The relationship between producers and underwriters often has been contentious, but carriers arent pulling any punches in finding ways to get both sides to work together for maximum impact. Whether it is through improved business practices such as tele-underwriting or better understanding and implementation of business rules for underwriting, both sides aim to knock out costly inefficiencies and errors.

By Robert Regis Hyle

Producers view policy issuance in much the same way as the carriers that issue the policiesthe quicker, the better. Quicker doesnt always mean better, though. For some agents, accomplishing this goal can mean traditional underwriting duties have been delegated to the agency force and not always to its liking. The agent is hired to sell and service clients, says Ernie Testa, president of Atset Consulting Group and a former executive with Prudential. Over time, the industry has tried to put some of the underwriting functionsfunctions that have nothing to do with the sales processinto the agents bailiwick.
Agents have more than a casual interest in the successful accumulation of a policyholders data, but performing underwriting duties sometimes can stretch the collaboration a bit too far. It is one thing for property/casualty agents to know the value of your home and possessions; its another thing for life agents to know a clients confidential medical history.

What They Need

Chubb Specialty Insurance (CSI) recently developed an e-business strategy for its specialty lines division. Mario Stassi, vice president, information technology, for CSI, reports the process involved a series of conference calls with underwriters, marketing managers, and agency representatives in each of Chubbs five U.S. zones. The focus was to identify short- and long-term business needs. CSI went through many items with the groupworkflow, agency management systems, how the agents handled submissions, what Chubb could do to try to improve its relationship with the independent agents, and whether Chubb should invest in the creation of an online editable application.

The electronic application received the most support. CSIs existing policy application process is manual. [The agents] identified this as a high priority and felt if we could provide them some type of electronic form where they could either e-mail it or enter it directly into a system, this would improve the ease of doing business with Chubb, says Stassi. The second preference among the groups, he adds, was for CSI to provide loss run information.

The agents showed an interest in including underwriting in the online system, Stassi says, but that likely will come later. Part of the e-business and marketing strategy would be to build not only the capture of the application itself, but also to prequalify the applicant with an automated underwriting capability that validates the insured falls within the CSI underwriting appetite, he explains. The last thing [agents] want to do is complete an application, give it to Chubb, and then have Chubb turn around and say, Were not interested. Its a waste of [the agents] time and a waste of our time.

The Mikey Effect

Todays agents often find themselves feeling like Mikey, the youngest brother in the classic Life cereal commercial whose siblings foist on him a potentially unpalatable meal. Many states require special disclosures, the gathering of signatures, says Testa. I dont know if I have the right answer on how to go about doing that differently, but whenever a new regulation or legislation comes along that requires an additional step, the typical reaction among companies has been, Lets have the agents do it. So, over time, agents are spending more time filling out forms and documents, which may well be necessary to the process, but [such tasks] are not part of the core functions of an agent.

Agents have to gather some initial information for underwriters to considerthe type of product, the amount of insurance, beneficiary arrangementbut Testa believes once the agent has made the sale and gathered this basic information, the carrier can pick up the load to free the agent to head out for the next sale.

Carriers have tried to use technology to simplify the information-gathering process, but for many life insurers, that stab at technology is simply to equip the agent with a laptop and send the agent into a home to gather information. Carriers have spent a great deal of money creating forms, but Testa points out the electronic forms often are exact replicas of the paper forms. So, as opposed to the agent sitting there filling out boxes, the agent is sitting there filling in keystrokes, says Testa. Consequently, what you find is most companies that have developed e-forms have not been very successful. The agents and others in the processing environment print the forms and rekey the information. The paper environment still is there, he asserts. In my view, you have to simplify the process. Youve got to determine who does what and allow people to do what they are trained and paid to dounderwriters underwrite, and agents sell and service customersvery simply stated.

Stassi believes agents want more options from their carriersa soup-to-nuts approach. [Agents] are asking us if we can give them real-time or near-real-time submissions, quotes, and binders through policy issuance, he says. The reality both sides have to live with, though, is adhering to the priorities of the carrier and the agents. From our perspective, shorter term, its the online applications and the loss runs, he notes. Longer term, well continue to gather feedback from agents and take a closer look at which portion of the strategy we should target.
Eventually, that could mean more underwriting at the point of sale. For some of the less complex products, we can push some of this capability further down the distribution channel, he adds.

Phone Home

One step carriers are taking is tele-underwriting, which Craig Weber, an analyst for Celent Communications, believes is an important trend, particularly in commoditized lines of business where real-time underwriting decisions are possible in a large percentage of cases. In a survey of producers last fall, on both the life/health side and property/casualty, Weber found life agents are more hesitant about handing over client information to the carrier than agents on the P&C side. Nearly 60 percent of life agents surveyed responded they prefer to control the application process themselves without the involvement of third partiesunderwriters. Only eight percent of life agents responded they like to have someone else take care of application details.
On the property/casualty side, though, only 37 percent of agents responded they prefer to control the application process without help from underwriters. Twenty- five percent of P&C agents (more than triple the number on the life side) say they like having someone take care of the application details.

Through tele-underwriting, call-center reps easily can capture basic application information over the phone and bind the policy, thanks to access to data from motor vehicle records and payment mechanisms, such as credit-card processing. Celent believes this split between tele-underwriting and electronic applications reflects differences in personal styles between producers and probably differences in experience levels, as well, writes Weber regarding the survey results. We think carriers should give tele-underwriting serious consideration, particularly for personal lines where new-business cycle time and efficiency could be improved dramatically. We believe a well-designed tele-underwriting program would receive the support of the majority of producers over time.

