“Carriers have already released all the reserves they can to lower loss ratios in commercial lines, and they can't do anything with pricing right now. That means they have to turn their attention to expenses and underwriting results,” says Karen Pauli, research director in TowerGroup's insurance practice. “In order to do that, they need a system that automates non-value-added tasks in the policy issuance and administration processes, gives underwriters more information, provides diagnostics relative to books of business, and integrates external data.”

“For pure commercial lines carriers, their rate of spend on policy administration right now is as much as, if not more, than other carriers,” says Frank Petersmark, former CIO of Amerisure and current director of client development at technology architecture consultancy X by 2. “Even among companies that write a mix of personal and commercial lines, there is a considerable increase in investments in commercial policy administration technology.”

Petersmark says there are a number of discrete pain points carriers are looking to address in commercial lines PAS projects, including a lack of customer and agent self-service, automation of smaller commercial lines, decision support for larger lines, and overall flexibility to accommodate underwriting complexity coverage customization.

Southwest Insurance Partners and Argo Group US are two commercial carriers that have recently completed PAS modernization initiatives. Subsidiaries of Southwest Insurance Partners (SWIP), they underwrite small and medium size risks through independent agents. The group had utilized a number of different tools that were “cobbled together” for policy administration, according to Jim Masterson, the group's director of application development.

“We had a combination of internally developed and off-the-shelf tools. One system handled accounting, another piece handled rating, and some rating was done manually on spreadsheets. A different platform handled forms generation. There was no connectivity between any of those tools, so every policy would need to be entered three to five times to get it through the workflow,” he says.

In September 2009, SWIP began implementing the Wynsure PAS from Wyde Solutions. “We were looking to streamline all the processes involved in policy administration. We wanted a single platform that was flexible and straightforward,” Masterson says.

Wynsure went live in April 2010 with commercial auto, worker's compensation, and occupation protection lines. SWIP will continue to roll out additional lines of business through early 2011. In combination with the PAS initiative, the insurer deployed ImageRight for electronic document management companywide.

Argo Group has grown significantly through acquisitions over the past ten years, collecting a number of PAS systems along the way. The company sought a PAS solution that it could use as a going-forward platform for policy administration systems consolidation. However, the legacy platforms at its disposal were inflexible and ill suited to handle growth goals.

“We spent far too much time bringing products to market,” explains Alan Wynn, vice president of Argo Group subsidiary Alteris Alterative Risk Solutions (AARS). Argo Group's specialty lines division, for example, was seeing a 12- to 18-month timeframe from product initiation to market delivery.

“A significant problem was that we couldn't get rates loaded into the system on a timely basis. Because rates weren't table driven, a lot of custom coding was needed,” Wynn says.

In an enterprise initiative, Argo Group selected Instec's quicksolver software for all its major standard commercial lines of business that require bureau content. In October 2010, nine months after project kickoff, rollout was completed for Argo Group's business owners, commercial package, commercial auto, and workers' compensation product lines in all states, as well as for the AARS division.

Advances in Automation

The work that has gone on at these insurers in recent months illustrates several key trends in the commercial lines PAS marketplace. Light identifies those trends as the growth of automation, particularly in new business issuance and underwriting decision support; the proliferation of underwriting and service desktops; the convergence of configurable and content-rich systems; and an increased focus on usability and UI design.

Light sees the ability to automate new business as the most significant evolution in commercial lines PAS in the past two years. “Just a few years ago, it was difficult to find a policy administration platform in place at an insurer that supported new business automation in commercial lines. We saw insurers undertaking custom development to achieve that automation, or dealing with a lot of manual processes,” he says.

Just as in personal lines, new business automation in commercial lines links multiple systems, including Web portals, rating engines, rules-based underwriting, and billing and financial systems to take simpler policies straight through from application to issuance. Rules-based workflow enables more complex accounts to be routed to underwriting for handling, and underwriting desktops provide information and decision support.

Light credits this automation to the development of service-oriented architectures on the part of both technology vendors and insurers. “For insurers that have built out SOA, it's easier to orchestrate business processes across multiple areas of the business without the extensive custom development needed in the past,” he says.

