The relationship between producers and underwritersoften has been contentious, but carriers arent pulling any punchesin finding ways to get both sides to work together for maximumimpact. Whether it is through improved business practices such astele-underwriting or better understanding and implementation ofbusiness rules for underwriting, both sides aim to knock out costlyinefficiencies and errors.

By Robert Regis Hyle

Producers view policy issuance in much the same way as the carriersthat issue the policiesthe quicker, the better. Quicker doesntalways mean better, though. For some agents, accomplishing thisgoal can mean traditional underwriting duties have been delegatedto the agency force and not always to its liking. The agent ishired to sell and service clients, says Ernie Testa, president ofAtset Consulting Group and a former executive with Prudential. Overtime, the industry has tried to put some of the underwritingfunctionsfunctions that have nothing to do with the salesprocessinto the agents bailiwick.
Agents have more than a casual interest in the successfulaccumulation of a policyholders data, but performing underwritingduties sometimes can stretch the collaboration a bit too far. It isone thing for property/casualty agents to know the value of yourhome and possessions; its another thing for life agents to know aclients confidential medical history.

What They Need

Chubb Specialty Insurance (CSI) recently developed an e-businessstrategy for its specialty lines division. Mario Stassi, vicepresident, information technology, for CSI, reports the processinvolved a series of conference calls with underwriters, marketingmanagers, and agency representatives in each of Chubbs five U.S.zones. The focus was to identify short- and long-term businessneeds. CSI went through many items with the groupworkflow, agencymanagement systems, how the agents handled submissions, what Chubbcould do to try to improve its relationship with the independentagents, and whether Chubb should invest in the creation of anonline editable application.

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

The agents showed an interest in including underwriting in theonline system, Stassi says, but that likely will come later. Partof the e-business and marketing strategy would be to build not onlythe capture of the application itself, but also to prequalify theapplicant with an automated underwriting capability that validatesthe insured falls within the CSI underwriting appetite, heexplains. The last thing [agents] want to do is complete anapplication, give it to Chubb, and then have Chubb turn around andsay, Were not interested. Its a waste of [the agents] time and awaste of our time.

The Mikey Effect

Todays agents often find themselves feeling like Mikey, theyoungest brother in the classic Life cereal commercial whosesiblings foist on him a potentially unpalatable meal. Many statesrequire special disclosures, the gathering of signatures, saysTesta. I dont know if I have the right answer on how to go aboutdoing that differently, but whenever a new regulation orlegislation comes along that requires an additional step, thetypical reaction among companies has been, Lets have the agents doit. So, over time, agents are spending more time filling out formsand 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 toconsiderthe type of product, the amount of insurance, beneficiaryarrangementbut Testa believes once the agent has made the sale andgathered this basic information, the carrier can pick up the loadto free the agent to head out for the next sale.

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

Stassi believes agents want more options from their carriersasoup-to-nuts approach. [Agents] are asking us if we can give themreal-time or near-real-time submissions, quotes, and bindersthrough policy issuance, he says. The reality both sides have tolive with, though, is adhering to the priorities of the carrier andthe agents. From our perspective, shorter term, its the onlineapplications and the loss runs, he notes. Longer term, wellcontinue to gather feedback from agents and take a closer look atwhich 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 thiscapability further down the distribution channel, he adds.

Phone Home

One step carriers are taking is tele-underwriting, which CraigWeber, an analyst for Celent Communications, believes is animportant trend, particularly in commoditized lines of businesswhere real-time underwriting decisions are possible in a largepercentage of cases. In a survey of producers last fall, on boththe life/health side and property/casualty, Weber found life agentsare more hesitant about handing over client information to thecarrier than agents on the P&C side. Nearly 60 percent of lifeagents surveyed responded they prefer to control the applicationprocess themselves without the involvement of thirdpartiesunderwriters. Only eight percent of life agents respondedthey like to have someone else take care of applicationdetails.
On the property/casualty side, though, only 37 percent of agentsresponded they prefer to control the application process withouthelp from underwriters. Twenty- five percent of P&C agents(more than triple the number on the life side) say they like havingsomeone take care of the application details.

