National Grange Mutual Insurance Company, a member of the Main Street America (MSA) group, took the first step in the process of bringing its automated vision to reality by signing an agreement with AT&T Insurance Solutions. This agreement creates the foundation for the MSA group's Agents CommuniCation Entry & Service System, ACCESS as it's known. ACCESS is a point-of-sale system that represents a quantum leap forward in the insurer's automated abilities to receive and deliver business transactions, products and services. While fully implementing ACCESS will take several years, the company expects to take its first major steps later this year.
Main Street America group doesn't boast about sophisticated e-mail capabilities at its home office in Keene, New Hampshire. It hasn't yet established a site on the Internet to attract computer-savvy customers. Indeed, the company has only begun to download information to a few of its agents' computers.
A technologically backward regional insurer? No--a technologically focused company. For MSA, a cautious, methodical approach to automation, combined with a focused commitment to the personal lines and small business commercial markets, has proven to be a winning combination.
Main Street has consciously devoted its automation efforts strictly to those internal operations that allow it to quickly and efficiently process and deliver its product to its front-line customers--insurance agents.
"We read about one insurance company that was proud that it could order pencils through its PC network," observes Tom Van Berkel, senior vice president of insurance operations for MSA. "We simply haven't done that. Instead, we've focused on automating our product delivery to the point where we can process auto and homeowners policies quickly and efficiently."
A key measure was to automate the company's personal lines underwriting activities in the early 1990s. That allowed it to eliminate one layer of personnel (its assistant underwriters) and transfer those people to other, more productive work. Today, about 40% of MSA's personal lines policies are underwritten without human intervention. By enhancing the accuracy of the data going into its automated underwriting system (an effort that will, at last, lead the company to agency automation), MSA expects to be able to raise that figure to between 70% and 80%.
"If an agent sends us an application that is complete, and it goes through our automated underwriting system without being kicked out for a driving violation or something like that, it's in the mail to the agent the day after we receive it," says Van Berkel.
Thanks in part to efforts such as these, MSA enjoys operating ratios in its personal lines on a par with some of the most efficient agency insurers in the country--34.8% for personal auto and 45.1% for homeowners in 1995, according to A.M. Best. The company expects to squeeze several more percentage points from its operating ratio in the years ahead, now that much of its investment in automation at its home office has been completed.
"We will continue to refine our internal processes, whether it's for underwriting, rating, policy issuance, or billing and handling claims," says Stanley Vanderhoof, the company's director of strategic systems development. "But a major focus now will be placed on providing more automation directly to the source of our business, the agents. By doing that, we expect to make the processing and handling of our business much more efficient for both of us.
"The initial focus in personal lines will be on processing new business applications and providing an inquiry capability for agents on billings, claims, and other policy status items."
Despite the rewards of its automation efforts, Main Street, like most low-cost insurers, doesn't attribute its efficiency to automation alone.
"The major contributing factor," says Van Berkel, "is that we've been very consistent in our business operations as far as products, territories and the ways that we do things. We write the same business today that we did five and ten years ago. Any time you stay focused on a particular thing, it's going to be a lot easier than if you allow yourself to become diverted."
Personal lines account for about 65% of the company's business, and commercial lines the balance. The company operates in 16 states along the length of the East Coast, with about 650 agents, up from 500 at the start of the decade.
It maintains good relations with its agents (its average agent produces over half a million dollars in premium revenue each year), and it retains the vast majority of its policyholders (better than 90% of its personal lines policyholders renew when their policies expire; slightly fewer, as is typical, do so in commercial lines).
Going forward, it expects to remain a low-cost operator in the markets where it chooses to compete.
"If you compare our operating ratios to the [captive agent] direct writers, we're already pretty close," says Van Berkel. "As for the direct-response companies...not everybody wants to buy insurance from somebody over an 800 number or through a fax machine. For the companies we compare ourselves to, we will continue to be very competitive."
Reprinted with permission from INDEPENDENT AGENT magazine, October 1996. Written by Randy Myers.
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New business applications are available for any line of business. Applications are developed based on ACORD standards and customized to the carriers' specific requirements. The new business application is a Windows™ application resident on the user's desktop, with off-line editing. It uses the Internet for transport.
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