Technology

REMOVING FRICTION

Company takes API-first approach to helping E&S and specialty providers update products, get new ones to market, and bolster distribution

By Dave Willis, CPIA

In some people’s minds, the insurance business is perceived to lag other industries in adopting technology to improve efficiency. That may not be entirely true. In the early 1950s, my dad helped pay his way through college by working in the data processing operation of one of the world’s oldest insurance companies. True story; I’ve seen the key punch cards they used to use.

That said, the speed with which our industry has leveraged 21st-century tech capabilities may indeed trail others. That’s partly because insurance is complex. And much of it—especially excess and surplus (E&S) and specialty lines—is difficult to automate. Or perhaps I should say “was” difficult to automate. Over the last few years, we’ve seen these lines evolve from traditional paper and handshake processes to digital transactions with spreadsheets, word processing docs, and years of amassed institutional knowledge. Today, companies are introducing solutions for automating the specialty lines distribution chain.

One firm making a positive difference in this arena is ClarionDoor, a company that delivers frontline distribution solutions for rating, quoting, and issuance to insurance providers. Company founder and CEO Michael DeGusta has been a part of the insur-
ance tech evolution for more than 20 years. “I co-founded one of the first online insurance companies, eCoverage, back in the original dot-com boom days,” he explains. “At that time, we thought we’d go find the best piece of insurance soft-ware out there, build a website around it, and we’d be good to go.” They looked at what was available, found nothing suitable, and ended up building their own technology from scratch.

“And then the dot-com bust happened,” DeGusta recalls.

Coming out of that, he started another company. “We took the approach of creating one system to do absolutely everything,” he explains. He and his partners sold that company to a large insurance enterprise software provider, and then he launched his present firm.

“We started ClarionDoor with a more focused mindset based on what we had learned from our past experiences, namely to really focus on equipping insurance providers with a platform for getting their products out to their distribution channels,” he explains. “We decided to not worry about the back-office billing, accounting, and claims functions, but rather leave that to the legacy systems and the insurance carriers.”

Their goal: address the point of friction and help carriers, MGAs/MGUs, wholesalers, and program administrators update products, get new products to market, enter new channels, and develop new distribution partnerships. “We wanted to focus on those things,” DeGusta explains, “and, alongside that, be a software vendor whose reputation was that ‘their stuff actually works.’ We found that to be not very common in the industry.”

He has observed in the market—and heard from prospects and eventually customers—that too many companies “over promise, and under deliver. A lot of projects were either failing or being dragged across the finish line, but not really solving the problems that the person buying technology hoped they would.”

Market challenges

Coming up with a way to improve operational efficiencies in E&S and specialty lines has been a tough nut to crack over the years. Industry trade groups have been working on the issue for some time, with what some might call frustrating results—or lack thereof. DeGusta recognizes the challenges. “Technology providers, whether they’re in-house IT staff or outside firms building off-the-shelf products, have traditionally struggled with specialty lines,” he explains. “It’s just hard.”

He adds, “Insurance encompasses so many different things—from travel insurance being sold for $25 dollars a policy to complex protection for commercial or catastrophic or maybe international exposures. Those are both insurance, but they’re really different things.

“The deeper you get into the specialty side of the business, the further and further away you get from a commoditized insurance offering, which is how people traditionally approach automation—as a set of rules that you code and then move on,” he notes. “As you enter more specialized areas, it seems like everything is an exception, more things may need to be overridden, and there’s a lot more ambiguity.”

Traditional software approaches, inside and outside of insurance, struggle with exceptions and ambiguity. “That’s why people have traditionally fallen back on Excel spreadsheets and Word docs and the paper world for specialty lines,” DeGusta says, “because you could do whatever you want there.”

Another challenge: “E&S and specialty programs tend to be smaller and lack sufficient premium volume to justify a huge, multi-year initiative to move from manual processes that firms have been getting by with for years.” Another factor is the prevalence of “mental rolodexes” in the business, where agents and brokers know in their heads who at which carrier or MGA will entertain what types of (sometimes faxed) submissions; automation can throw a wrench in these long-held processes. Reliance on such institutional knowledge also poses challenges when onboarding new people; use of technology can help overcome those.

Finally, DeGusta notes, the relationship of offerings’ complexity to their scale affects where they fall in a corporate system’s project pecking order. “Technology marches on,” he explains. “Companies know they need to modernize, and they start, for instance, with personal auto and then maybe get to homeowners. By then, five or 10 years have passed, and it’s time to start over.”

Others have tried to tackle the problem. “A common approach involves a behemoth policy administration system that works well for more straightforward insurance products and distribution relationships,” DeGusta explains. The company believes the answer to all their problems is to get everything onto this one platform.

But there are too many variables—from the nature and complexity of the product to the sales or purchasing process to user capabilities and more. “Trying to apply a one-size-fits-all solution to get everything on one system that wasn’t designed for it tends to be a problem,” he says.

At the other end of the spectrum are those who try to do too little. “Maybe they want to use technology to help manage the queue of fax and email submissions coming in the door or maybe track how long it takes to get things back,” DeGusta observes. “They’re not even attempting to tackle the underlying problem, and that obviously has massive limitations.”

