By Bruce Hicks, CPCU, CLU
Paul Baiocchi, CPCU, is president of the American Association of Insurance Services (AAIS).
If your insurance surfing lands you on the shore of a certain Web site, you may happen upon a company describing itself as:
"A product development resource for property/casualty insurers who require responsive, innovative information services. With more than 60 years of expertise in actuarial analysis, policy form development, and regulatory filings, AAIS is now a recognized leader in customized product research and design. More than 600 property/casualty companies use AAIS products and services."
With this plain, direct passage, the American Association of Insurance Services, or AAIS to its friends, is guilty of ... truth in advertising. The company behind the above e-statement is newly nestled in suburban Chicago (Wheaton, Illinois, to be exact) and the location is becoming familiar to an increasing number of insurers. Why? Because more companies, big and small, have found AAIS to be a solid way to answer some important questions.
"Company A" may have a line of business with poor loss experience that is causing major concern. "Company B" may visit to talk about getting guidance with entering a new line of business. A chief executive of "Company C" is getting close with AAIS after celebrating that a group of important form filings, prepared by AAIS, were approved by a state insurance department known for its strict scrutiny.
All of the above are commonplace scenarios that provide insurers with important reasons for getting better acquainted with the American Association of Insurance Services. The people at AAIS operate with a huge emphasis on the last part of their name ... "Services." The association is affiliated with more than 600 property/ casualty insurers. It doesn't matter whether it's large or small, monoline or multiline, forms, rules, loss costs or filings; AAIS prides itself on making it easy to deal with its partners. AAIS follows a mission that revolves around providing a variety of insurance-related services for home, farms, commercial property, commercial liability, personal and commercial inland marine and personal and excess umbrella.
Origin and purpose
AAIS was formed in 1975, taking the place of the Transportation Insurance Rating Bureau, which specialized as a rating bureau for inland marine coverages. AAIS quickly expanded its product and service focus so that it now offers a variety of state-of-the-art products and services in multiple lines of business. AAIS files forms and entire programs on nearly a nationwide basis. It also tracks state activity in order to file state-specific forms that comply with changes in state law or insurance authority requirements. Besides its work with a host of forms and nearly two dozen separate insurance programs, AAIS also helps its affiliates create custom programs, provides statistical reporting, actuarial analysis, product filings, software development and maintenance.
Companies need these services because of the old, primary reason. Though an insurer may seem to have a large customer base, its numbers are far too small to credibly determine basic cost of losses in any given line of business. Further, fewer companies have the resources or expertise needed to do the groundwork necessary for product development and maintenance. AAIS, like its predecessor bureaus of old, collects and analyzes loss and premium data from its affiliates and uses that information to develop base loss costs. It also has the actuarial know-how to crunch industry-wide and/or individual company statistics in order to make pricing and rating decisions.
Insurance educators
AAIS puts a tremendous effort into its role as an educator. New or substantially revised programs are often rolled out with a road show called "Technical Conferences." What is special about these conferences is that the educational sessions are run by the people who had a direct hand (typically the lead person) in creating or revising the program. Conference participants can ask questions or express concerns with a person who is directly accountable to, say, the farm or inland marine product or program. This high level of accessibility and accountability is a welcome respite from what is frequently experienced by curious insurance professionals--events run by someone who "heard of" someone who "knew the person" who created the product.
AAIS also distributes large volumes of educational material that support their products including comparisons and background papers that explain their intent and rationale. Phone calls and e-mails to AAIS are handled so quickly that, if you listen carefully, you can hear the sound of work being dropped so that a reply can be handled.
Casual conferences
AAIS' annual conferences provide another insight into the company's character. While their annual meetings could easily be mega-affairs, the approach is the opposite. AAIS focuses on crafting meetings that consistently feature a combination of comfortable surrounding, valuable content, networking opportunities and entertainment. Their organization and attention to detail are such that none of these areas lacks in comparison with the others. Conference speakers are knowledgeable in their field and are good communicators. Conversations with attendees reveal many affiliates and vendors who are very happy with their AAIS experience. Frequent comments are that AAIS is quite helpful and that it is easy to work with the company.
