Information Workstations: The Future Is Now For Some Underwriters

By Lisa S. Howard

While underwriting workstations are not a new concept, insurers are just beginning to develop Web-enabled technology systems to aid in underwriting and risk management decisions as well as to improve efficiency.

Rory Cline, executive vice president at CNA Re, contends underwriting workstations are the biggest change hes seen in the industry over the past five years, noting that such workstations provide the industry with real-time data to help insurers do their jobs better.

Such online workstation platforms enforce a consistent underwriting discipline throughout the organization via integration of data streams in areas such as claims, customer relationship management, knowledge management, as well as forms and process, insurers who use such systems say.

“The whole premise of the underwriting workstation initiative is to provide underwriters all the tools they need to make the best underwriting and pricing decisions,” says Rick Harold, director of workstation development for Zurich North America in Schaumburg, Ill. This allows underwriters to spend more time on analysis of information, rather than clerical collecting of data, he said.

Last November, Zurich unveiled its underwriting workstations as part of its strategy to further enhance underwriting quality.

Mr. Cline said CNA Re has developed separate workstation systems for treaty and facultative business, which allow underwriters to gain access to large amounts of data at the click of a mouse. He noted that CNA Re has used underwriting workstations since 2000 and is updating the system this year.

In the past, for an underwriter to get claims information or to check whether premiums have been paid, it would require a lengthy process and entry into several different data systems, Cline says. “Now we have brought it all together.”

“We had an objective of making sure we were getting to underwriters our best thinking as an organization to improve the risk-selection process,” says Rob Fishman, Zurich North Americas chief underwriting officer and CEO of underwriting management and technical services.

Despite its evident pluses, the insurance industry has been slow to implement this technology, especially in the larger commercial risk area, according to Ted Devine, a principal who runs the North American operations and technology practice for McKinsey & Co. in Chicago.

It is harder to implement this technology for more complicated, less homogeneous risks, such as personal lines, “where youre relying more on the expertise of the individual underwriter than you are on pure data,” Mr. Devine said. “And getting the information out of the underwriter and into a system is hard.”

The key leverage of such systems in judgment-intensive risks is in providing increased transparency for underwriting managers into the underwriters assessment of the risk and their ultimate pricing decisions, Mr. Devine said. Through underwriting workstations, he explained, insurers are trying to give the underwriter support in two areas:

Risk management decisions.

The risk management area would cover details on loss experience and help develop the technical price, he says. “For example, [it tells] who the expert is on plastics manufacturing within the institution the underwriter could call upon.”

Customer relationship management.

This would tell the underwriter whether the plastics company is up for renewal, the amount of claims it has had, the profitability of the account, when the last contact took place with the client, and whether the client called the service center, according to Mr. Devine.

“The complexity here is how to build something like this, which you know has to morph over time, as the institution gets better at the process of underwriting and gets better at data-related CRM,” Mr. Devine said. It is important to build a system that continues to improve as the companys underlying underwriting model improves, he said.

“Thats the challenge. Its a very complex, custom-built, multifunction software development linked to a very complicated underlying business process,” he said. Because each company has different business processes, there are no package solutions, so youve got the problem of all the large-scale development issues, he said.

Mr. Fishman said the development of Zurichs workstations was driven predominantly by the desire to lower the companys loss ratio, through data retention and audit, by making adjustments to risk selection and underwriting assessment strategies as well as associated training of field underwriters. The workstation project is designed to produce better and more efficient underwriting.

“It allows us to implement, on a real-time basis, continuous improvement in our best practices,” he said. “It also enables us to have a much better control over the policy coverage and terms and conditions that are being utilized by underwriters.” There are checks and balances built into the system, such as real-time auditing, to prevent underwriters from exceeding established company parameters, Mr. Fishman said.

The system may react by providing a reminder to underwriters that they are heading into a problem area, while another system response would send an automatic referral to a higher level of management, Mr. Harold said, further explaining the features of Zurichs system.

