Business Insurance RMIS Article

"Technology, education increase efficiency at USAA

April 19, 2004

by Dave Lenckus

With only a four-person staff for support as he manages enterprise risk at United Services Automobile Assn., Christopher E. Mandel saw that his team's effectiveness would hinge on more than just establishing risk management officers in every business segment.

That select group could be counted on to foster risk management within the organization, but the enterprise risk management department still would have to work more efficiently to be most effective.

Two moves have both saved a tremendous amount of time for the team and improved communications and relations between the team and various segments of USAA, according to Mr. Mandel's staff:

- Scanning several years of insurance policies into USAA's computer system.

- Developing an education program that shows USAA's contracting department how to more quickly resolve questions and problems that arise over insurance-related contract language.

"Chris recognized that our department is smaller, so we can't do things the same way we did it two years ago," said Paul G. Beattie, risk management adviser.

Scanning USAA's insurance policies into the company's computer system so that the risk management team and other departments could access them quickly went a long way toward helping risk management and others work more efficiently, according to Mr. Beattie and Jeffrey L. Vernor, director-operational risk process.

"Policy research is a big part of any risk management department," Mr. Beattie said.

USAA has 69 active policies, counting the excess layers of coverage for many risks, he said.

Many policies are voluminous. For example, the workers compensation insurance policy is 575 pages thick, and 85 pages comprise the general liability insurance policy, he noted.

"One of Chris' pet peeves was that we had all of our policies in filing cabinets in the office or in archives-stuffed with invoices, endorsements, etc.," Mr. Beattie said. "It was a pain. There wasn't a way to look at all of the policies" in an efficient way.

Often, a policy search could take hours, he said.

Locating files could be extremely difficult as well as time-consuming. In some cases, they had been misfiled. Other times, unknown to whoever was looking for a policy, another member of the staff was working with it.

Finding a policy file also did not always mean the search was successful. Files occasionally got mixed up and contained the wrong information.

In 2002, Mr. Mandel concluded that the department's policy management was not as organized as it should be.

The department approached USAA's document imaging unit with its problem and was shown an imaging program that another part of the company was using. Mr. Mandel decided the program would meet his department's needs.

Beginning in the summer of 2002, the department-with the aid of an intern-began collecting, sorting and fixing hundreds of policy files dating back to 1998.

If piled in one stack, the files would have been at least 13 feet tall, Mr. Beattie noted.

As the files were collected, the risk management department organized each file and used green sheets of paper to indicate which segments of each file-such as policy endorsements, invoices, correspondence and claims information-should have their own bookmarks so users could quickly find and pull up those sections. Of course, users also can review an actual policy itself.

The document imaging unit completed the scanning project in January 2003, working the task in between scheduled activities.

"We would not be able to do it if we were a small company and had a scanner we bought at Costco," Mr. Beattie noted.

The cost of the undertaking was not a factor, because USAA already had a document imaging unit and the chief financial officer had additional data storage capacity for his group that he assigned to the risk management department to accommodate the scanned documents, according to Mr. Vernor.

"The key is really having time and taking time to organize data and formatting it," he said.

"Now it's easy to maintain," he said. As additions to a file come in throughout the year, the document is immediately scanned into the system by the document imaging department-or by risk management itself, if the new documentation is small enough or is submitted electronically.

Risk management holds new paper policies, which are immediately scanned into the system, for 90 days and then shreds them. But the department has asked insurers to deliver policies electronically in PDF format. Some documents, such as endorsements, still have to come in paper format, because they have to be signed, Mr. Beattie noted.

The enterprise risk management department can now make the online policies available to other USAA staff, including company attorneys and the real estate unit, so they can conduct some policy research themselves.

While offering policies online has aided several USAA units and departments, it has particularly benefited the risk management staff, because it has speeded up its research capabilities, Mr. Beattie said.

Mr. Vernor agreed. "It's become one of those power tools on my desktop."

For those questions it still must field from other departments, the risk management staff can quickly find the answers and e-mail them and the link with the supporting information to the individual who requested the information.

Online access to policies also has greatly reduced the research time needed to complete risk management's own projects, Messrs. Beattie and Vernor agree.

For example, within seconds, risk management staff can find which insurer participates on a particular layer of coverage and how much premium is in force in the aggregate for a particular program or with a particular insurer. That information is useful for understanding USAA's relationship with an insurer, particularly as renewals approach, according to Mr. Vernor.

"Taking paper out of our office saved us a lot of headaches," he said.

Another task that needlessly ate up valuable time for the enterprise risk management department was resolving many of the insurance-related contract language questions that USAA's contract department posed.

The risk management department got away from that and improved its strained relations with the contract department by instituting a program that trained USAA contract analysts how to resolve most of those questions themselves.

Since mid-2001, the risk management department has conducted two or three training sessions annually for contract analysts, with each session accommodating 10 to 15 analysts. The department plans on conducting refresher courses for the analysts every couple of years.

Before Mr. Mandel's department began offering the training, the feedback from the contracting department was that risk management was not as responsive as it should be.

"But we thought their requests were too urgent and didn't give us enough time," Mr. Vernor explained. "We found that there was too much volume coming to us that didn't need to come to us."

The problem, risk management found, was that contract analysts were not very knowledgeable about insurance. Risk management partially resolved that issue by working with the contract department to draft standard insurance language for contracts.

In addition, Mr. Mandel's department created several contract templates that are available to contract analysts on the USAA intranet.

That still left the contract department with questions over the meaning of some provisions and uncertainty about which insurance provisions were negotiable.

"So we created a basic training program," Mr. Vernor said. "It showed them what they could do themselves and what they needed to come to us about."

For example, in contracting with a vendor that will not work within any USAA building, requiring workers compensation or auto coverage may not be necessary. Even a small organization hired to conduct a training seminar at a USAA site may not have standard workers comp coverage and perhaps should not be required to obtain it, Mr. Vernor said. But even a small contractor hired to work on the lighting in a vaulted courtyard at company headquarters would have to prove it had workers comp insurance, he said.

Before the training program, answering those kinds of questions "took up too much of our time," Mr. Vernor said. Now, contracting department staff who have gone though the training can and do answer those kinds of questions themselves.

Contract analysts still come to risk management for what Mr. Vernor called "high-risk support."

Risk management had to adjust its approach to handling such requests, which require a response within a specified time.

"We realized that as much as we don't want urgent requests, we realized that sometimes that's necessary," Mr. Vernor said. "That really helped the relationship a lot."

The result of this spirit of cooperation is that risk management has not missed a response deadline in "well over a year," Mr. Vernor noted. Indeed, risk management's policy is to respond to all urgent requests from contract analysts within a few days, even when it has a week to reply, he said.

"We don't want to be in the position that risk-management review is holding up a contract," Mr. Vernor said. "That's just not acceptable to us."

And contract analysts are submitting far fewer urgent requests, because they can answer questions themselves, he said. "It's definitely down to a trickle now."