Blog

Too Much Manual Effort is a Show Stopper

Angelyn Treutel Zeringue
Insurance Experts' Forum, July 11, 2014

We write thousands of small homeowners policies with the excess and surplus (E&S) market. Most of the premiums are under $1,000. We also write thousands of policies with other major admitted carriers. However, the administrative burden of doing business with the E&S market is about to be a show-stopper.

For agency bill policies, retail agents are required to follow up on every renewal two to three times. Every three years, we are required to get a new application reviewed and signed by the client, and we respond to an inspection that typically requires additional interactions with the client as well as follow up on any property issues or disputes over replacement values. We can’t afford to keep doing this.

We love the E&S market. It covers unique risks and has great rates that are easy to sell; however, the administrative requirements are putting us in the red.

Over the years, certain processes and requirements were put into place, but it’s now time to take a hard, logical look at some of the onerous tasks that exist.

Example 1: What additional value is derived from requiring an application on every policy every three years? The applicant’s date of birth, social security number and address will not have changed. What new data received could possibly justify the enormous clerical burden placed on the retailer and wholesaler?

When we work with standard carriers, they only require an application when the policy is originally written, unless there are some extenuating circumstances, and their billing is handled automatically with very little clerical involvement by the retailer.

Example 2: What additional value is derived from requiring an inspection on every policy every three years? Inspections are a huge cost to both the industry and wholesalers that is passed on to the clients. The receipt, review and analysis of every inspection is an onerous task for the wholesalers. Then, if any issues are identified, the wholesaler sends the inspection to the retailer to communicate to the insured. Almost every policy becomes a dispute over the replacement cost and property clean-up requirements.

To make the swamp even deeper, obtaining a replacement cost estimate far from an exact science. In our area, if the coverage is within a “reasonableness” range of $90 to $110 per square foot, and the client is comfortable with the coverage level, then who are we to disagree? I have run several different cost estimators on a 1,000-square-foot home and I have received values from $75,000 to $200,000. The exercise is futile. For the less than $100 per policy, per year we are paid, we cannot afford to do this.

In addition, the insured often is offended by the inspection experience, and we spend excessive time explaining the process and calming them down.

To validate the risks being insured, standard carriers conduct infrequent random inspections on small properties, and concentrate more inspections on higher-value properties. They put an inflation guard on the policy and bump up the coverage a bit each year so no one has to run expensive cost-estimators that provide extreme variations in results.

How can we fix this insanity?

Angelyn Treutel Zeringue, CPA, is president of Southgroup Insurance Gulf Coast and the chair of ASCnet's Industry Solutions Industry Initiatives Committee and the past-chair of the IIABA Agents Council for Technology.

Readers are encouraged to respond to Angelyn by using the “Add Your Comments” box below. 

This blog was exclusively written for Insurance Networking News. It may not be reposted or reused without permission from Insurance Networking News.

The opinions of bloggers on www.insurancenetworking.com do not necessarily reflect those of Insurance Networking News.

Comments (0)

Be the first to comment on this post using the section below.

Add Your Comments...

Already Registered?

If you have already registered to Insurance Networking News, please use the form below to login. When completed you will immeditely be directed to post a comment.

Forgot your password?

Not Registered?

You must be registered to post a comment. Click here to register.

Blog Archive

In the Big Data Era, Storage is More than 'Just' Hardware

For on-premises needs, the latest technologies, including flash, solid state drives, and in-memory computing offer new ways to provide rapid access to new data.

Core Transformation – The Ultimate Balancing Act

The core transformation journey requires companies to shift from reactive to proactive business models, incorporating maturing and emerging technologies, customizing and personalizing products, and accelerating speed to market while providing improved customer service.

Wearables Poised to Reshape Insurer-Insured Relationship

Boosted by the impending release of the Apple Watch, wearable devices have received a fair amount of attention recently – and with good reason. This emergent technology has the potential to alter the way the health insurance industry operates on a fundamental level.

Despite Valiant Efforts, Insurers' Consumer Ratings Drop

Insurers also are confronting waves of disruptive changes, including big data analytics, an aging population, ongoing economic uncertainty and the growing frequency and severity of natural disasters, which threaten to challenge and undermine businesses.

Why You Can't Take a Wrecking Ball to Your Legacy System

If you think of enterprises like collections of neighborhoods that need to be nurtured, you quickly see that architecture, not obliteration, is the key.

The Apple Bounce: Are Wearables Truly this Big?

I just don’t believe it; only 720,000 Androidwear watches were sold in 2014. Apple has been amazingly successful in so many markets. Were they always first? No, a lot of products before. Were they always best? Again, no, superior devices have fallen.