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June 2000
Evolution in Insurance
By Debra Haverson
Whether it’s a new-economy upstart or an old-line stalwart, insurance companies have a lot
to gain from Internet technology.
By accepting policy applications over the Web, insurance companies can reduce data input costs and
expedite coverage. Better still, they can interact with customers in real time to deliver customized
quotes and even completed policies. Once the transaction is done, the company can minimize service
costs and maximize satisfaction by making account information and records available online. Even if
they’re just tackling the basics of imaging and workflow, it won’t be long before most
insurers will want to bring electronic images and business processes online.
Taking Regulated Docs Online
Most companies have an Internet presence these days, but some exist solely on the Internet. Amazon.com
and eBay are two of the best-known examples. In the insurance business, Esurance (www.esurance.com) is
a dot-com startup that entered the automobile market last December. Efficient gathering of
applications and delivery of documents are both key factors in making this venture a success.
Esurance currently offers insurance in eight states, but it has completed the bureaucratic process to
acquire licenses throughout the United States. While many auto insurers stick to selected states and
regions, Esurance’s CIO, Glynn Evans, says the company’s Internet marketing strategy makes
national coverage a logical move. When users visit the Esurance site, they enter a zip code and
anonymously fill in information that leads to a price quote. They can click on tools that offer
guidance in figuring out the best coverage for their needs. Only if they decide to buy (with a credit
card) or hold a price quote for a later decision do they enter user-specific information. Once they
do, they receive a user ID and password.
Online policy applications yield significant efficiencies. First of all, Evans says, Esurance has a
low transaction cost, bordering on zero. Secondly, customers get the answers they’re after
— and even the coverage — on the spot.
“Our aspiration is to bind and write policies online in real time so that the consumer goes
through a process and completes the transaction in minutes,” says Evans.
Although insurers sell an inanimate product that does not require physical distribution, government
regulations dictate specific requirements for delivering the documentation behind that product. An
insurance company cannot simply deliver the content of a policy, declarations page or insurance card
over the Internet. Each state has its own rules about the presentation of documents. “We have
to be certain about what is being received at the other end, about how it looks and that it is in
compliance with those regulations,” says Evans. “We started off trivializing this exercise
because you think, ‘Oh, it’s easy to get documentation to people over the Internet.’ In
fact, it’s quite hard to do it in a controlled manner.” Since Esurance plans to go
national as quickly as possible, the delivery of documentation in compliance with multiple- format
specifications has turned out to be a critical issue. Esurance has tackled this challenge with a
systems architecture comprising many different off-the-shelf software components linked together with
a great deal of customization. This solution is built on a distributed architecture over a
wide-area network: Policy management resides in Illinois; claims in South Dakota; access to motor
vehicle agencies in Atlanta; and the Web site, with its 40 NT Web, database and business application
servers, is in California.
The main piece of the architecture is a popular policy management system from Specialty Insurance
Services. However, Esurance uses it very differently, Evans says.
Most companies still collect paper applications, key in the information at a processing center, verify
the information, and then send it in night batch-runs to a printer. Mailing and distribution occurs
the next day — that is, if the application is not missing information.
At Esurance, the system pulls information from the electronic form the customer has filled out on the
Web site and feeds it to the policy management system. Then, using OptioDCS information distribution
software from Optio Software (www.optiosoftware.com), the company effectively “unplugs the
printer,” Evans says. OptioDCS not only delivers traditional print copies wherever they’re
needed across an enterprise, it converts print stream data to PDF for publication on the Web. The
software can also send email or fax notifications to customers to inform them that their documents are
available online.
Most customers have Adobe Acrobat Reader, the viewing tool for PDF documents. Those who don’t can
download it from the Esurance site. They can then print all documentation or hold it in a personal
“electronic glove compartment” on the Esurance site.
The online immediacy provides convenience to the customer and saves money on printing and mailing
costs for the company. Occasionally there is a delay in granting coverage, such as if the customer
sends in information on paper or if the state still requires a “wet signature” from the
customer to finalize the deal. Evan says that Esurance has hidden the complexity of the policy
management system behind an intuitive front end on the Web site so that customers can act as their own
insurance agents. Even the initial entry of a zip code leads to a customized view of the site
incorporating declarations required by certain states. Of course, the company hasn’t completely
eliminated agents; through email or a call center, customers can receive advice from one of the 25
licensed agents on staff.
Esurance plans to add artificial intelligence tools that will help users through their decision
process. The architecture already provides access to collision-history and motor vehicle databases
that help determine rates and prompt the customer for more or corrected information as necessary.
Once customers have coverage, they can access the site with their ID and password, maintain or change
their policies (to add coverage or another driver, for instance) and view or print electronic
documents. If they need to replace their lost insurance card, for example, they can do it immediately,
and without call center or processing costs to Esurance.
Initially the company printed and mailed documents, but the need for paper processing has diminished
now that the Optio application has become fully functional.
Evans would not disclose the cost of implementation, but he says Esurance has done it more quickly and
at lower expense than the “12- to 18-month cycles and $2 million budgets” one usually
encounters to build this type of infrastructure. The custom coding work began last July and was
completed soon after the site went live. Esurance plans to expand into other insurance markets, such
as homeowner’s, renter’s and term life; the latter will require a separate policy management
system.
