MetLife has good reason to be proud of its property and casualtydivision, MetLife Auto & Home. It has consistently outperformedthe rest of the industry in underwriting its risks, but theacquisition of the St. Paul Companies in 1999 made that industryposition a little more tenuous.

Bonnie McHenry, director of corporate underwriting for theproperty team at MetLife, said that after the acquisition it wasevident that the property side needed to do more underwriting withthe policies it had acquired. Approximately 70 percent of the bookwas underinsured, some of it by as much as 30 percent, McHenrysaid. Thats significant when you have several hundred thousandpolicies.

McHenry said lower values on property risk is a common problemin the industry. Homeowners often remodel their houses or add a newdeck or a garage without notifying their insurance agent or thecarrier of the change. MetLife knew it had to get better valuationsof the property it was insuring, but the company did not have thepersonnel or the expertise to initiate such a project. We couldhave done it ourselves with the proper manpower and a dedicatedservice center, but thats hard for a company like ours, McHenrysaid. It was better to outsource it.

The company knew that Marshall & Swift/Boeckh (MS/B) couldhandle just such a project. At the time, we already had arelationship with Marshall & Swift, McHenry said. They did asample of our book in upstate New York and we decided to go withthem.

MS/B offers Tele-Estimating Services (TES), in which it contactshomeowners by telephone and mail and completes a carefully scriptedquestionnaire about the home. MS/B then uses this data to calculatetotal component replacement cost value for each property. From itsstudies, MS/B estimates that 73 percent of all homeowners policiesare undervalued, and that the average increase needed by theinsureds for adequate protection is 35 percent.

MetLife wanted its customers contacted 120 days before policyrenewal; it presented the data it had to MS/B. The TES teamverified the homeowner, data it had on file, and went through thelist of questions. The completed file was sent to a calculationengine.

Any customer questions were directed to the homeowners agent orto MetLife. And that turned out to be a problem. With so many newpolicies bought from St. Paul, MetLife also inherited a large groupof independent agents who were unfamiliar with the new company. Allthe questions about the new valuations coming from the homeownersand their agents forced MetLife to suspend the TES programtemporarily. If the renewal was underinsured, we would take thecalculated amount, and that is what the renewal would be processedat, McHenry said.

But the independent agents didnt have the same calculationtools. So we had a communication mess, she said. We didnt do enoughup-front training with agents, many of whom were acquired with theSt. Paul purchase.

Massive training began for the new agents on MetLifes extranetso the agents could have access to the new estimatesand the abilityto answer their clients questions. It also allowed another set ofeyes to examine the data to validate its worth. The TES program wasrestarted three months later and is still rolling. Some 200,000policies have been completed, and McHenry said earned premium is upby $17 million.

MetLife still has a lot of work to do with MS/B. Its in thesecond year of the St. Paul book of business and have just begunthe same program with the USF&G book that came with the St.Paul purchase. Then it will take on what McHenry calls thetraditional MetLife book, sold under the MetLife name. ROBERT REGISHYLE

THE PROBLEM: IMPROVING INSURANCE-TO-VALUE FOR AN ACQUIRED BOOKOF 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