MetLife has good reason to be proud of its property and casualty division, MetLife Auto & Home. It has consistently outperformed the rest of the industry in underwriting its risks, but the acquisition of the St. Paul Companies in 1999 made that industry position a little more tenuous.
Bonnie McHenry, director of corporate underwriting for the property team at MetLife, said that after the acquisition it was evident that the property side needed to do more underwriting with the policies it had acquired. Approximately 70 percent of the book was underinsured, some of it by as much as 30 percent, McHenry said. Thats significant when you have several hundred thousand policies.
McHenry said lower values on property risk is a common problem in the industry. Homeowners often remodel their houses or add a new deck or a garage without notifying their insurance agent or the carrier of the change. MetLife knew it had to get better valuations of the property it was insuring, but the company did not have the personnel or the expertise to initiate such a project. We could have done it ourselves with the proper manpower and a dedicated service center, but thats hard for a company like ours, McHenry said. It was better to outsource it.
The company knew that Marshall & Swift/Boeckh (MS/B) could handle just such a project. At the time, we already had a relationship with Marshall & Swift, McHenry said. They did a sample of our book in upstate New York and we decided to go with them.
MS/B offers Tele-Estimating Services (TES), in which it contacts homeowners by telephone and mail and completes a carefully scripted questionnaire about the home. MS/B then uses this data to calculate total component replacement cost value for each property. From its studies, MS/B estimates that 73 percent of all homeowners policies are undervalued, and that the average increase needed by the insureds for adequate protection is 35 percent.
MetLife wanted its customers contacted 120 days before policy renewal; it presented the data it had to MS/B. The TES team verified the homeowner, data it had on file, and went through the list of questions. The completed file was sent to a calculation engine.
Any customer questions were directed to the homeowners agent or to MetLife. And that turned out to be a problem. With so many new policies bought from St. Paul, MetLife also inherited a large group of independent agents who were unfamiliar with the new company. All the questions about the new valuations coming from the homeowners and their agents forced MetLife to suspend the TES program temporarily. If the renewal was underinsured, we would take the calculated amount, and that is what the renewal would be processed at, McHenry said.
But the independent agents didnt have the same calculation tools. So we had a communication mess, she said. We didnt do enough up-front training with agents, many of whom were acquired with the St. Paul purchase.
Massive training began for the new agents on MetLifes extranet so the agents could have access to the new estimatesand the ability to answer their clients questions. It also allowed another set of eyes to examine the data to validate its worth. The TES program was restarted three months later and is still rolling. Some 200,000 policies have been completed, and McHenry said earned premium is up by $17 million.
MetLife still has a lot of work to do with MS/B. Its in the second year of the St. Paul book of business and have just begun the same program with the USF&G book that came with the St. Paul purchase. Then it will take on what McHenry calls the traditional MetLife book, sold under the MetLife name. ROBERT REGIS HYLE
THE PROBLEM: IMPROVING INSURANCE-TO-VALUE FOR AN ACQUIRED BOOK OF BUSINESS.
THE COMPANY: METLIFE AUTO & HOME
LINES: HOMEOWNERS AND AUTO
EARNINGS: $45 MILLION AFTER TAXES IN 2001
WEB SITE: www.metlife.com
THE SOFTWARE: REPLACEMENT COST TECHNOLOGY FROM MARSHALL & SWIFT/BOECKH
WEB SITE: www.msbinfo.com
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