Digital rescue: how three insurers used technology to solve underwriting problems, including speed, pricing and accumulation of risk.

Key Points

* Once & Done Underwriting gives Commercial agents a yes-or-no decision on applications, plus a range of scheduled credits and debits that they can apply to a policy.

* iNB creates a paperless process and supports the automation of routine life underwriting decisions.

* GUARD gives underwriters information about all of Zurich's exposures in various lines of business in a particular geographic area.

Underwriters are faced with two daunting tasks: speeding up the underwriting process and accurately assessing which risks to write. Several insurers recently developed technology systems and tools to assist underwriters in assessing risk, while trying to strike a balance between automating as much of the underwriting as possible and maintaining necessary human interaction.

Companion Property & Casualty

When Columbia, S.C.-based Companion Property & Casualty Group set out to build a more sophisticated underwriting and pricing module within its Internet applications, it also gained an added bonus: fewer and less costly resources were needed to maintain the new module vs. the old programmed rules.

"In commercial lines, there's not only an issue of whether a policy is acceptable, but there's also a pricing component to commercial lines underwriting that's equally important," said Helmut Tissler, director of e-commerce. Companion Property & Casualty developed its Once & Done Underwriting Module to gather all of the company's underwriting and pricing rules into the flow of its Web site. This allows agents who complete their policy entry to have not only a yes-or-no decision but also obtain a range of scheduled credits and debits that they can apply to the policy. Agents are then able to come up with a final price to successfully sell to clients.

As agents enter workers' compensation, commercial auto and small business package applications into the company's Internet system, the system applies underwriting rules to determine overall eligibility, additional data entry requirements, supplemental forms that may be needed, eligibility for standard or preferred rates, applicability of scheduled debits and credits, and eligibility for levels of coverage.

Once & Done Underwriting, which is built upon Computer Science Corp.'s Agency Link product for Internet-based applications, is also an effective tool for eliminating the time-consuming back-and-forth communications that underwriters and agents often face. About 40% of the company's policies are referred to underwriters, and if they need to communicate with agents, the system provides them with the use of an e-mail function that operates much like instant messaging.

Prior to implementation of the Once & Done Underwriting Module, underwriting and pricing logic were less sophisticated and were embedded in the system's program code, said Tissler. A programmer had to make all changes, and the total time for coding, testing and implementation of a relatively simple change averaged more than 10 hours. Complex changes could take more than 40 hours to complete. But the Underwriting Module changed all that and many changes now can be made in less than one day or sometimes only a few hours. Now Companion can quickly adjust to changing market conditions in its Internet applications while using fewer technical resources, Tissler added.

"Once & Done has had a big impact on our business. More than 80% of our new business premium originates on Once & Done" Tissler said. "A substantial part is being handled without human intervention, which allows underwriters and staff to focus on the more difficult risks and let the more routine ones flow through the system without having to be physically handled and processed." That ability, he added, has been a big selling point internally.

"Other commercial lines sites allow you to enter an application and submit the policy for later issuance by an underwriter. But our system builds the underwriting and pricing logic right into the application" Tissler said.

The biggest challenge came with getting people to adapt to something new, said Tissler. "On the company side, people were nervous that if you put policy entry and issuance on to the Web, results may deteriorate. But that turned out not to be the case; results are as good or slightly better. In fact, over a five-year period, policies issued via Once & Done have a loss ratio that's about three points lower than those that were issued via conventional methods." He said it was also a bit difficult initially to convince agents to use the system, but that challenge was quickly overcome. "While there's some additional work on their part in having to enter information, the payback is an immediate decision and a process they can control as opposed to waiting for a response," he said.

Companion Property & Casualty is now working on expanding the system to include commercial umbrella applications and commercial package policies.

Western & Southern Financial

Western & Southern Financial Group's iNB system increases the speed with which the Cincinnati-based company can underwrite and issue policies, in addition to helping increase back-office efficiencies. "If we had that information coming in electronic form, we could automate the underwriting process and thereby reduce the number of processors and underwriters required to do the business," said Clint Gibler, senior vice president and chief information officer. "And from a cycle-time reduction standpoint, we could get the applications issued much more quickly."

One of the things the company set out to do was to transform its life underwriting process, which it has done with the help of its partner NaviSys. A J2EE-based system, iNB has improved not only the company's producer and client service but also its operating efficiency and underwriting results. The system creates a paperless process and supports the automation of routine underwriting decisions. The result? The company now has a jet issue rate of 25% of issued policies without any home office staff involvement, Gibler said.

