For Immediate Release
August 20, 2001
Insurers Can Improve Efficiency and Profits
Through "Virtual Insurance Company"
Many insurers could improve efficiency and profitability by transforming themselves into virtual companies, Mark D. Harris, President and Chief Executive Officer of Quadrant Insurance Managers, told a recent conference in Boston.
Sponsored by CSC (Computer Sciences Corporation), Electronic Business Works and Milliman USA, the conference focused on the growing movement of insurers toward so-called "virtual operations," outsourcing functions traditionally performed in-house. Quadrant Insurance Managers of Columbus, Ohio, is a national managing general agency with extensive experience in program business.
Prescribing "virtual insurance companies as a recipe for change," Mr. Harris said, "the alternative model for insurance programs without bricks and mortar is an innovative approach that can achieve a higher level of service to clients and improve profit to insurance carriers." He pointed out that many companies are plagued by inefficient communications, legacy systems that are incompatible with today's technology, and inexperienced underwriters.
"With the decline in the stock market, companies can no longer rely on investment income to offset high operating rations," Mr. Harris observed. "The result for many companies is a combined of 110 or higher. The knee jerk reaction of come companies is to cut service staff which results in negative feedback from agents and consumers. Moving into a virtual environment and embracing Internet technology would be a far better answer for many companies," Mr. Harris suggested.
"Outsourcing to professionals who can meet or exceed your service standards can keep a company competitive by reducing overhead," he told the conference. "The keys to successful outsourcing are to communicate frequently and openly with vendors, challenge them with incentives, and monitor their performance at regular intervals. Use of the Internet to facilitate communication between buyers and risk takers upgrades performance and satisfaction for both parties."
"Managing general agents with detailed knowledge of targeted industries know the best risks and can provide insurers with profit opportunities at lower costs. When underwriting is seated with these MGA's, as they should be tied to the profitability of the business written. Having them take some risk is often desirable."
Mr. Harris also advised participants to seek reinsures who understand and buy-in to the underwriting goals. He suggested that "back-office functions that are normally performed by insurance companies can be turned over to the new breed of specialists in policy issuance and statistical reporting, billing, bordereaux, and cancellations. Third party administrators and loss control services can tailor protocols specifically to particular programs. Vendors can provide 7-day, 24 hour service if necessary."
He recommended "packaging critical information on a website so clients can get to it easily, understand the request, and respond simultaneously. Automating routine rating and underwriting processes allows the underwriter to monitor the operation through random sampling and to focus on exceptional risks."
Mr. Harris concluded that, "the virtual insurance company can improve the experience of the buyer and the ultimate risk taker by keeping the expense ratio low, allowing the program manager to focus on core business decisions while improving the flow of information in all directions, and attracting sophisticated reinsurance capacity."
For additional information, contact info@usre.com