How much can be automated in commercial lines depends in part on account complexity. “A small BOP [business owners policy] isn't much different than a standard homeowners or automobile policy. Commercial underwriters will hate me for saying that, but it's true. A structure is a structure, a vehicle is a vehicle,” says Pauli. “The liability may be a bit more complex but even with that, the standard classes can be automated using rules and analytics.”

Beyond those commoditized lines, how much you are able to automate depends on who you ask. “The more complex the account, the more difficult it is to automate, and the more resistance you will find to attempts to do so,” Pauli says, adding that it's an “absolute fight” at some carriers.

“Unfortunately, the higher up in commercial lines management you go, the more you find people who believe automation doesn't apply to them,” she says. “And if the chief underwriting officer doesn't buy into it, the CIO can't make a policy administration project happen.”

Even so, “You can still bring automation to bear in your processes without pulling out the decision process,” Pauli adds. “You need to step back and focus on where you can support your underwriters by putting information and business intelligence at their fingertips at the right point in the decision process.”

At Argo Group, a key benefit of the quicksolver platform has been the automation of routine tasks that underwriters previously performed. “Today, for instance, if we need to put to put a notification on policies written in Kansas that require a loss control notification, that happens automatically. Before, the underwriter would have had to recognize that form needed to be applied. We can also automatically control and apply loss-cost modifiers, deviations, and rating effective dates,” Wynn says.

The Instec platform has also brought consistency into the end-to-end new business issuance process. “Some of the coverages we provide are specialized and require a number of premium-bearing endorsements, such as waiver of subrogation, maritime coverage, and drug-free workplace credits. In the past, those were manually handled and we'd have to true up the premium at policy audit. With quicksolver, those endorsement charges can be built in,” says Wynn.

“The system that we had previously was built on workarounds,” says Byron Way, president and COO of Bunker Hill Underwriters Agency, an MGA within SWIP. “Automation simply wasn't possible in that manual environment. Today, applications can be entered, issued as policies, and changed and administered without needing to be reentered.”

SWIP has also been able to leverage the Wynsure PAS platform in an outsourcing relationship with Resource Pro. Incoming applications are scanned into ImageRight, giving underwriters immediate access to the imaged application. Simultaneously, the image is routed to Resource Pro's China-based data entry staff, who set up the application record.

“We have essentially done away with application entry ourselves,” says Masterson. “By combining contract resources with ImageRight and Wynsure, we enable underwriters to do their job without waiting for the file to be set up. Previously, a file would bounce back and forth ad nausea between the underwriter and assistant. Today, the application is automatically task-directed to the right people and multiple people can view a file at one time. We are able to grow our book a tremendous amount without adding new people on the service side.”

SWIP has explored expanding automation through online report ordering, VIN decoders and data scrubbing, and policy prefill, but for now will continue to handle those tasks manually. “What that decision comes down to is that the volume of our auto policies is not sufficient to justify the cost of those services,” says Way. “If that volume changes, it's something we'll reconsider.”

Underwriting Desktops

Underwriting desktops used to live outside the scope of policy administration; however, as more administration platforms have built in desktop capability, the lines have been blurred.

“Underwriting desktops are one of the top 10 business drivers for insurers in 2011 and are impacting policy administration projects as well,” Pauli says.

Carriers are also working to extend desktop capability beyond underwriting. “A lot of carriers are really trying to push more and more information into the agents' hands,” Petersmark says.

“There are a number of reasons for that,” he adds. “Particularly in the commercial lines space, policies are more complex. Providing agents information that they need to conduct their business via the Web takes on greater urgency in commercial lines than in personal lines, where straight-through processing is more of the focus. There is a higher need for collaboration. And as part of trying to automate the workflow in this environment, a sharable desktop experience is valuable.”

A consolidated view of all the information related to a commercial lines policy has been a key benefit of the Wynsure system to SWIP. “Before, we had this hodgepodge of systems. You enter data here, here, here, and here. Then, if the policy binds, you enter it here, and accounting has to enter it there. When you have those individual pieces, things fall apart occasionally, but there was no way to go to a single place and find out what the problem was. Now, we can pull up data on an insured or prospect and find out everything about them,” Masterson says.

Configurability

Speed to market may be an overused phrase, but getting new products on the streets fast is a driver behind commercial PAS modernization.

