment, where there's still plenty of room to cut costs, according to analysts.
"Best practices is starting to trickle into the commercial markets," said Deborah Smallwood, managing director, insurance, for the management consulting firm Tower Group Inc. "The overall trend in property/casualty is about gaining market share."
The "new assumptions" under which leaders of the commercial-lines segments are operating dictate that manual transactions, exemplified by regular mail, fax machines and printers, are no longer acceptable.
Top executives in commercial-lines companies also want to develop and distribute products much faster than they were even three years ago, said Smallwood, citing results of a survey conducted last year with vendor Infosys Technologies Ltd.
The leaders of these commercial-lines companies also assume that the entire support infrastructure for commercial-lines clients, including data analysis, is a function carried out on the desktop, she said. Advances in technology are helping underwriting units do that. "It's different now than in the early 1990s. Robustness of technologies will help companies go after market share," she said.
Bob Lukas, principal of the consulting firm Realistic Outcomes Inc., said the changes in technology have upped the ante on corporate technology executives because their bosses, CEOs and chief financial officers, will expect technology departments to deliver insurance products and services more quickly. There's a "set of expectations around you as chief information officer to deliver at speeds and ways you've never had in the past," said Lukas.
He and Smallwood delivered their comments during a seminar on innovative approaches to commercial property/casualty underwriting hosted by trade groups advocating the use of standards in the property-casualty and life/health insurance industries.
Yet while leaders expect a higher, faster standard in the electronic execution and delivery of commercial-lines policies, research shows there's still a gap between what C-suite executives believe their companies should or could be doing, and how commercial policies end up in the hands of clients.
There are several reasons why the flow of technology into commercial lines is still described as a "trickle."
In one case, said Smallwood, policy information was exchanged as frequently as 16 times between an agent and an underwriter before both parties agreed that the information was accurate. In another instance, a policy went through 17 different "handoffs." Some commercial policies take weeks or months before they arrive, signed and sealed, on the desk of a client.
Agents complain that insurance carriers have multiple systems that agents must use to obtain a quote, leading to hours of re-entering mundane information into computer systems. Insurers all run on different computer systems requiring different applications, which in turn require processing data in special ways. One national carrier has 26 policy administration systems to manage its commercial-lines contracts.
Smallwood said that one of the Infosys survey's key findings was that carriers wanted to make their systems easier for agents to use, which they will have to do if they want to remain competitive. Agents have said that if a carrier's data-entry system is too complicated, they will use another carrier even if doing business with that carrier is more expensive.
Carriers at the forefront of adapting new technology for commercial-lines policies include St. Paul Travelers, Liberty Mutual, Chubb and The Hartford, the consultants said.
July 1, 2006
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