Many carriers are beginning to embrace a change in the process, according to Testa, but he also believes tele-underwriting is a misnomer. Underwriting is not really taking place over the telephone, he says. [This form of tele-underwriting] really is nothing more than the usage of the telephone to gather critical underwriting information from the customer.

The way the process generally works, Testa explains, is for the agent to perform normal functionsmeet the customer, make a presentation, and identify the right product to satisfy the needs of the customer. Once an agreement is reached between the agent and client as to what plan and what amount, the agent is asked to gather basic identifiers, he says. This is where technology becomes effective.

It makes sense to capture information from the client on a laptop, Testa maintains, but the amount of information gathered by life agents is a fraction of the typical amount of information [carriers] are capturing today. With life insurance applications running 15 to 20 pages in length, he points out carriers have made it almost impossible for the agents to collect the data themselves.

In this new process, carriers tell agents to go out and do what theyve always doneget the name, address, phone number, the time clients want to be calledand the carrier develops a process where it reaches out to the clients without disturbing the sale in any way, shape, or form, says Testa. Carriers are likely to find ways to eliminate some of the entitiesthe inspection company, the paramedical companythat traditionally have contacted the customer, he adds. Most carriers have developed call-center environmentssome even 24/7so you can reach people at a time that is convenient to them, he notes.
The good news on tele-underwriting on the life side is the elimination of a substantial amount of typical medical-records gathering that delayed the process, frustrated agents, and probably frustrated customers, too, according to Testa. What tele-underwriting advocates is not the elimination of all this stuff, but a different method for getting it, he says.

Here Are the Rules

Underwriting decisions have been made simpler for specialty lines products purchased from either Westport Insurance or First Specialty Insurance, carriers owned by GE ERC. A system of managing general underwriters across the continental U.S. offers the specialty lines programs, which have strict underwriting guidelines. The company has worked hard to develop underwriting guidelines that are specific to the particular niche in which the MGUs operate, says Margaret Zechlin, program segment leader for GE ERC. For example, the underwriting guidelines for tow-truck operators are very specific.

Where the technology comes in is those underwriting guidelines are distilled into computer programs that limit [the MGUs] ability to underwrite [be-yond] those underwriting guidelines, states Zechlin. If it falls outside of that underwriting box, it would become a referral. [The rules] ensure the system supports only what weve agreed to underwrite, per our operating agreement with that MGU.

The system helps keep [producers] inside the underwriting guidelines, adds Deborah Samples, customer service leader for GE ERC, and it points directly to situations that need referrals. [The system] not only reminds them, it makes them contact the GE ERC underwriter for approval before they can continue. It keeps [the MGUs] where they need to be, and its a good documentation of what they are doing.

Zechlin describes the underwriting system as a rating, issuance, booking, and coding system. Once [the MGUs] get finished, the policy is rated, issued, printed, and booked into our system, she says.

GE ERC has tried to tailor the systems, Samples explains, because each of the specialty lines programs is unique. We take each underwriting guideline and requirement and tailor it for [the MGUs] needs as much as we can. Zechlin points out 99 percent of the policies follow the guidelines without referrals. When we say, This is your underwriting box, we really do mean it, she adds.

GE ERC has been doing business with MGUs since 1997, and the underwriting rules were more fluid then, Zechlin believes. Thats a different story today, though. In order to ensure the long-term profitability of this market segment, I would say once we define that underwriting box, were pretty much going to stick with it. There has to be a really compelling reason to deviate from our strategy.

The rationale behind a defined underwriting box, she suggests, becomes apparent when a program begins to trend the wrong way. Its much easier for us to determine what is the cause of the trend, she says. If we had a fluid underwriting box, wed always be chasing our tail.

Its also easier for our users to analyze their own results, Samples notes, so they can monitor their programs and be proactive on things. The MGUs have had significant input in the systems functionality, she asserts. [The MGUs] are the end users, so its a win for everybody if its something they can understand and work with, she says. We cant make it so unique it doesnt have some common functionality to feed things such as accounting systems and reinsurance systems. Whenever possible, we try to tailor [the system] so its easier to use and more beneficial for [the MGUs] to work with.

Whos to Blame?

Corporate culture and the old weve always done it that way excuse are the biggest factors in the unwillingness of producers and underwriters to embrace new methods of operation, Testa maintains. Theres a fear many companies have the agent will not embrace any kind of change in the way companies deal with customers, he says, adding some carriers have been proactive in making sure agents understand the policyholder is the companys client, not the agents. He admits, though, that probably works better in an environment where you have a captive agency force.

The reality of the situation is that the customer belongs to the agent, Testa believes. The company is providing a product, he says. I think agents have been reluctant to give up this perceived ownership. I think theyve been concerned every time [a carrier] has somehow reached out and touched a customer, [the carrier] screwed up the relationship. [Agents] are fearful [carriers] are going to do or say something that is going to impact a sale and the relationship the agent has with the customer.

Carriers may argue this point, but Testa counters they have given the agents good reason to feel that way. Theres a basic mentality that exists in the underlying processa lack of trust. Thats not what [carriers] really say, but thats what all the rules, forms, signatures, checks and rechecks, and investigations and follow-ups really are all about. Theres an environment where [carriers] dont trust the agent and dont trust the customer. That creates a pretty tough business model. Im not aware of any other industry where the two most critical players in the processthe people who sell your products and the people who buy your productsare not trusted.