Michael Koscielny has been using business rules technologies and strategic practices to transform and integrate the complex insurance underwriting process at Auto Club Group, formerly AAA Michigan. Koscielny has been utilizing business rules management software in the insurance industry for more than 20 years.
The sales and service initiative of the Auto Club Group identified the need for an automatic underwriting solution for new business functionality.
Michael Koscielny has been using business rules technologies and strategic practices to transform and integrate the complex insurance underwriting process at Auto Club Group, formerly AAA Michigan. Koscielny has been utilizing business rules management software in the insurance industry for more than 20 years.
The sales and service initiative of the Auto Club Group identified the need for an automatic underwriting solution for new business functionality. They wanted to reduce underwriting review from 100% to 15% of new business applications and 30% to 15% of the renewals. This would improve the loss ratio, expense ratio, cycle time, and quality of all the processes. The insurance industry is highly regulated and regulations are somewhat different for every state so the solution had to be flexible and agile.
A rules-based solution was defined and the current underwriting rules were used. It was decided that a third-party rules engine would be a better solution that something made in-house.
The rules development strategy included:
- Rule alignment, aligned by states and line of business
- Reusability, rule templates and rule flows can be copied between states
- Task/rule set, templates were tied specifically to tasks or rule sets
- Only rules that resulted in actions were entered into the tool
- In order for the rule to ‘hit’, all conditions had to be true
- Nested ‘ifs’ were avoided
- All rule changes underwent the same process
- Everything was tested, including regression testing
Auto Club Group decided that no rule should ever be changed once it is established. If it needs to be redefined, the old rule is expired and a new rule is created. This keeps all rules current and their effects known. The rules template establishes the values the rule is based on, which determines the data that is acted upon. The rules engine did many fairly complicated computations that had been previously done by the sales people. The rules engine also provides a referral process so humans can see all the data and check to make sure the rules engine is working optimally.
The web-based user interface is an integral part of the new system. The rules engine sits between the user and the back end. The sales people like the new changes. Over 90% of the auto policies that are written are mailed to the customer the next day. Home owner policies came next along with amendments and changes to existing auto policies.
Rule maintenance is handled by rule set and task. An underwriting analyst is able to locate rules through the rules list in the templates. The benefits to the new rules engine are many.
- Consistent application of underwriting rules across all markets
- Improved risk assessment
- Improved risk classification/pricing
- Limiting exceptions to current rules
- Improved loss ratio
For cost reduction and efficiencies, Leverage underwriting FTEs allowing response to increased volumes and new markets Migrate to portfolio management Reduce decision referrals for underwriters review Improved response time Consistency in business processes where possible across markets Reduce cost of obtaining and applying external data Reduce IT maintenance and support costs
Business process management and business agility has been enhanced by,
- Improved process control enables faster implementation of underwriting changes
- Improved ability to react to market conditions in real time
- Ability to focus on key performance drivers including agents, vehicles, and home types
- Speed to new markets
The sales and service portal statistics have all improved too.
- 3,120 active rules in place today and growing
- Current rule sets are being expanded to allow for more refined market segmentation
- All of this was done in 24 months
In addition to this, the claims fraud indicator software has been rewritten into the rules engine tool and has been implemented into production. The rules engine is also being considered to handle in-bound calls at the call center, assessing them to provide VIP treatment for the best customers.