Responsive approach

ClarionDoor takes a different approach to solving insurance providers’ rate, quote, bind and issue challenges. “First, we come in from a platform perspective, with a minimum-assumptions and maximum-flexibility approach,” DeGusta explains.

“We start with the recognition that, for all kinds of insurance, people are trying to answer three questions: Do you want this risk? What do you want to charge for it? And what do you offer for that price, in terms of coverage and contract forms,” he notes. “Those are really the only three things you assume across all kinds of insurance. We don’t prescribe a constrained workflow where there’s only one way to do things or where you need a certain hierarchy data model. There’s none of that. It’s a very flexible, liberating technology.

“On top of that, we’ve been cloud only from day one,” DeGusta says. “We wanted to be a truly modern platform, where you’re not dealing with installations, upgrades, and conversions, and you don’t need to worry about bring-up time. That lets customers get things set up quickly and easily.”

The company also works from client source documents. “There’s no need to translate their Excel pricing models or their Word forms,” he explains. “Just leave them as they are. The net effect is we can get something stood up very, very quickly that offers rate, quote, bind and issue—or any subset thereof.

“There’s no big, multi-year risk,” DeGusta adds. “We can implement something, then the customer can look at it and iterate from there. We can show customers how to do that in our tools, or we can do it for them. It’s a pragmatic approach to tackling the real complexities of the underlying insurance product in a way that serves whatever the need, large or small.”

“[E]very line of business-every program-should be automatable and at a price that makes sense for the product. Everything should be able to move forward in the world, not just the big lines or products from the big guys.”

-Michael DeGusta

The firm prides itself in serving the entire market range. “We work with some of the very largest carriers, as well as startup insurtech carriers; we work with MGAs and program administrators. So, whether someone has 74 underwriting units and each has its own program and they want to automate all those, or it’s a single program, we can help. We think every line of business—every program—should be automatable and at a price that makes sense for the product. Everything should be able to move forward in the world, not just the big lines or products from the big guys.”

For some projects, the company works with product staff, for some, a client’s IT professionals. “And sometimes it’s their distribution staff, who say, ‘People are finding us too hard to do business with and we want to change that,’” DeGusta says. The solution could be anything from a carrier that wants a simple web portal for agents to an MGA that wants something built on a set of web services that offer integration throughout the distribution chain, or any combination or hybrid approach in between.

“We can address all of these because our platform offers all of those options out of the box,” DeGusta says. “Set up the product and changes can be made without having to engage the carrier’s IT department or setting up a long-term, custom project.”

The approach also enables customers to better exchange information between different internal systems—or no systems at all. “Maybe you’re an MGA and you have different programs you’re doing different ways. For some, you’re using different systems. For others, it’s mostly on Excel and paper. We can bring those all together with web services and a UI (user interface) on top of it. With the platform, customers have one hammer to hit all those nails every time, and do not have to go out looking for different solutions.”

The approach also lets customers decide how to interface with partners, including retail agents and brokers. “For an MGA or program, it could be a matter of managing authority or empowering external users for larger and larger roles over time. In other situations, it could be something as simple as allowing agents to transmit data how they want—through the management system or direct through a portal, for instance. Everything we do from day one is API (application programming interface) first. There’s never not an API for doing anything.”

Positive outcomes

DeGusta says the results his firm delivers are far-reaching: “Everybody wins; the various stakeholders in the insurance chain can work with each other the way each wants to work; there aren’t hard and fast rules requiring everyone to do things the same way.

“No longer does every new relationship or product or tweak need to be custom-developed with very high overhead and very high inefficiency,” he adds. “Instead, we create a rich, loosely coupled world where each one can work with the others how they want to. It facilitates delivering a non-disruptive experience for everybody.”

Flexibility and the ability to have products and offerings be more responsive to the needs of the market and/or the producers using it is another win. “Customers can really just try something, see if it works, and then tweak it,” he explains. That’s a big change from when every decision required justifying or at least contemplating a huge IT investment. “If you can make a change and get market feedback or feedback from producers quickly—things you can act on—you fundamentally change the nature of the market and increase the upside for all stakeholders.”

Data benefits come into play in a couple of ways. First, the platform helps companies get a better handle on their own data. “We’re cloud only and centralized, and that means every rate request received in one place,” DeGusta explains. “Regardless of how it came in, it’s in one place and one format, and that makes it an asset the insurer or MGA or program manager can really dig into for insight.”

Second, the API structure makes it easier for companies to use third-party data providers. “There are the big legacy providers, but also a number of new startups that are making strides in the insurance business. For any data provider out there that has an API, we’ve either plugged them in already or we can plug them in, and we can show that information to the underwriter.”

Bright outlook

“We’re living in an exciting time,” DeGusta observes. “People’s expectations are increasing as they use their phones and apps. They’re thinking, ‘this stuff is easy. Why are the things I have to use in my job so hard?’ And that’s a really healthy pressure for all of us.

“It leads people into the kinds of discussions that move the industry forward—discussions around how we can make things better for everybody,” he notes. “We shouldn’t be involved in a push and pull between different stakeholders and between the business and technology.

“We need technology to facilitate one another in a powerful and enabling way,” DeGusta concludes.

For more information:

ClarionDoor

www.clariondoor.com