Do you know this company? Do you recognize the computer behind these trailblazing initiatives in Enterprise Decision Management?
Trailblazer, a leading P&C auto personal lines carrier, wanted to improve its market share and up its profitability. To meet these goals, the company determined it needed to win more customers through realtime quotations and competitive cross-sell offers. At the same time, Trailblazer wanted to verify its customers were getting the same treatments and messagesno matter what channel they used. Finally, the company wanted to facilitate efficient customer care in such areas as claims handling.
Heres how they did it.
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CHALLENGES: Write more new business with less expense
Reduce risk for new business
Increase profitability
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SOLUTION: Enterprise Decision Management (EDM) solutions from Fair Isaac EDM includes:
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POINT OF SALE (POS)
Trailblazer has pushed quotations and new business binding and underwriting to its front lines, where it can deliver speedier, less costly decisions.
To help reach its POS aims, the company is using Fair Isaacs Enterprise Decision ManagerTM systemsoftware that supports the integrated development and deployment of business rules, predictive models and optimized strategies. (Enterprise Decision Manager includes Fair Isaac Blaze Advisor, the industrys leading business rules management system, preloaded with customizable rule sets and process flows for insurance decisioning.)
The solution solved the companys problem with poor quality inbound data. It incorporates XML Manager for Insurance, which validates data up front by making sure its complete, within valid ranges/types and consistent with the ACORD object model. The company can also add its own extensions to the model and validate against those.
The POS quotation and new business processes are quick and uncomplicated. The rules management system checks online forms so that they ask only relevant questions, based on the information being inputted and the applicable state regulations or corporate policies. The rules management system, which communicates with Trailblazers legacy systems and databases, orchestrates calls to external data sources as needed only, avoiding unnecessary costs.
The predictive analytics in Enterprise Decision Manager enable Trailblazer to make complex POS decisions with a high degree of accuracy. The company uses credit-based insurance bureau scores, invoked by the business rules only where they are allowed by state regulations. Custom loss risk scoring models were built by Fair Isaac for each line of business using Trailblazers own data. In the custom model, credit is just one variable of many being analyzed to predict loss ratio relativity.
The entire solution is dynamic. Managers in Trailblazers lines of business can roll out new products or change the rules affecting existing ones without IT help. Changes made in one place simultaneously update all of Trailblazers POS applications, including the customer self-serve website and browserbased application that Trailblazer provides to its customer service representatives (CSRs) and independent agents. The application displays different views based on user roles. Managers can also update a third-party agency management application (with automatic translation from that systems mainframe language to and from XML).
| POS benefits: Trailblazer is now able to deliver accurate quotations in real time and automate more than 80% of its policy applicationsagents can thus provide most customers with a policy number and ID card right at the POS. Agents are enthusiastic about the new processes, and revenue is up from the channel for existing products. Dozens of new products introduced over the past 12 months have increased revenue even further. At the same time, the cost of writing a policy has shrunk, since fewer errors and exceptions are being kicked out for manual review. The underwriting staff is more productive now that its focused on cases that truly require its expertise. |
PRICING
Using the loss risk models in conjunction with its existing rating engine, Trailblazer has expanded its pricing tiers from 3 to 10+. More granular pricing lets the carrier write policies for a much wider range of customers while controlling risk.
But Trailblazer isnt stopping there. The company has engaged Fair Isaacs Strategy Science experts to optimize its pricing strategies. The process, which maps the mathematical and economic relationships between all elements in a pricing decision (including outputs from multiple predictive models), will help Trailblazer balance competing objectives, such as maximizing acquisition campaign results and premium growth while minimizing losses. Optimization is expected to deliver a 5%35% profit improvement.
| Pricing benefits: Precision pricing has enabled Trailblazer to introduce products for markets it had previously considered too risky. New products developed using strategy optimization quickly became the companys top profit producers. |
RENEWALS
Trailblazer is taking a similar approach to renewals. Predictive analyticscredit-based scores, custom risk models and response modelssegment its policyholders with granularity and precisely target renewal terms and packages (including cross-sales offers). Rules then pull renewals that match the designated criteria. The rules management system also enables Trailblazer to be selective about when to order external data, and it manages the complexities of whether or not to re-tier (in states where allowed) and when to make a call to the rating engine (surcharges, credits, etc.).
