This month: Permanent General Companies Larry Lauder, and Selective Insurance Groups Richard Connell

Larry Lauder
Permanent General Companies
He runs home-grown systems that bring in 98 percent of the business electronically.

The typical insurance company started out as a small carrier and expanded both geographically and by lines. Some have gone national, and many more have stayed as regional carriers. No one, however, can refer to the Permanent General Companies as typical.

All of its uniqueness exacts a price. When it comes to application software, much of it has to be customized. Our policy administration and underwriting system started as an SIS (now Fiserv SIS) system years ago, but its been completely rewritten internally. Any remaining similarity to the original system is purely coincidental, jokes Larry Lauder, vice president and chief information officer.

Permanent General Assurance Cor-poration (PGAC), the lead company in the group, does only one thing. It writes non-standard auto insurance$175 million premium per year of it. No other personal lines, such as homeowners. Not even closely related non-standard commercial lines. Just non-standard auto.

Also atypical, the insurer hopscotches around the countryno routine expanding into adjoining states. Of its seven states, three (California, Wisconsin, and Ohio) dont touch any of the others, although Florida and Georgia do. The company doesnt sell insurance in a typical fashion, either.

We use three distinct distribution channels, explains Lauder. About five percent comes from our newest channel, written direct over the Web. The other 95 percent is split between independent agents and a retail operation that operates much like an independent agency.

Non-standard auto is a highly competitive business, so PGAC supports all the main comparative raters. These raters dont capture all the unique company questions, however. More importantly, PGAC always had the problem of a significant number of upcharges due to accidents and tickets the insureds forgot to mention. To solve these problems, PGAC developed a product called WinPUB.

It stands for Policy Upload and Bridge, Lauder explains, referring to it as point-of-sale software. It bridges the data over from the desktop rater, captures any additional data, and does a real-time upload to the companys AS400, where it runs MVRs, possibly CLUE reports, and credit scores (in some states). If theres a premium difference, the agent finds out right away, not later, he says.

Besides the obvious advantages to the agents, there are some major benefits to PGAC, too. PGAC stores the uploaded data and prepares a special fax cover sheet for the agent. When the agent faxes in the signed application, the fax goes directly into the companys SolCom document management system, and the cover sheet allows the system to match it up programmatically with the data and put it into the workflow, without anyone touching it. Between WinPUB and the Web business (which is already electronic, of course), 98 percent of the companys new business is coming in electronically.

Lauder runs all this, and the rest of the IT operations, with 33 of the companys 600 employees. He came up on the technology side of the business. A Chicago native, he graduated from the University of Iowa with a degree in computer science and then joined the University of Chicago as a programmer. Lauder next spent five years with Ernst & Young. E&Y was split into industry specialization and technology specialization groups, he says, and he was in the latter but worked a lot with the insurance specialists. One of the contacts he made, the CIO of Liberty Life, approached him a few years later with a job offer, and he went off to Greenville, S.C., for four years, heading up Libertys infrastructure. In October 1998, he was recruited to Permanent General as the CIO.

Our big push these last few years has been automating as many processes as we can. Its not like weve come up with any new secret, he admits. Maybe not, but he brought over at least one idea from his life insurance background. Life carriers use jet-issue to refer to business that comes in clean enough to be written without any extra back-and-forth communications. Lauder refers to his implementation of it as automated issuance.

Its very tough, he says, because a really clean piece of business is a rarity for us. Nevertheless, by constant tweaking of the algorithms, he says, theres now up to 20 percentand growingof business that gets issued automatically.

Permanent General is experienced in specialization. Its a wholly owned subsidiary of Ingram Industries, whose two other main holdings are Ingram Book Group (the countrys largest book wholesaler) and Ingram Barge (the second-largest barging operation on the inland waterways). It used to own Ingram Micro, a leading distributor of microcomputer products, before it was spun off as a public company in 1996. What do books, barges, and insurance have in common? The same thing California, Wisconsin, and Ohio do: Theyre places the company can make money, with specialization.

Richard Connell
Selective Insurance Group, Inc.
His focus on technology helps keep the company ahead of the pack.

At about $1 billion in premium and ranking 60^th out of over 3,000 P&C carriers, Selective Insurance Group, Inc., is one of the largest of the regional property/casualty carriers and nipping at the heels of larger, national carriers. Following the retirement of its former chief information officer, CEO Greg Murphy went looking for someone with experience in large-carrier IT operations. Richard Connell was recruited and took over as CIO in August 2000.

Connell has spent his entire 30-year career in insurance IT operations. After graduating as a business administration major from Central Connecticut State University, he joined Aetna as a programmer trainee. When he left 23 years later, he was vice president of IT and had just completed a three-year stint as CIO of a Mexican subsidiary in Mexico City.

He went on to spend over four years as CTO at Liberty Mutuals IT headquarters in Portsmouth, N.H., 55 miles north of Libertys Boston home office. In addition to his CTO functions, he set up Libertys operations in Belfast, Northern Ireland, growing to over 100 employees. Connell was president of that operation, called Liberty Information Technology.

Selective is a strong supporter of the independent agency distribution channel, writing its commercial (80 percent) and personal lines (20 percent) insurance solely through a network of approximately 850 agencies in 20 northeastern, southeastern, and mid-American states. The insurer has about 2,400 employees, with 220 direct employees (and 30 consultants) reporting to Connell.

Basically, we have four areas of focus, Connell says, describing his IT operations. The first is business strategy alignment, which he describes as making sure those IT initiatives are aligned withand driven bySelectives business initiatives.

The second is project management, Connell continues. As part of CEO Murphys management vision, Murphy set up an Enterprise Program Management Office, which the CEO personally heads up. All major initiatives, IT and otherwise, go through this office. Starting with the business case, Connell explains, there is a formalized template-driven process for managing all major projects. There is regular status reporting, with scorecards that go all the way up to the board of directors. Connell says this is indicative of the importance of this management methodology. There is also an ongoing training program, for both IT and general management, leading to the Professional Management Professional (PMP) designation. Twenty-four members of Selectives management team have completed the program (half from IT), and another 24 are now in it.

Connell describes the third focus as technology management. He instituted architecture management, assigning target archi-tectures for certain areas, such as Web services. All new projects follow the target architecture, and older ones are either rewritten or retired over time. He also instituted service level agreements, not only for vendors but also for the companys own IT department, and formulated total cost of ownership metrics.

Last, but not least, are major initiatives. Some, such as agency integration, are comparable to those of other agency-based carriers. Others, however, have come about specifically as a result of Selectives Presidents Club, roughly the top 10 percent of the agents, and annual strategy meetings with agencies. Two years ago, our agents asked for an optional small business service center, which we implemented about a year ago. Its been very successful, with many agencies opting to use it. That was followed by a claims service center, which has just gone live. Agents and their customers who opt to use it have 24x7 access to Selective personnel who either resolve the claim on the spot or immediately assign it to one of the companys field adjusters. Claims are handled faster, better, cheaper, Connell says.

Other initiatives include a new general ledger suite, various Web projects, and ongoing development of Selectives popular One and Done system for writing simpler, slot-rated commercial risks. When asked about emerging technologies, such as wireless, Connell says Selectives intent is to be just behind the national carriers and well ahead of the other regionals.