Insurer Goes Click-and-Mortar
Old-economy businesses looking at e-commerce have to consider how to make new approaches fit with
existing business systems, gain widespread acceptance among users and provide a tangible business
benefit. Colorado Casualty (www.coloradocasualty.com) is doing just that with an intranet solution
that allows agents to interact with the insurance company’s AS/400-based policy management
application.
Colorado Casualty views this Web interface as something the company will need to compete, says Ron
Kienzle, a vice president. Agents, too, recognize that the insurance industry is embracing the
Internet, says Kienzle, and have shown great willingness to participate. As of April, eight agents
were in the beta project; marketing will soon promote this capability to the 350 agents expected to
come online within two years.
The system will handle the bulk of the 1,000-plus applications that come in each month for
business-owner policies (a combined property and casualty-and-liability product). The project’s
main requirements were that it be “user seductive,” fully functional, and efficient and
inexpensive both to implement and maintain, says Kienzle. By year-end, the company hopes to extend
this functionality to its homeowner and artisans/contractor insurance lines.
Agents access the Internet to complete new policy applications online using a combination of forms,
question-and-answer screens, pull-down boxes and pick lists. During a single Internet session, agents
can generate multiple quotes using rating tables accessed from the company’s AS/400. The site
also provides real-time interaction with the company’s Point software from Policy Management
Systems. The policy management system also resides on the AS/400.
The glue that links the site to the AS/400 is ClientBuilder WebPack 2000 from ClientSoft
(www.clientsoft.com). This middleware reformats and manipulates information as needed to facilitate
communication between the green-screen data and the html codes delivered over the Web. The Internet
piece of the application stores completed documents as PDF files and makes them available for viewing
and/or printing through Adobe Acrobat Reader. In some cases agents will need to upgrade their Internet
access for faster information exchange, but the system will reduce storage requirements and mailing
costs for agents and Colorado Casualty alike.
The insurer estimates it will save between 5 percent and 7 percent of total costs just on the labor
formerly associated with producing the policy. The greatest benefit, however, will be in improved
customer service. Kienzle says the paper-based process often takes two weeks — between
processing, telephone-tag delays to correct wrong zip codes and vehicle identification numbers, and
mailing.
Working online, the system will not accept an application with erroneous information; agents are
prompted to correct these mistakes immediately. The insurer still prints and mails completed policies,
but this can now take place the day after the agent submits an application. The system also tracks the
accounting status of claims and policies, which will reduce the 60 to 70 phone calls the company gets
per day from agents wanting to know if customers paid their bills. Thus far, Colorado Casualty has
spent less that $150,000 on software, a dedicated server and four months of development support
services from ClientSoft. Development staff at the company have been trained so that they will be able
to move forward and expand the project to other insurance lines.
BMA Starts With the Basics
The Workplace Benefits Division of the Businessmen’s Assurance Company of America (BMA) in Kansas
City, MO, represents a more traditional imaging and workflow implementation that has yet to migrate to
the Internet. As a small unit with approximately 100 employees, the Workplace Benefits Division
showed great caution even before investing in this proven technology. The Information Technology
department had proposed the move to imaging several times during the past decade, but the past
two-year investigation finally convinced the company to do so. Last spring, BMA selected Eastman
Software (www.eastmansoftware.com) from among four finalists in a long RFP process. While previous
estimates of $1 million to $3 million in previous years had held them back, this project was estimated
at less than $1 million, including software and hardware. BMA’s Workplace Benefits Division
offers life insurance, disability insurance and dental insurance to employers, particularly law firms
with fewer than 1,000 employees. The main objective of the imaging solution was to reduce retention
and storage of paper files and to provide convenient access for all employees. The unit has more than
5,000 customers, and coverage for each is documented in a 75-plus-page file. These records were
previously stored in a nearby warehouse, where employees had to go to retrieve the records. If files
were misplaced, a “search clerk” made the rounds looking for the missing records. Often it
took two to three days to gain access to a file.
With the imaging and workflow system now in place,
the company scans and indexes new documents and pre-existing files on demand. All new documents go
straight from Word to PDF for storage. An Oracle database is used to populate the index in the Eastman
system. Once files are imaged, they are routed by workflow to technical account specialists and
underwriters. Staff in the 25 group-sales offices can log onto the system for immediate access,
thereby eliminating the need to keep duplicate (but often incomplete) copies of files in the home
office.
Since the start of implementation, in April 1999, BMA has realized enormous efficiencies just from the
first phase. The Workplace Benefits Division has managed a 25 percent increase in business without
increasing its staff. The second phase, now under way, will provide more detailed file tracking, and a
barcode application will bring the billing process into the workflow queue.
In the third phase, the unit plans to integrate claims processing and extend Web access to the system
to customers. However, this is on hold, pending a sale of the division to MetLife. Clearly though, the
intent is the inevitable next step for any imaging, document management or workflow solution.
Debra Haverson (hercster@bcpl.net) is a freelance writer based in Baltimore.
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