Copyright © 2002 Business Insurance

Spotlight -- Risk Management:  New Technology & Online Solutions "Timely Policy Delivery Still a Concern of Buyers:  Technology Not a Panacea for Complaints" December 3, 2001

by Mark A. Hofmann

 

For risk managers, the phrase "the policy's on its way" can ring about as true as "the check's in the mail."

In fact, insurers' failure to deliver policy papers on time is a constant complaint of risk managers-particularly given the impact of electronic communications in other aspects of life. Fortunately, there appears to be some evidence that technology may finally be catching up with the needs of risk managers where policy management, claims data and other functions are concerned.

Underwriters caution, however, that there are limits to what technology can accomplish.

For some observers, anything would be an improvement over the way policy papers have traditionally been delivered.

"It is frustrating, because it often takes three months after the inception of the policy before you get the actual policy forms, particularly when it's a new policy as opposed to a renewal," said Jim Green, an independent risk management consultant who acts as risk manager for Acme Building Brands Inc. and Justin Brands Inc., both of Fort Worth, Texas.

"Since 1975, I've never seen anybody receive a policy on time," said Susan Meltzer, assistant vp-insurance and risk management for Sun Life Financial in Toronto. "I don't care if they're electronic or paper, I just want them on time and accurate. You can focus a lot on time, but you need to focus on accuracy as well."

During her 1999-2000 tenure as president of the Risk & Insurance Management Society Inc., Ms. Meltzer said that she was able to "solve the problem for the most part," albeit through somewhat drastic measures.

"I said I wasn't going to pay for policies until I got them," she said. The tactic worked, too. "It got fairly good fairly quickly, because people really didn't want to get me upset. I basically dared them to send me a cancellation notice for nonpayment," she said.

Ms. Meltzer noted that some insurers are now using technology that allows risk managers to track the status of their policies. "Anything that facilitates the provision of documents and gets the stuff to me is what I care about," she said.

Other systems are making it easier for risk managers to access policy information.

"I have heard of some of the large carriers developing programs where individual policyholders can go online password-protected and access their policy file themselves. That is coming quickly, but it is not across the board yet. It will be a big help in getting policies to the policyholders much quicker when the major carriers complete that process," Mr. Green said.

New York-based American International Group Inc. is one of the insurers that has turned to technology to speed the policy-issuance process, said Neil Faulkner, executive vp and chief operations officer of AIG's domestic brokerage group. He said that the insurance company has created a system for customers to actually see transactions, "including a preview of the finished product." The system was devised in collaboration with large clients and brokers.

He noted, however, that "fundamentally, the largest single issue is the coverages that are most important to our risk managers are more complex," which limits how effectively technology can be used to speed the policy-issuance process. Some policies require "an awful lot of hand-crafting," which doesn't lend itself to a technological solution, he said.

But AIG identified lines of coverage that could be easily automated, such as excess casualty and the low end of workers compensation, he said. AIG talked to risk managers and brokers about what was feasible and then developed technology to meet customers' needs. As a result, AIG has been able to get policies out very quickly, with customers receiving quotes online, Mr. Faulkner said.

Paul Pruett, vp and e-business manager in the strategic development division of Chubb & Son Inc. in Warren, N.J., said that initial expectations about the benefits of technology might have been overly optimistic.

"I believe risk managers thought that the advent of the Internet would replace the agent, but I believe that you can't put something as complex as placement on the Web," he said.

Further complicating the situation is that most large risk management accounts involve multiple insurers and brokers.

"We do have policies online; we can show claims information online," he said. But he added that underwriters would need input from buyers. "The quest for efficiency is really more of a buyer-driven initiative," he said.

The issue goes beyond policy issuance, said Mr. Pruett.

Risk managers would "love to have one place to look at all their claims information from all of their carriers." Insurers are devising an extensible markup language, or XML, dictionary for claims, "so that we can all agree what `loss' means," he said.

The drive toward more effective technology in all aspects of the insurance industry requires a collaborative effort, said Christopher E. Mandel, assistant vp-enterprise risk management at USAA Group in San Antonio, who is also first vp of RIMS.

All property/casualty insurers "need to support the RIMS/ACORD data standards initiative that will drive XML as the common data standard and allow greater portability of claim data for provider/user to provider," he said (see story, page 10).

Mr. Mandel also called on insurers to "get on board" with the RIMS quality improvement process being worked on by the society's Quality Committee.

"It will measure key areas of performance of carriers, TPAs, brokers and consultants. Policy turnaround is, of course, one of our pet peeves that we would hope this type of measure would facilitate," Mr. Mandel said.

 

© Copyright Business Insurance 2001, 2002