Further, the system provides greater efficiencies in the underwriting process because it creates automatic feeds for information, Mr. Fishman noted. “Data has to be entered only once, so the underwriters get to spend more time thinking about risk and evaluating it as opposed to administering it,” he added.

In a November 2002 statement to announce the workstation project, Zurich said the workstation allows underwriters “to access new features as they are installed, including tools for catastrophe modeling, pricing, risk selection, locations and building valuation, risk engineering, reinsurance, claims, and customer relationship management.”

The system currently is being used to underwrite property risk for large companies and will be expanded to include Zurich North Americas other property markets, such as small and medium accounts.

Mr. Harold describes the system as built by underwriting for underwriters and a vehicle for delivery of best practices. “The underwriters sit at their desks, and on their screens are all the tools they need to do the job of risk selection and pricing effectively.”

Previously, theyd have to go look at an Excel spreadsheet or open up a manual for a price, he said. “Now its all online. So they dont have to sign on to 20 different places, and they can actually emphasize and work on the analysis of accurately pricing and underwriting a risk,” he noted.

“What Rick is saying is, if they had their lunch at their desk, theyd never have to get up again,” Mr. Fishman joked.

Mr. Harold said the system also facilitates collaboration between underwriters in different field offices and company risk engineering staff. While this traditionally has been performed via phone, fax and e-mail, Zurich has made the process more efficient by putting it into the workstation environment for those involved in the underwriting process, he says.

In the future, the company plans to expand this collaboration to external partners. “We plan to connect whenever we can with customers, brokers and reinsurers, so that the transaction becomes much more seamless and effective–meaning data thats needed to do our job[s] is coming to us and back to them via the Internet in a secured environment,” Mr. Harold said.

Mr. Harold also said that information collection via a “knowledge center” is one of the key components of the underwriting workstationadding to the breadth and depth and accessibility of underwriting knowledge. In that knowledge center is information about underwriting guidelines and underwriting practices for the various business segments, he explained.

This enables Zurich to retain the history of an account and the lessons that have been learned, he said. As a result, underwriters have the benefit of the experience of their predecessors when they next write this type of business, he added.

Mr. Harold explained that if an oil and petroleum account comes in, all the information surrounding oil and petroleum types of business from an underwriting perspective would be right at the fingertips of the underwriter.

“We knew this was the right way to go a long time ago, but until recently, technology wasnt advanced enough to allow for such interactive knowledge sharing,” he said, adding that Web-enabled advancements have provided the breakthrough for such underwriting tools.

Mr. Cline describes the workstation process used by CNA Re underwriters once they receive a submission from a client.

“The underwriter first will go into the system and do a global clearance to check the history of the account, whether another office already is looking at the account and whether this will exceed CNA Re prescribed aggregates,” he said.

The system contains an underwriting rating model, which reacts when the underwriter has entered all the information on the risk into the system, he continued.

As much data as possible is downloaded from the ceding underwriter or broker, so data doesnt have to be re-entered by the underwritera technique known as “pre-population” of data, he said.

“In the ideal world, the submission would start with the agent/broker and be sent to an insurance company that then sends it to a reinsurer on a common platform capable of loading everybodys workstations,” he says, which eliminates duplicate keystrokes.

“Unfortunately, this industry is still very paper-intensive, which were trying to change,” he said. As a result, during 2003, the company plans to redesign the workstation system so “we can send back to the clients quotes, binders and certificates of reinsurance electronically on a PDF file,” he continued, noting that U.S. law now allows electronic signatures.

“Our system is live,” Mr. Cline said, which means the underwriter and client can communicate via the Web about the risk, similar to instant messaging.

This also is useful for an underwriter and an actuary who want to look at an account at the same time, Mr. Cline said. “This is pretty cool because the underwriter is saying, OK, do you see what Im doing here? What do you think of my loss pick or my assumptions? At the same time, the actuary could be saying, No, I think we should be doing this instead.”