It's the people of AAIS who generate these feelings and compliments from their affiliates. The core personnel of AAIS are models of the nonprofit association's focus on service. They include Paul Baiocchi, president; Joyce Tignino, vice president, marketing and industry relations; Debi Summerlin, vice president, insurance lines; Bob Guevara, assistant vice president, inland marine; and Bill Stripp, vice president, technical services.
President discusses some critical issues
Paul Baiocchi, AAIS president has been with the association for more than a quarter-century. He has a strong hold on AAIS' past and future and shares his thoughts on some important items that help shape his company philosophy and course of operations.
On AAIS's role in the property/casualty industry, he says, "AAIS is an insurance product development resource that develops policy forms, manuals, and advisory rating information, and files them with state regulators. We are also a licensed statistical agent.
Baiocchi points to AAIS's company reputation, built on customer service and product expertise, as the reason that the last 10 years have seen their number of affiliates double to more than 600 property/casualty companies. AAIS has maintained its role by providing product standards for commercial inland marine, boatowners and artisan contractor coverages. He believes that AAIS' product tradition acts as a model for so many companies' programs that many agents would immediately recognize their handiwork.
On helping companies compete, Baiocchi states, "Many specialty writers use our custom product development and filing services to help them put together niche programs. Our ability to deliver custom programs distinguishes us as a product development resource."
Deborah Summerlin, CPCU, vice president of insurance lines, supervises product development, maintenance and filing, and maintenance for most AAIS programs.
One might assume that successful product development depends only upon getting a lot of customers to buy into essentially the same product concept, but Baiocchi dispels that notion.
"Companies today want choices. They don't want to be told that 'One size fits all.' They are shopping for the best value package for all of their operational needs, be it forms, software, or any other service. As a result, a growing number of customers use AAIS for some lines and another provider, or independent programs, for other lines."
How AAIS works with producers
AAIS does not focus its customer concerns only on insurance companies. "AAIS has always worked closely with agents and agent organizations," says Baiocchi. "We include agent representatives on our product advisory teams to ensure that new forms and endorsements reflect the concerns of agents. We supply our companies and agent education directors with training materials on AAIS programs for no charge. Beyond that, AAIS recognizes that producers today play a growing role in originating and developing products. They are often the ones identifying market niches and supplying critical pricing data for program business proposals."
AAIS' position on the importance of agents isn't just talk. The association has had success with taking ideas advanced by companies and managing general agencies (as a result of producer feedback) and creating new products.
When Paul discusses AAIS, there's a sense of mission that permeates his words. The same aura is present in the words of other members of their management team, such as Debi Summerlin and Bob Guevara, who both offer some observations on product trends.
"The pace of insurance product development has picked up in the past 10 years as insurers have sought to cover more exposures," says Summerlin. "The stepped-up pace of product development also reflects a growing desire by insurers to have products designed for unique classes of risk. Many insurers are paying close attention to the profitability of individual customers and accounts, as well as to the overall performance of each line."
Summerlin, vice president of insurance lines, has been with the association for more than 20 years. Supervising product development, maintenance and filing, and maintenance for most AAIS programs, she is most responsible for their highly regarded farm programs. She lists the following highlights of AAIS' product accomplishments over the last decade:
* led industry in filing a standard endorsement that permitted commercial coverage to be added to a homeowners policy to cover an in-home business
* began their Artisans Contractor program that focused on their heightened liability exposure for work done on customers' property
* took employment practice liability coverage beyond its status as a special, monoline product and packaged it as an option under a businessowners policy
* introduced the Agricultural Output (AgOp) program, a package of commercial property and inland marine coverages that focuses on the needs faced by large-scale agricultural risks
* created and filed complete, standard, umbrella and excess coverage programs for farm, personal and commercial risks
Robert Guevara, assistant vice president of inland marine, is the chief force behind several of AAIS' latest commercial and inland marine products.