More than 20% of all applications coming into the company are processed and decisions are rendered on the same day they are received. In fact, 65% of applications are approved within the time it takes for a paper application to be mailed to the home office, said Gibler. In addition, underwriting staffing requirements are 25% less than in a paper environment.

iNB also has helped make interaction with agents more productive, while at the same time improving the company's customer experience with the application process. On the back-office side, the system has an underwriting engine based on rules developed from data mining and historical customer data. The end result, Gibler said, is more cost-effective, consistent underwriting.

The key to its successful development stemmed from a collaboration among various stakeholders, Gibler said. "This is not an IT project ... we've had extraordinary collaboration with the new business area and other stakeholders such as our chief medical officer, NaviSys, etc. The project was so big and had many opportunities to fail, but everyone was committed to it and no one allowed it to fail and we came up with something that leapfrogged our processes and many industry processes as well."

The system's underwriting rules engine is one thing that makes the system unique in the industry, Gibler said. He said another unique feature is the company's reflexive questionnaire. "We achieved the objectives of improving the application process and creating backoffice efficiencies with respect to our electronic application process by creating a reflexive questionnaire that's not just a form with fill-in pieces but one that asks a number of questions and at the end populates the actual form," Gibler said. Customers can then use a biometric e-signature to sign the application at point of sale.

iNB allows underwriters to click on a link to determine which cases need even a small amount of underwriter involvement and those cases then are delivered to their queue immediately for processing. As a result, it aids in meeting production goals, the company said. The system also provides underwriters with other value-added services such as help screens for prescription medication use and online real-time paramedic requests and updates.

Zurich in North America 

The terrorist attacks of Sept. 11, 2001, alerted insurers that they didn't have a firm grasp of accumulations in dense urban areas that took into account not only property but also workers' compensation business, and for larger insurers, their different business units and types of products being written.

Zurich in North America developed an underwriting system to address that problem.

The commercial property/casualty insurance provider developed its Global Underwriting Accumulations Repository of Data, better known as GUARD, to allow underwriters to better evaluate risks. Through the system, underwriters can view interactive maps that display Zurich's exposures across multiple lines of business and business units. Underwriters can even zoom in on maps in urban areas to view individual building footprints and zoom out to view exposures with aerial photograph overlays. By selecting a specific building footprint, an underwriter can access such information as the name of the insured, number of employees, values, and Sanborn information, including occupancy type, number of stories, year built and building construction class.

Prior to the system's October 2004 launch, Zurich's front-line underwriters lacked the tools that could provide them information on capacity and existing accumulations they needed to make effective decisions before binding business, said Brad Kramer, director of underwriting program projects for Zurich in North America. The weekly accumulation process also tracks risks that drop out of the portfolio, such as expired accounts of accounts previously reserved but not bound.

Zurich worked with catastrophe management firm Risk Management Solutions on the project. Following Sept. 11, RMS developed an accumulation management system, with industry input from Zurich and several other companies.

As an example of its use, an underwriter considering an account with a hotel in Manhattan is empowered by GUARD to determine how the risk affects Zurich across its entire risk portfolio. The underwriter can then make a decision to accept or decline the risk, and the decisions have a measurable impact on the company's surplus and underwriting performance.

GUARD allows underwriters to validate and reserve available capacity in terrorism-prone areas across the United States from within the company's Web-enabled Underwriting Workstation. The workstation allows underwriters to conduct catastrophe analyses on an account within the context of other risk selection and pricing tasks that improve underwriting efficiency and effectiveness.

"[GUARD is] a series of tools to collect the data, models to analyze data and then an accumulations process used internally to interpret results and tie them into underwriting guidelines and processes. This helps make a measurable difference at the portfolio level and all the way down to field underwriters," Kramer said.

Not only are underwriters able to leverage an existing underwriting system, thus requiring less training, they are also able to conduct sophisticated catastrophe analyses using an account's detailed financial structure instead of relying on a policy's limit or a locations value as a proxy. The system also provides underwriters continued access to a single source of data entry as opposed to a separate process that requires duplicate data entry.

Zurich said that underwriters have exceeded the enterprise goal for accurate geocoding in key areas by nearly 90% of tracked locations.

Learn More

Companion Property and Casualty Insurance Co.

A.M. Best Company # 01979

Distribution: Independent Agents

Western and Southern Life Insurance Co.

A.M. Best Company # 07243

Distribution: Sales representatives

Zurich Financial Services NA Group

A.M. Best Co, # 86976 (Zurich Financial Services Group)

Distribution: Brokers

For ratings and other financial strength information about these companies, visit www.ambest.com.