“Much more flexibility is needed in commercial lines administration because of the complex definition of products and specialized rating. The ability to create new products through configuration, rather than customization, is critical,” Petersmark says.

Argo Select has been able to trim the go-to-market timetable to about four months. “With quicksolver and its array of program administrator capabilities, we have control over the system,” Wynn says.

SWIP was recently able to implement a new coverage under commercial property in two weeks. “With our previous system, [the coverage] would have been administered on a set of spreadsheets or may have even involved handwritten calculation of rates. With other [PAS] solutions we evaluated, handling the administration of that coverage would have turned into a custom-development project that spanned several months,” says Masterson.

“The advantage that we saw with Wynsure is that it is a tool-based system. It provides great flexibility that enables speed to market,” says Way.

Light stresses that it's not just an ease of configuration, but a combination of configuration and bureau content that differentiates today's commercial lines PAS from their predecessors. “Insurers should choose a PAS that comes with enough domain content to get them started with the implementation of new products and workflows, rather than simply a 'blank slate' that can be configured,” he says.

“There is some great technology out there that is fully loaded with templates for commercial lines administration systems,” Pauli says. “For small commercial lines where the expense ratio makes a huge difference, you have to have it. If you don't, you're behind the eight ball.”

Usability

Another driver cited by insurers in the modernization of commercial PAS is upgrade of the user interface. While it may seem trivial to focus on the UI as a driver, the sheer amount of time that users spend living in policy administration systems means that significant gains in productivity can be made from making the systems easy to work with.

“Better usability and an intuitive design can shorten the learning curve and create greater buy-in among all the staff who deal with the policy administration system,” Light says. “We've seen more vendors make investments in the user interface and overall design, and that's an area where we expect to see a continued focus in the future.”

For users of Argo Group's quicksolver platform, a better UI compared to the previous platform has been a welcome change. “Our underwriters like the enhancements. The navigation is user friendly, intuitive, and simple,” says Wynn.

For AARS's state workers' compensation fund customers, enhanced VPN connectivity has also improved the user experience. “There are many fewer steps than with our previous platform, and inputs are recognized without having to do a screen refresh,” Wynn adds.

Cultural Changes and Challenges

The next trend to impact commercial lines policy administration, predicts Light, is mobility.

“Right now, the new business workflow in commercial lines tends to be stationary. But more and more, people want to move around, and certainly producers tend be more mobile. Therefore, we expect more insurers to consider whether their policy administration systems can support mobile functionality,” he says.

“Smartphone apps for business submission and administration haven't changed the business model yet, but they may, particularly as the iPad and similar devices offer capabilities that can truly change the location of where business gets done,” Light adds.

The shift to mobile is only one cultural change insurers have to contend with. More challenging is the internal cultural shift that needs to accompany a move toward greater automation in commercial lines policy administration.

“Some companies are literally going today from paper files to imaged files and automation in one fell swoop. That's a tremendous change,” Pauli says.

“The activity going on in commercial policy administration will create a vast difference between carriers that can truly elevate their performance in the marketplace versus those that will find themselves at a disadvantage from an expense perspective. But on the other hand, underwriters are concerned about attempts to replace the underwriting decision process, or they see the effort to target expense reduction through automation as means to eliminate staff,” she adds.

Therefore, carriers should focus on the benefits of commercial lines PAS modernization to underwriting and sales staff, including the ability to be more competitive and take on additional business. “Insurers need to identify how they can provide better service and make better decisions if routine tasks are taken off the underwriters' desk. They need to show how internal staff can work on higher value-added tasks, spend more time with the agent and customer, and elevate their importance to the organization,” says Petersmark.

“We are all subject to a mindset that says we should keep doing things the same way,” Way says. “Fortunately, we didn't have to push the issue of change very much here because of how unpleasant and inefficient the manual process was before.”

Prior to deployment, Southwest Insurance Partners made it a point to get everyone involved in PAS system specification and testing and held naming contests for the new platform to generate buzz. Now that the platform is in place, the business impact has proven to be the most effective way to achieve system buy-in.

“Our submission flow has increased dramatically and we haven't had to hire more people because of the Wynsure system and Resource Pro,” Way says. “When it comes to system modernization, people are asking, 'When am I next?'”