By Tim Attia
Ask Baby Boomers for an example of automation that revolutionized their industry and you'll hear similar stories touting automation's benefits -- it saves time and money, it eliminates menial chores and allows people to focus on what's most vital to driving their business.
Those benefits outweigh virtually any pain associated with implementing or adapting to automation too. Not one of those baby boomers will tell you that they miss the good old days of normally courteous clients and suppliers turning into raving lunatics after being on hold, playing phone tag for an eternity, or drowning in a sea of mail and paper.
Insurance carriers are joining the online automation bandwagon allowing business owners and risk managers access to the technology-powered tools they need to get suitable coverage through online direct-to-consumer platforms such as the BOLT Insurance Agency (www.boltinsurance.com).
Features like real-time quoting and quote comparisons enables businesses to find the right policy as quickly and easily as most globetrotters can find an appropriate last-minute trip to Rio on a site like Expedia or Kayak.
However, one of the gaping voids in automation for businesses looking to buy the right policy is the automation of excess and surplus (E&S) lines, a key component in today's economic reality necessary to meet the needs of today's growing small business market. Not everyone who has been in business for less than two years is a bad risk.
The E&S Value Chain
To appreciate the impact that a fully automated solution could have, you need to understand the challenges of automating excess and surplus. The big barriers lie in the long E&S value chain and the lack of automated systems that connect standard lines to excess and surplus lines.
Adding to this challenge is the lack of automation within the excess and surplus value chain itself. Many carriers, wholesalers and agents handle E&S manually with little or no automation. From a process perspective, there are further challenges: businesses need to be declined for a standard policy before they qualify for E&S lines and reaching this verdict can take as long as two weeks.
Once declined, businesses and brokers can't go directly to the E&S market; they must go through a wholesaler. The broker starts the quote process anew once the business qualifies for E&S coverage and this requires that businesses fill out a second round of paperwork.
The broker submits the information to a wholesaler, and the wholesaler finally turns the submission over to an excess and surplus carrier. Questions and answers regarding the submission are exchanged through phone calls, emails and faxes between the business waiting on coverage and everyone involved in the value chain.
When all is said and done, the business is offered one E&S quote rather than a variety of options at various prices. If the many steps involved in getting the E&S quote sound exhausting and lengthy, it's because they are; the entire process from start to finish, unsurprisingly, can take four to five weeks to complete.
In the current value chain, there's no mystery as to why excess and surplus is avoiding the small business market. Given the considerable effort E&S lines would need to invest to serve small businesses, with minimum premium amount, and the lack of structured incentives to do so, there's simply no profit in it.
The length of this process has obvious financial impact for a company that needs to wait more than a month before it can get the coverage necessary to launch, expand or scale up a business. Clearly, if excess and surplus could speed up the process, they could also handle a significant increase in business volume resulting in more revenue.
The shifting E&S market
Addressing the automation void has been a big concern as commercial carriers prepare for a change in the U.S. market cycle. In a soft market where standard lines have a bigger appetite for underwriting, excess and surplus lines take a smaller piece of the pie. As the market hardens, the big question arises:without automation, will excess and surplus lines be able to profitably meet the overwhelming volume of work as standard lines become more selective about the policies they write?
There's a growing potential market for E&S in successful small businesses, particularly among start-ups with unique needs. The majority of flourishing small businesses are happy to reduce their business risk if they have access to inexpensive insurance coverage.
The challenge here is that most small businesses aren't well educated enough about insurance to determine how they can get the appropriate coverage at a reasonable price. Small business owners are looking for low-touch, one-stop shopping solutions. If purchasing appropriate insurance coverage requires them to become experts at navigating the long value chain involved with standard and E&S lines, then they simply won't buy insurance coverage at all.
As a result, they typically either avoid the risk (along with the opportunity) or self-insure which results in no coverage. These businesses are good risks that, for whatever reason, are not served by the standard markets. The key to making E&S lines accessible to small business and microbusinesses is removing the complexity in the value chain so the solution is easy to buy. Automation provides the efficiency and speed necessary to achieve this.
Online Goes Mainstream
Creating the tools necessary to coordinate the workflow, expedite the paperwork, and speed the chain of communications between standard and E&S lines has taken time, but the first steps toward a clear solution are now in place.
In November 2011, the first automated system with fully nationwide E&S product capabilities through multiple carriers was introduced. BOLT Insurance Agency and Willis Insurance Noodle, an online quoting hub for insurance agents, started beta-testing submissions through a distribution portal that provides retail agents with online access to E&S lines markets through Crump Insurance Services, the nation's largest insurance wholesaler.
Retail agents first submit an applicant's information to standard markets for coverage; if the submission is declined through standard markets, it is then automatically submitted online to Crump markets for E&S quotes. The BOLT/Insurance Noodle/Crump arrangement now enables new and existing retail agents working with Crump to access automated E&S indications and quotes in real time.
While, the current environment provides indications and quotes for general liability and package policies only, there is a plan in place to expand to other lines in the future. And two markets are currently available to provide instant indication for agents; Western World and Catlin, with additional markets available in 2012.
The Measured Value
Though E&S automation is still in its infancy, the results from the early carrier adopters is proving to be effective in automating lead flow and underwriting, increasing collaboration between E&S and standard lines, and substantially reducing the time required to produce indications and quotes.
For those carriers taking advantage of automation, the new approach already accounts for 15 percent of commercial policies when dealing with standard lines. The recent addition of the capability to handle E&S lines means that 80 percent of submissions can now be serviced. General liability submissions for E&S comprise 40 percent of the current standard flow, and package quotes for E&S reach 14 percent of standard flow after a risk has been declined in standard markets. The most impressive result to date is definitely speed. All quotes are processed in less than a minute for participating carriers such as Western World and Catlin.
There's no doubting the measurable return on investment for excess and surplus automation. Improved workflow empowers the excess and surplus value chain to accelerate the speed of service, increase its market efficiency, improve customer service, and generate more business and revenue. It allows underwriters to focus on their core competencies rather than chase paper, and it enables E&S carriers to improve the quality of information and education they provide to their clients.
As the U.S. market hardens and the number of small and medium-sized businesses continues to grow rapidly, the opportunities for excess and surplus lines will also grow. Businesses want to make informed decisions that will reduce their risk and provide them with the right insurance. Ultimately, with the power of automation, excess and surplus will be available to more businesses and it will become a greater revenue generator for carriers, wholesalers and brokers.
Tim Attia is senior vice president sales and marketing for SeaPass Solutions. He can be reached at email@example.com.
April 13, 2012
Copyright 2012© LRP Publications