Tech Leads To Unexpected Growth

This disparity was not the aim of the MGA when they decided to enter the wholesale arena in 1997. Back then, Reliance National started a new workers compensation quoting system called Cybercomp, explained Mr. Arowood. The system, he said, was so efficient for its time that the brothers thought they could enhance their retail business with a little wholesale work and signed onto the program.

One year later, the system "was working so well" the agency decided it would partner with Cybercomp and some other carriers and see if they could expand the business a little more.

"We did not think it would ever be this size," Mr. Arowood said. "We thought we might have to add a couple of agents. We would have been happy with $3-to-$4 million in premium. That would have been a success for us."

As it turned out, success grew beyond their wildest dreams to a 130-employee MGA that is "still a family business," said Mr. Arowood.

"A lot of it had to do with being in the right place at the right time," he noted.

Part of their success was in their marketing strategy. The agency concentrated on small business accounts of 50 employees or less. They focused their business in a couple of states bordering Tennessee. Being a retail agency themselves, they understood what retail agents needquick quotes and quick turnaround time. This was essential because of the nature of the clients they were dealing with.

Mr. Arowood explained that with the middle market and large commercial accounts, most of these corporations have an individual to watch over their insurance needs. That person is often working on the account during the 60- to 90-day lead time before renewal. On the other hand, with small accounts it is the owner who takes care of the insurance. This is the last thing on his or her mind until he gets the bill, Mr. Arowood said.

The traditional insurance system, where agents would mail or fax changes or spend time on the phone seeking a new quote, posed a real challenge due to the short time frame clients left agents. However, he explained, thanks to Cybercomp, they got efficiencies that made marketing to small accounts possible.

These efficiencies have allowed the agency to today do business in 18 states primarily in the Midwest and Southeast.

"Its a good segment for us," said Mr. Arowood, adding that the bulk of their business comes from dealing with small to mid-size retail agencies.

The technology has grown from simple quoting to a full-service quote-and-bind system under GE Commercial Insurance, which purchased the system from Reliance National in April of 2001, explained John Goldwater, executive vice president and business leader for GE Cybercomp.

He said the Internet-based program allows for the underwriting of a small workers comp policy with the carrier in 10 minutes or less by an independent agent. This compares to the old mail or fax system that would take "days or weeks to complete" in the past. In 98 percent of the cases a written policy is either mailed or available for an agent to print out within 24 hours after it is completed.

When it comes to ease of use, Mr. Goldwater said agents can learn the system within 30 to 60 minutes. The only requirement to run the program is Internet browser Microsoft Explorer 5.5 or above.

"There is a difference in the traditional method and the way in which we bring this product to our customers. Independent agents can clearly see the advantages in terms of speed, efficiency and consistency in transaction costs," Mr. Goldwater noted.

The system has gone through three generations of advancement. The basic ability to "point, click and bind" has always been there. Under the current system, agents can receive loss runs, claims and billing inquiries.

Mike Healey, assistant vice president and information technology leader for Cybercomp, said an added feature is the ability to renew policies online.

The average customer pays premiums of around $10,000 a year, representing a third of the workers comp market. In 1996, Cybercomp started with zero premium, but by the end of 2003, it will do in excess of $200 million, the executives said.

Mr. Goldwater said there are 700 classes of business in workers comp and Cybercomp selects about half of them. "We have a pretty wide appetite for risk," he observed.

"We have an airtight underwriting model, and I think agents appreciate that," noted Mr. Healey. "We dont send the account to an underwriter to review. We made the call that if you put the right brains into the technology, the system should make the right decisions. Thats a real plus for us and for our customers."

"We liked the turnaround time; thats what sold the agency on the product," noted Mr. Arowood. "We did not have to wait for someone else to make a decision."

While the agency may have been able to grow new business, he said it is the renewal business and servicing of the accounts that would have suffered tremendously without Cybercomp.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, October 10, 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.