--Robert Guevara
Robert Guevara, assistant vice president, inland marine, has been with AAIS for six years, after nearly two decades of experience as an inland marine manager with a major insurer. He is the chief force behind several of AAIS' latest commercial and inland marine products. Guevara sees electronic property and underwriting needs as critical trends impacting inland marine. He points out: "In today's economy, the information in a company's customer database and its proprietary systems for transacting business electronically can exceed the value of buildings, business personal property, and stock. Along the same line, most businesses today have networks of automated equipment at the core of their operations."
"Inland marine professionals want options for writing coverage, but they don't want to be overwhelmed with a complex series of decisions every time they issue a policy," Guevara adds.
AAIS' responses to these trends include the following:
* They enhanced their EDP Program by clarifying the coverage intended for computer viruses and damage caused by hackers as well as created four distinct categories of software. These changes have allowed underwriters to more accurately evaluate and rate these exposures.
* Offered an equipment breakdown endorsement under their Commercial Output programs, acknowledging that the exposure is now common to most businesses
* Modified their Inland Marine Guide to give underwriters the option of choosing blanket or among two levels of scheduled coverage
* Incorporated additional sources of underwriting information into the manual for several programs
* Offered package coverage options by introducing their various Output Programs, reducing the need for assembling a variety of forms to insure commercial property exposures
Guevara points out a key reason for being so attentive to commercial inland marine: "It's important to remember that, while inland marine insurance may provide a relatively small fraction of the premium for an account, it often provides a larger share of the profit margin. It pays for companies and agents to be constantly looking for opportunities to add inland marine coverage for an account. We try to make it easy and cost-effective to do so."
Both Joyce Tignino, vice president, marketing and industry relations and Bill Stripp, vice president, technical services, are critical to AAIS' success, providing marketing and technical initiatives that keep the association dynamic. Proof of this is the AAISdirect Internet services. This program gives the association's customers direct, electronic access to their full library of forms, manuals, and bulletins. The immediate, paperless access to this valuable information improves their contact with their affiliates, reduces costs and makes it easier for their customers to use their products. Further, Bill provides the automation expertise to complement the insurance content created by Bob and Debi's small product army. All the while, Joyce is a primary force in getting the word out about their products and services to current and prospective affiliates.
What the future holds
While insurance company consolidations are on-going, AAIS' number of affiliates continues to grow at a healthy pace. AAIS executives recognize that many companies face the pressure of needing more specialty or custom products at a time when they have fewer internal product development and compliance resources. AAIS executives believe that they are already capable of meeting the product and special service needs of such insurers. Another area of opportunity and challenge for AAIS is the Internet, which has demanded and will continue to demand that companies exploit this vast medium to transact business and communicate with customers and partners.
Paul Baiocchi believes the key to AAIS's future success lies in keeping in touch with what has made up the bedrock of their philosophy.
"We still are a nonprofit association dedicated solely to helping our member companies succeed. We still draw on our traditional strengths to maintain our position as a market leader in inland marine, agricultural, and large commercial specialty property programs. We still provide standard programs in other areas that offer companies a cost-effective alternative. We still communicate openly and directly with our customers."
No matter your level of acquaintance with AAIS, it looks like it's worthwhile to get to know them better. *
The author
Bruce Hicks, CPCU, CLU, is senior editor, Technical and Educational Products Division, for The Rough Notes Company, Inc. He has been in the insurance industry since 1981, serving as a personal lines underwriter for several regional and national companies. He also has worked in corporate underwriting with experience in product research and development, auditing, product filings and compliance. Hicks is also the creator of Liten Up! cartoons which are featured periodically in Rough Notes.