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Auto Club Group Blazes New Trails

Therese Rutkowski September 2006

When Mike Koscielny joined AAA of Michigan four years ago, the Dearborn-based auto club was entering expansion mode. It was acquiring AAA clubs in Illinois, Minnesota, Iowa and Wisconsin-and planned to grow in other nearby states.

As a result, senior managers were considering how to accommodate the increase in business, says Koscielny, director of regional underwriting operations. Joking over lunch at Brainstorm's Business Process Management Conference in Chicago in April, he tells Insurance Networking News: "We thought we might have to add on to our building just to house the extra employees we'd need to meet our growth targets."

Today, the Auto Club Group (AAA of Michigan) operates in nine states - now including Nebraska, North Dakota, Indiana and Ohio - and, the organization has not had to construct new office space for more employees.

In fact, the Auto Club moved into these additional states and processed 35% more applications with three times as many independent agents, while hiring only six more underwriters.

The increase in business without an equivalent increase in staff was accomplished primarily because of technology, says Koscielny. Specifically, the insurer implemented a business rules engine called Blaze Advisor, from Minneapolis-based Fair Isaac Corp., which automatically issues 99% of its automobile and 92% of its homeowners policies.

"We've gone from manually reviewing 100% of (auto) applications that come through the door to having the system issue 99% of them," says Koscielny. Although 20% of new business applications are reviewed by underwriters after the system issues quotes, that's only to verify specific information, he notes. A full 99% of auto insurance applications are issued by the system within a day.

For homeowners insurance, the results are similarly impressive. Approximately 8% of the Auto Club Group's homeowners applications are sent to underwriters for review-and that higher number is due to the fact that the company requires an underwriter to review applications for high-value homes, says Koscielny. "It has nothing to do with the technology-or regulatory requirements. It's just our policy."

SALES AND SERVICE PORTAL

The initial thrust of the Auto Club's automated underwriting initiative actually focused on building a user-friendly and efficient Web-based sales and service portal for its independent agents.

"We were operating with three (policy administration) legacy systems and no front end," says Koscielny. "It was all green-screen technology, and we had both employee agents and independent agents writing business with us. But, we had no real easy way to get that done."

Those agents were processing business directly in the insurer's systems, with no edits or checks, Koscielny adds, which meant underwriters had to review every application that came in-just to make sure all the information was correct and the policies were rated properly.

Knowing their market share was expanding, management quickly realized the need to standardize and automate the organizations' disparate and antiquated underwriting processes. "It was imperative that we get rules (technology) in place so we could reduce the number of applications underwriters had to look at," says Koscielny.

Working with Bermuda-based Accenture, the insurer built a standardized Web-based, front-end sales and service portal, while also investigating rules technology vendors with the help of Accenture and Gartner Inc., Stamford, Conn.

"We immediately gave up on the idea of building (the rules engine) ourselves," Koscielny says. "We wanted much more flexibility, and we wanted a technology that would allow us to write rules not just for auto and homeowners insurance, but also for other areas of the enterprise."

As a result, claims and "the club" areas of the business were also involved in the vendor selection process. Claims was interested in using the technology for fraud detection, and the club-which provides membership benefits, such as towing and travel services-saw potential to automate its processes as well.

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