This gives the CNA Re home office “real-time monitoring,” he said. “To me, this is the biggest change affecting our industry. At any point in time, I can go into our system and say, What is my Atlanta branch doing? I can go into the system and look at the last 10 submissions they worked on.”

Not only does this provide the company with an auditing and control feature, “but it also gives us the benefit from a client perspective of being able to provide quicker, more responsive service,” Mr. Cline went on to say.

All information on a client is stored on the system, which provides “monthly and quarterly updates for all major clients,” he said. “So I now can produce very detailed reports, which show the activity of these clients, the submissions that have come in, the classes of business submitted, our hit ratio on these classes of business, what we wrote, and what our experience is.”

“This provides some nice client management,” he said. “From a reinsurer standpoint, were finding we are able to produce those reports quicker, with more detail, than our clients can, especially in the facultative area,” he added.

“Clients are very interested in that because they often dont have that much detail on their facultative purchases, and we can slice and dice it in many different ways for them,” he said. He explained that CNA Re can provide clients with details on lines, geographic areas, as well profit and loss experience.

CNA Re last year tied in the accounting system to the workstation, so underwriters can see what the status is on premium payments, he said. This year, he added, the company plans to tie claims into the system, which will enable the underwriters to see the claim activity on a current book of business while they are in the workstation, rather than being forced to exit one system and log on to another.

Zurichs Mr. Fishman encourages other companies to develop these systems because it will make the industry as a whole more effective and efficient. “On the other hand, we view this as a competitive advantage,” he said.

“The whole premise of the underwriting workstation effort is to get at the issue of best practices in our underwriting function,” according to Mr. Harold. “There are a lot of underwriters in our organization who do a lot of good things, but there historically was not a lot of sharing of best practices,” he said, emphasizing this is an industry problem and not just an issue for Zurich.

The officials at CNA Re and Zurich all emphasized that successful development of such systems requires close communication between underwriters and the IT department.

“In the past, we just gave the project to the IT department, and IT wouldnt quite understand what we wanted, because underwriting is a unique concept in and of itself,” said Mr. Cline. “They would come back with a system, and it often wasnt right.”

As a result, teams now are formed when the company embarks on such projects, he said. “So we assign a couple of underwriters, along with a dedicated IT team from the facultative side and a separate IT team from the treaty side,” he added. “You get a much better product out of that because the underwriter has to provide the concept of what he is looking for.”

Mr. Fishman said his company included the users in the workstation design process. “Once we created the overall design, as we started to drill down and build the requirements, we required dedicated users who would be people actually using the system to be involved with us 100 percent of the time until the system was built,” he said.

“Weve blurred the line between staff and line,” Mr. Fishman affirmed. “We have taken the thinking from the field underwriting offices and seamlessly integrated it into the corporate development workstation team,” Mr. Harold said.

McKinseys Mr. Devine noted that there have been many failures of large technology projects, which have cost a lot of money and are not of much practical use. Part of the reason, he said, is underwriters and IT people have not worked together closely, and hence, a system is delivered without the functional requirements needed by the business users.

“The reason these things dont deliver is they dont link the business driversuch as the need to reduce loss severitywith the business process,” he says.

Mr. Fishman said the Zurich workstation project was not outsourced because there are no vendors that have built anything that would meet the companys requirements. “If you look around the industry, no one is buying this kind of system. It really has to be internally built,” he said.

Mr. Cline uses outside consultants where it makes sense. “From a reinsurance perspective, on the facultative side, it was easier to create the system internally because you cannot find an off-the-shelf product that works for such a specialized area,” he said. “I think the primary industry probably has more vendors developingoff-the-shelf product[s], which they might be able to plug and play better than we can,” he said.

“From the external perspective, youve got to be real careful about your intellectual capital,” he said. “If were designing a system here and weve got to bring in outside consultants, we get them to sign a very tough noncompete, nondisclosure agreement, so that they dont take what theyve learned from our knowledge of system design and go to our competitors,” he noted.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, June 2, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.

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Information Workstations: The Future Is Now For Some Underwriters

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