The economy is experiencing one of its worst recessions sinceThe Great Depression. The real gross domestic product decreased atan annual rate of 5.5 percent in the first quarter of 2009 aftercontracting by 6.3 percent in the fourth quarter of 2008. Theunemployment rate has risen from 7.2 percent to 10.2 percent overthe past six months, and mortgage and auto loan delinquencies arehitting record levels.

Consumers have responded by tightening their belts, examiningevery purchase and every expense, determined to get the most valuefor their money.

Despite the negative economic implications, there is some goodnews. U.S. industrial production declines may be close to bottomingout, while business and consumer confidence recently has improved.The economy appears to be stabilizing in the second half of 2009,and a gradual recovery will begin in 2010.

Since this recession has been called unprecedented in nature,consumers will likely respond cautiously, facilitating a slowrecovery. It also is expected during this recovery period that theywill continue to be conservative with their spending, focusing onfinding the best prices.

As the economy recovers, the property and casualty insuranceindustry will remain in a soft market.

The economic slowdown has resulted in a reduction in the numberof new homes and new cars purchased. Consumers are becomingincreasingly price sensitive, shopping insurance and reconsideringcoverages. Many carriers are reporting an increase in the number ofconsumers shopping their auto insurance.

Captive agents are seeing a double-digit percentage increase inquoting volume. In the independent agent market, the quote volumehas risen even more significantly as corresponding close rates havefallen. The increased volume of quotes is taxing personnel,pressuring systems and data resources, and increasing carriers'operating costs.

In addition, with the economic downturn and the fluctuation ingas prices, consumers are driving less. Miles-driven decreased 3.6percent in 2008. The trend, however, is not resulting insignificantly fewer accidents.

Personal passenger auto has seen a rise in claim costs due toincreasing medical costs. In an effort to save money, more peopleare turning to motorcycles and scooters, which tend to carry morerisk for accidents and serious injuries than traditional passengercars. In addition, regulators have begun pressing for lower ratesto coincide with the decrease in miles driven.

All of these factors point to expectations for stagnant orfalling top-line growth for insurers.

As consumers increase their shopping activity, carriers arefacing increased threats to retention. Carriers must do everythingthey can to retain their current policyholders. To do so, they needto identify their best customers and use proactive tools to ensurethey take action to retain them.

A decline in their retention rates will only exacerbate theproblems carriers are having in absorbing the costs of additionalquote volume and medical costs.

In the 1980s, when interest rates were high, insurers could useinvestment income to offset an underwriting loss. In the 2000s,interest rates have been low, increasing the importance ofunderwriting profits.

With downward pressure on premiums, rising quoting and claimcosts, risks to retention of policyholders and falling investmentreturns, carriers need to focus on controlling and loweringoperating costs.

They need to improve their efficiency in the quoting process.And they must ensure the data they use to make a quote is accurateand valid. Finally, they need to improve the point-of-saleexperience for the agents and consumers.

How can they accomplish this? For one, carriers can review andimprove the process for quoting and binding new policies–the waythey bring new customers “on-board.”

Using external data, flexible decision platforms and advancedanalytics, the on-boarding process can be completed in less thanthree minutes. In that period of time, carriers can issue accuratequotes on verified application data.

The process starts with the first interaction between theapplicant and the agent. Consumers are increasingly concerned withprivacy and are more and more reluctant to provide personalinformation over the phone. They are especially concerned when thatinformation has to be provided through a Web site.

Social Security numbers, which are critical for ensuringcomplete and exhaustive data searches, continue to be a concernwith consumers and agents. The ability to offer a consumer theoption of providing a partial SSN–just the last four digits–andhaving a data provider who is able to accurately convert that to afull number for inclusion in the search process is the first stepin improving the consumer's experience.

Carriers that have implemented this approach have seen hit ratesimprove as accurate four-digit numbers are provided by consumerswho may otherwise have refused to provide a number or who wouldhave given an incorrect number. Most importantly, these carriersare seeing the rate of completed applications increase. Carrierscan achieve double-digit percentage increases in completedapplications.

New real-time solutions for prefilling application data greatlydecreases the time required to deliver a quote. The ability tosearch multiple data sources and intelligently cascade through themin just seconds is critical.

This capability improves the accuracy of data found and reducesdata acquisition costs. It also reduces the number of quoterequests that are abandoned before completion. Prefilled data fromtrusted sources will also produce quotes that are comparable to thepolicies consumers currently have, greatly reducing the risk oflosing a policy opportunity because an applicant mistakenlybelieves their current policy offers better coverage.

Validation products that identify possible misrepresentations orsimple mistakes reduce rate evasion, identify possibly fraudulentapplication data, and improve the ability to quote and provideaccurate premiums. Validation is critical, even on prefilled data.Consumers who misrepresent application data on a quote are verylikely to have done the same thing with their current policy.

Alerts and flags, delivered to point-of-quote by leveragingother third-party data, can be used to optimize the agent andconsumer's time during the call.

Additionally, it's important to understand the likelihood thatother relevant risk data exists. Through alerts, this data can beused to streamline the interview process and reduce the timerequired to quote.

Risk data can be moved up in the quote process, producing moreaccurate quotes in shorter time periods. Flags can be created fromthird-party data, identifying potential cross-sell and up-sellopportunities.

Agents can be focused on the relevant information that is uniqueto the applicant; reducing time spent on the quote, improving theaccuracy of the premium, addressing additional insurance needs ofthe applicant, and providing better overall value to the applicantfor the time they are spending with the carrier.

In today's economy, carriers need to focus on improving theefficiency of their business process. The ability to quickly andaccurately quote premiums is one of the most critical elements.

Effective automated on-boarding, customized to a specificcarrier's needs, can significantly improve agent relationships. Itwill greatly enhance the applicant's experience during the quoteprocess, improve the efficacy of the rating plan and generate morebusiness.

Michael Gaughan is a vice president inTransUnion's insurance group. He may be reached at [email protected].