| Renewal benefits: Lower renewal costs and improved retention of desirable customers. |
CHANNEL MANAGEMENT
The automated validation methods Trailblazer is using at the point of sale are providing the company with opportunities to gradually improve its channel management. By adding checks against additional internal and external data sources, for example, Trailblazer is able to confirm that new policies are indeed new, and not replacements for existing policies.
The company can enforce applicable state regulations as well as its own guidelines for verifying that funds borrowed from one insurance product are not being used to finance another.
Analytics have also proved to be a valuable tool for channel management: by compiling the scores from the applications submitted by each agency, Trailblazer has an objective scale with which to evaluate the quality of the business submitted. Underwriters, spending less time filling holes in inbound data, have more time to review this information, and work with channel partners to improve relationships and results.
| Channel management benefits: Lower renewal costs and improved retention of desirable customers |
MARKETING
The improved pricing flexibility is making some markets that Trailblazer had previously viewed as too risky look quite attractive. Using the custom risk scores and additional sources of data, the company is now able to differentiate various levels of risk in these markets and select the most attractive segments.
At the same time, the company is applying EDM to cross-selling opportunities.
Trailblazer is using analytics to identify those auto and homeowner policyholders who are the best candidates for cross-selling life insurance. Rules automatically select these policyholders, match them with offers and send the offer packages to agents.
Another marketing initiative is taking an even more scientific approach. Trailblazer is working with Fair Isaac experts to apply a mix of experimental design, analytics and premarket internet-based testing to pinpoint the most effective product feature sets and rate levels for each target segment. The goal is to roll out offers that are optimalin terms of achieving revenue and profit goalson day one.
| Marketing benefits: Increased revenues without increased risk. |
CLAIMS PROCESSING
Using Enterprise Decision Manager in conjunction with its existing claims handling systems, Trailblazer is able to implement new rules very quickly to verify that all claims are being handled consistently according to the latest company best practices and state regulations. Trailblazer is also adding analytic models to the process, with the goal of doing a significantly better job than the industry average of detecting fraudulent applications and identifying opportunities for subrogation.
| Claims benefits: Faster claims handling with less expense. Also reduction of unnecessary lossesTrailblazer projects that it will be able to improve fraud detection by double digits while identifying 10%15% of claims with highest recovery potential through subrogation within 24 hours of receiving accident reports. |
AIG TradeCredit.com
American International Group, Inc. offers online risk mitigation services for traderelated activities through its AIG eBusiness Risk Solutions Division. By using Fair Isaac Blaze Advisor as a core component of AIG TradeCredit.com, the company has been able to speed up its entry into new markets as well as its ability to adapt to ever-changing international laws, business conditions and risk factors.
Results: Country-specific risk models, rating criteria and decision algorithms can be developed and deployed in as little as 5 to 14 days (versus several months, previously). This accelerated pace has enabled AIG to expand the number of countries where it offers coverage from 2 to 16 in less than three months. Changes to existing products can also be implemented in as little as eight hours from recognition of a need to full online availability.
Kemper Auto and Home Group
Kemper is using business rules management and custom risk models built by Fair Isaac Predictive Science for personal lines P&C underwriting.
Results: 8 point reduction in combined ratio after first year; lower underwriting losses and improved targeting of new business.
The Hartford Insurance Group
The Hartford has combined Fair Isaac Blaze Advisor and XML Manager for Insurance with credit-based insurance scores and its own predictive models in a POS solution for personal lines quotations and new business. This supports a customer self-serve website as well as browser-based interfaces for its internal staff and external producers. It also supports agency management systems (automatic translation to/from XML) and can prompt users with carrier-specific questions. Hartford has plans to extend the approach to renewals as well. A similar solution is being used in The Hartfords commercial lines.
