Ernie Feirer is vice president and general manager,Commercial Insurance, LexisNexis Risk Solutions.

Technology has intensified the service expectations in nearlyall industries.  What was introduced in insurance 25 yearsago, now you can't do business without.  Today, we're inthe age of comparison, using social media and mobile for manytransactions. The time has come for business customers, whocontinue to increase their own automation to improve customerservice, but don't always receive reciprocity from the commercialproperty-casualty insurance industry.

Commercial underwriting and pricing have in some ways laggedbehind the broader business marketplace.  The industry hasrelied largely on manual loss-history data collection that placescarriers in a lose-lose situation: find thorough information, whichprolongs the quoting process by weeks or quote without completeinformation at the risk of mispricing due to a limited orinaccurate profile of the applicant.

Think about brokers trying to quote risks in theirpipelines.  They are charged with collecting informationin a timely manner, but have limited means of verifying that theapplicant's loss history is accurate or complete.  Brokersjuggle requests for various types of information across carriers,but must also juggle the risks and costs associated with beinginaccurate or taking too long to service their customers.

At the point of renewal, is there new information that mayimpact the quote, such as changes in reserves?  During thepolicy term, reserves on pre-existing claims with prior carriersmay have gone up.  With manual loss history collection,adjusted reserve levels over the current policy term may beoverlooked due to the challenges of retrieving data from previouscarriers. 

Underwriters often miss pre-existing claims from prior carrierswhere reserves have changed during the existing policy term, andeven in-house reserve data may be difficult to uncover during therenewal quoting process.  As a result, the risk may beunderpriced.

Today, however, change is under way.  While thebenefits of technological advancement have long been apparent incertain areas of the insurance industry—in particular the heavyautomation within personal lines over the past couple ofdecades—some of the most exciting developments are those that bringmore complete data to the forefront on complex commercial policydecisions.

By participating in a contributory loss history database, aconcept that is an engrained, integral part of the personal linesworkflow, commercial insurers can meet the more sophisticatedrequirements of their brokers and business insureds whilediscovering premium growth opportunities at the same time.

What is a contributory loss-historydatabase?

A contributory loss-history database is a centralized repositoryof data where every contributor receives real-time access to theindustry-wide dataset.  For commercial insurance, thismeans the availability of data across all standard commercial linesof business, including commercial package, commercial auto,business owner policy (BOP), workers' compensation, and umbrellainsurance.

A database of this nature needs to accommodate diverse searchesto meet varied needs, with three types of searchespredominating.  First, users can query by business and/orthe business owner's name, typically the first line of attack toaccess the full file.  Second, searches by locationidentify site-specific losses.  And third, searches bypolicy number isolate loss data for a specific policy.

Finding Profitable Opportunities

A contributory loss-history database for commercial P&Cinsurance helps assure adequate pricing by resolving problemsintrinsic to manual collection.  Consider the manualverses automated loss history collection processes:

• Manual process—possible missing information at newbusiness and renewal: Traditional collection proceduresjeopardize informed underwriting decisions as brokers work throughthe laborious and time-consuming process to compile comprehensiveloss history data from the applicant's prior carriers. Information is often missing or overlooked as a result. Additionally, when preparing a renewal quote, underwriters oftenforego checking for changes in reserves from prior carrier claimsdue to the cumbersome nature of the manual collectionprocess.  Changes to reserves on these claims are then notreflected in the renewal quote.  In both new business andrenewal cases, the risk is potentially underpriced.

• Automated process—full documentation for intelligentdecisions:  With access to an industry-wide losshistory database, applications are submitted with fully documentedloss histories, all in a standardized, consistent format. The underwriter uses this information to provide an accurate andfair quote based on a complete view of the applicant's priorclaims.  

At point of renewal, carriers use the database to revisitpre-existing claims with open reserves and adjust renewal quotesaccordingly.  This can uncover changes to reserves thatpresent an opportunity to charge more premium. 

Looking ahead

The complexity of commercial p&c insurance presentschallenges, but also great opportunities.  Withsubstantial disparities among insurance companies in terms ofsystems and processes, an industry-wide loss history databaseenables improved claim coding and other standardization to simplifyloss data analysis and interpretation.

This sets the stage for further automation and businessintelligence to be used in commercial insurance to bringunderwriting, rating and even claims adjudication to a new level ofsophistication.  In the meantime, immediate access toaccurate and complete loss history data streamlines businessprocesses and helps ensure prompt and accurate pricing.