Through tele-underwriting, call-center reps easily can capturebasic application information over the phone and bind the policy,thanks to access to data from motor vehicle records and paymentmechanisms, such as credit-card processing. Celent believes thissplit between tele-underwriting and electronic applicationsreflects differences in personal styles between producers andprobably differences in experience levels, as well, writes Weberregarding the survey results. We think carriers should givetele-underwriting serious consideration, particularly for personallines where new-business cycle time and efficiency could beimproved dramatically. We believe a well-designed tele-underwritingprogram would receive the support of the majority of producers overtime.

Many carriers are beginning to embrace a change in the process,according to Testa, but he also believes tele-underwriting is amisnomer. Underwriting is not really taking place over thetelephone, he says. [This form of tele-underwriting] really isnothing more than the usage of the telephone to gather criticalunderwriting information from the customer.

The way the process generally works, Testa explains, is for theagent to perform normal functionsmeet the customer, make apresentation, and identify the right product to satisfy the needsof the customer. Once an agreement is reached between the agent andclient as to what plan and what amount, the agent is asked togather basic identifiers, he says. This is where technology becomeseffective.

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

In this new process, carriers tell agents to go out and do whattheyve always doneget the name, address, phone number, the timeclients want to be calledand the carrier develops a process whereit reaches out to the clients without disturbing the sale in anyway, shape, or form, says Testa. Carriers are likely to find waysto eliminate some of the entitiesthe inspection company, theparamedical companythat traditionally have contacted the customer,he adds. Most carriers have developed call-center environmentssomeeven 24/7so you can reach people at a time that is convenient tothem, he notes.
The good news on tele-underwriting on the life side is theelimination of a substantial amount of typical medical-recordsgathering that delayed the process, frustrated agents, and probablyfrustrated customers, too, according to Testa. Whattele-underwriting advocates is not the elimination of all thisstuff, but a different method for getting it, he says.

Here Are the Rules

Underwriting decisions have been made simpler for specialty linesproducts purchased from either Westport Insurance or FirstSpecialty Insurance, carriers owned by GE ERC. A system of managinggeneral underwriters across the continental U.S. offers thespecialty lines programs, which have strict underwritingguidelines. The company has worked hard to develop underwritingguidelines that are specific to the particular niche in which theMGUs operate, says Margaret Zechlin, program segment leader for GEERC. For example, the underwriting guidelines for tow-truckoperators are very specific.

Where the technology comes in is those underwriting guidelines aredistilled into computer programs that limit [the MGUs] ability tounderwrite [be-yond] those underwriting guidelines, states Zechlin.If it falls outside of that underwriting box, it would become areferral. [The rules] ensure the system supports only what weveagreed to underwrite, per our operating agreement with thatMGU.

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

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

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

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

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

Its also easier for our users to analyze their own results, Samplesnotes, so they can monitor their programs and be proactive onthings. The MGUs have had significant input in the systemsfunctionality, she asserts. [The MGUs] are the end users, so its awin for everybody if its something they can understand and workwith, she says. We cant make it so unique it doesnt have somecommon functionality to feed things such as accounting systems andreinsurance systems. Whenever possible, we try to tailor [thesystem] so its easier to use and more beneficial for [the MGUs] towork with.

Whos to Blame?

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

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

Carriers may argue this point, but Testa counters they havegiven the agents good reason to feel that way. Theres a basicmentality 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 andfollow-ups really are all about. Theres an environment where[carriers] dont trust the agent and dont trust the customer. Thatcreates a pretty tough business model. Im not aware of any otherindustry where the two most critical players in the processthepeople who sell your products and the people who buy yourproductsare not trusted.

Part of the reason for this problem, he continues, is the agentsare being asked by the carriers to gather critical underwritinginformation, something for which they are neither trained norcompensated. Quite frankly, I dont think [agents] really want to doit, he says. Then [carriers] spend a bunch of money trying to proveor disprove the initial information the agent has given them iseither correct or incorrect.

Carrier distrust isnt universal among agents, Stassi points outbut acknowledges that during the CSI meetings with agents,producers in some zones acted nervously when the suggestion wasmade for CSI to send documents directly to policyholders. From aChubb perspective, were not looking to go directly to the insured,he says. We partner with the independent agents.