Hands Off

With the merger of three Farm Bureau insurance companies into Farm Bureau Financial Services back in 2003, the carrier's new management team believed technology would enable the organization to improve the business processes each of the entities had performed in the past. One area the carrier sought to improve was underwriting, and it turned to a rules-based system that would eliminate many of the touches previously required of underwriters.

Farm Bureau identified several benefits it expected to gain with rules-based underwriting, according to Brett Clausen, vice president of the property/casualty companies for Farm Bureau. That list included reduction in workloads, better policy issuance times, improved consistency in underwriting risks, adaptable response to market regulatory changes, expense reduction, allowing underwriters to focus more on exposures that create a higher liability to the company, and the ability to manage and monitor results better.

Farm Bureau's goal was to get the carrier's business rules out of the legacy code so the rules would be more manageable, explains Clausen. "The question we asked ourselves initially was how could we use this tool to achieve speed to market while at the same time underwriting more effectively and efficiently?" he says.

One reason BRMS from Haley Systems was chosen by Farm Bureau was because the business rules in the system could be written in a more natural language structure rather than code. "One of the goals of the project was to allow those closer to the business to develop and manage the rules instead of having the application programmers code rules," says Clausen.

"It's easy to add, change, or delete rules," he continues, noting Farm Bureau used a conservative approach to the business rules when it began with the new system, so there was a substantial rules base. "Our challenge early on was a lot of our policies going through were being reviewed," he says. "There was a very low percentage–about 10 percent to 12 percent–of transactions that were going through without being reviewed. We've increased that now to more than 60 percent of transactions going through without being reviewed."

With such an increase, Clausen points out it is easy to see how many rules have changed in the last two years. The cautious pace allowed users to identify the business rules that were important and had an impact on business results and eliminate some of the rules that didn't have an impact on decision-making. "We wanted to be conservative and targeted 20 percent as a good pass-through rate," he says. "That would give us the ability to step back and look at what rules were firing and what rules were not firing." Audits were conducted to make sure the policies that were passing through without being looked at were quality business and also to ensure a policy didn't get through that the carrier normally would not have written.

"We were pleased with that initial juncture, and then we started looking at the rules again," Clausen says. It wasn't hard for Farm Bureau's underwriters and customer service representatives to reexamine the rules because the results of those rules were showing up in their workload. "We've made rules changes as we went along," he indicates, "and now we're up to more than 60 percent [pass-through]." He believes policy renewal may go as high as 80 percent to 90 percent without being manually reviewed. For new business, he asserts the carrier will stick to its 60 percent to 70 percent projection with the possibility of ultimately reaching 75 percent.

Farm Bureau has reduced its transaction time by about 75 percent, Clausen claims. "The amount of transactions that are coming through is phenomenal," he says. "In 2005, we had about 450,000 transactions come through our automated underwriting rules base. Roughly 250,000 of those passed without being looked at. When you look at the impact that has on the human resource perspective, getting our underwriters to focus on where we want them to focus, and our customer service representatives to focus on building relationships with our policyholders, that's a major step."