Results: Drastically reduced error correction cycles, lowering the cost of writing policies.
Malaysian National Insurance
The company has integrated Blaze Advisor with a Siebel CRM system to improve efficiency and decrease cycle times across the customer lifecycle. Blaze Advisor rules automate decision making processes for quotation; policy application, renewal and cancellation; and claims.
Results: Faster, more consistent decisions. Rapid updates as regulations and corporate policies change.
Republic Indemnity
The company is applying business rules management and XML Manager for Insurance to Workers Compensation new business. With Fair Isaac assistance, the carrier has built intelligent web forms that not only present supplemental questions based on context, but dynamically change as rules are changed. Business rules will also be used to dynamically generate ACORD forms with carrier-specific, context-driven questions in PDF format, for faxing or emailing to agents working offline or delegating tasks to administrative support staff.
Results: Improving data quality from all channels and making it easy for all agents to do business with the company is expected to substantially increase revenue.
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WHO IS TRAILBLAZER? Trailblazer is the immediate future of the insurance industry. The way the fictional Trailblazer does business is the way leaders in major insurance markets around the world are beginning to operate -- faster and more responsive to customers and channels, yet far more precise and with less tolerance for error. While no single Fair Isaac customer today is doing everything described for Trailblazer, many are well along the path to enterprise decision management (EDM). |
A large regional carrier
This carrier is using business rules management, XML Manager for Insurance and Fair Isaac loss risk models for POS decisioning. These EDM components are being used to drive web interfaces for independent agents, including a rules-based application that delivers quotes from the carrier and its competitors, yet is able to prompt users with carrier-specific questions. EDM also supports a dedicated application for new business. Use of the loss risk models along with credit-based scores has enabled the carrier to expand its number of pricing tiers from two to eight. Fair Isaac Professional Services also worked with the carrier to make back office infrastructure improvements, including a more flexible rating engine.
Results: Projected payback within year two with a total net present value of about $3.8 million. Other results projected over five years include increase in automation level from less than 50% to 80% of policy applications; 200 basis point improvement in loss ratio (yielding more than $4.4 million) and $5 million in savings through reduction/redeployment of underwriting/data entry resources.
A large personal lines carrier
Fair Isaac Predictive Science built a custom risk model for this company and then helped it use the model to create a multitiered pricing strategy. The carrier has been able to increase its business volume substantially, while improving its level of confidence in the quality of new business being written.
Results: 50% increase in new business. Improved competitiveness and more precise pricing enables agents to offer auto insurance to 95% of prospects. Other results: 15% in net written premiums, 8% rise in policy count, losses down by $35 million after the first year.
GEICO
The carrier is using Blaze Advisor to intelligently direct its online quote process for consumer auto insurance. Intelligent forms, which ask only relevant questions, have cut the rate at which users abandon the process and the site from 9 out of 10 to 4 out of 10.
Results: Increased by six times the number of users completing the quotation process, giving GEICO the opportunity to attract more business with its competitive prices.
Samsung Fire & Marine Insurance
Blaze Advisor powers a website that provides an interactive insurance buying guide geared to younger customers. It recommends products and services based on user profiles. Also analyzes user behavior on site and tells the company what is working and what isnt.
Results: Attracts new customers to the site and promotes the correct insurance product to them. Enables marketing team to test various strategies and activate new rules, without IT help.
Other insurance carriers using Fair Isaac solutions include: AAA Michigan, Acuity, Erie Insurance, Fiserv AIS, Guardian Life Insurance Company, John Hancock Mutual Life Insurance, Kingsway Financial, Liberty International Holdings Company and Nationwide Insurance.
The insurance industry is moving en masse to bring intelligent automated decisioning forward to the frontlines. Channel partners will soon demand Trailblazer-like POS solutions from the carriers they do business with. Aggressive competitors will employ Trailblazer-like analytics to deliver innovative, well-priced, highly profitable new products.
Fair Isaac will help you get ready.
For more information about our EDM solution suite, see the back page, and visit: www.fairisaac.com/edm
