Underwriting a Successful Result | Article

underwritingBefore homebuyers can complete the transaction to purchase a home, they must demonstrate they have also arranged for homeowners insurance. Up until now, the process for obtaining that coverage was almost as arduous as finding the house in the first place.

The prospective homeowners must negotiate with an agent. Once all the details are finalized, the agent then turns to the insurance company’s managing general agents (MGA). The MGAs underwrite, bind, then print these policies, which they send to the consumer. Jefferson Insurance Company, a property and casualty company in Jersey City, New Jersey, utilizes MGAs to provide all its back office services.

Jefferson, which insures homes, watercraft, snowmobiles and all terrain vehicles, has no back office staff on its payroll. “No one works for us. We are the insurance carrier,” explains Linda Philipps, vice president of information technology and e-business.

And then last year a new customer approached the company with a block of business. However, the transaction required Jefferson to provide full back office services to complete these insurance transactions. Jefferson did not want to hire the staff and set up a computer system to do this. The insurer, however, did not want to turn down this customer. So it turned to outsourcing for a solution.

Outsourcing the Risk of a New Venture

“This was a new venture and we didn’t know if it was going to be successful,” says Philipps. The company, which has been underwriting insurance policies for 50 years in 48 states and the District of Columbia, shied away from investing capital in an operation whose outcome was uncertain. “We felt our exposure would be limited if we outsourced,” she continues.

Jefferson’s search for a supplier was specific. The insurer wanted a provider that specialized in back offices for insurance companies. But Philipps realized the insurance world was changing at Web speed. So she also wanted her supplier to be a company that was already using the Internet for ecommerce solutions for policy processing and quoting. “I think that’s the direction the industry is going,” Philipps predicts.

Cost was another consideration. Underwriting is an expensive process. “Our goal was to take dollars out of the process,” she says. She anticipates outsourcing will save the company between four and eight points. A point is one percent of the premium amount.

Streamlining the process is one way to cost costs. The old way requires days, even weeks to underwrite an insurance policy for a home or boat. Philipps reports Jefferson’s supplier can mail the policy to the insured in 24 hours. “It’s all done with very few people involved,” the executive notes.
The insurance company saves printing costs by printing the policies in batches. And someone would have had to file the insurance company’s copy of the policy. Now the outsourcing provider archives these policies on another computer. If anyone needs to check the policy years later – for example, if there is a loss — no one has to search for a paper copy of the report. They simply go online and find it. “There are no manual policies,” Philipps says.

The executive also reports the online solution is more accurate. Previously, customers would ask agents questions and the agent would respond, “Let us think about it.” Now, the computer tells the agent, “This is how we underwrite a policy.” Phillips says this has standardized the offerings, a difficult thing when doing business in so many states.

Selecting an Outsourcing Provider

Jefferson looked at six different outsourcing providers. Most only had “bits and pieces” of what she wanted. Mynd was “the only serious candidate,” she reports. Jefferson signed the outsourcing contract in March and the first segment of her virtual back office went live in May. “We were able to issue watercraft policies in 2.5 months,” she says, still amazed. The total process went on-line in August.

With the new system, a prospect calls a customer service representative (CSR). The CSR asks the prospect to name the city they live in. The CSR fills out the appropriate information on a screen that s/he calls up on the Net. The CSR can quote a price immediately and ask the prospect if the cost is appropriate.

If the consumer approves the premium, the CSR works with the buyer to complete the remaining questions on the application. Once that’s accomplished, the CSR stays online and checks with credit agencies and other insurance records to verify any previous losses.

If these third party providers report to the CSR that the facts are exactly as the insured stated, the CSR asks the consumer if they want this policy. “Once they say yes, they are bound,” Philipps says. The CSR takes a credit card number. After the charge goes through, the outsourcer issues the insurance policy the next day.

This method is in marked contrast to the old paper chase procedures. The prospect, after filling out an application, would fax it to the MGA. They would input the information into their ratings software to retrieve a quote. Often both parties would fax documents back and forth until they agreed on a quote. Once the buyer agreed, a staffer would have to key in the information. “This could take days or weeks,” reports Philipps. And if there were questions, the agent would always have to say, “I’ll get back to you.”

Outsourcing Makes the Impossible Possible

The executive marvels at how seamless the process is, even though there are many strategic partners involved.

Philipps says the company’s volume on watercraft policies has increased and the company has easily handled the larger volume. “If we didn’t outsource, we wouldn’t have been able to do this at all,” she says.

Lessons from the Outsourcing Primer:

  • Outsourcing allows old economy companies to revamp their operations and migrate to the Web.
  • Outsourcing saves dollars by streamlining processes.
  • Outsourcing standardizes processes and provides more accuracy.
  • Outsourcing allows companies to handle more volume.


Post a Comment

Your email address will not be published.

( required )

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>