The need for insurers to evolve in today's competitive marketplace is at an all-time high. Whether expanding to reach an untapped niche, or improving systems and practices just to keep the pace, carriers are constantly in need of setting goals and brainstorming effective ways of reaching them.One such company, New York-based XL Insurance, recognized a gaping hole in the U.S. casualty marketplace throughout the late 1990s and early 2000s and, in January 2004, made a strategic decision to swiftly expand into the casualty risk management business by offering a portfolio of risk-sensitive products. The impediment: limited internal resources and a rigid time frame in which to implement new solutions. And, for XL's rapid, creative and successful response to the problem, the company was named third-place winner of Insurance Networking News' 2007 INNovator award.
In 2004, XL Insurance was already a veteran presence in the specialty lines market but, recognizing a need in the casualty market and demand from its customer base, sought to integrate a number of outsourced technology solutions to expedite entry into the fray before its competitors.
"XL was established as a specialty lines player in the U.S. marketplace, as well as a pretty large player in the overseas marketplace," says Frank Smith, vice president, head-primary casualty and programs claims with XL Insurance. "Basically, at the time, there was a demand from our customer base to enter the U.S. primary casualty market. We had many customers [who] were well established with us, and needed a solution for their domestic insurance needs, so after performing some careful analysis, XL decided to enter the marketplace."
QUELLING CONCERNS
Among XL's key worries in the planning phase was the need for an experienced technology solutions vendor that could quickly implement a system in a short time frame that met all of XL's needs. Given the complexity of the existing claims and underwriting systems, which used data feeds from various sources and could postulate a host of various options, XL chose Chicago-based CS STARS LLC.
"Our biggest concern was the complexity that was involved in [implementing the system]," says Smith. "Fortunately, we partnered with CS STARS, [who] had experience in handling these things, and they were able to work with us in forming a solution. The system has worked perfectly for us."
Without a cumbersome legacy system to replace, XL and CS STARS needed to implement an entirely new startup solution, but with a catch-XL desired an unbundled claims model that employed third-party administrators (TPAs) on an outsourced basis to handle the actual claims.
"We decided to use an unbundled claims model, which means that instead of having a traditional claims office structure, we decided to utilize third-party administrators to handle the claims on an outsourced basis," Smith explains. "To do this, we had to come up with a solution to our data needs so that we could get all this data in from the TPAs and then, on a monthly basis, feed them into our established XL claims systems."
With a large network of TPAs to connect, XL's solution had to address a variety of divergent needs, including ensuring data quality, improving claims oversight, quantifying audit values and enhancing customer satisfaction.
Because XL outsourced its claims administration of often complex, custom casualty programs to its network of TPAs, developing a data transformation process to support the TPAs was of the utmost importance. The system implemented by CS STARS enabled XL to develop its first TPA interface in less than six months. It has since converted 18 additional TPAs, which share electronic data with XL, while providing the ability to bring in a new TPA in less than six weeks. As a result, the staff also has become more efficient as provisional claims suspense has dropped to 3.3%, affording time to monitor claim activity.
The new system also enhanced claims oversight, providing a handful of key features crucial to the protection and growth of the business.
First, there was a consolidation of the database of information for XL's entire book of business. With the STARS solution automating a variety of routine tasks, expediting data availability and ensuring process consistency, staff requirements were minimized.
Next, the ad hoc reporting capabilities embedded in the system enabled users to build the reports needed to manage risk, which established and monitored XL's pricing policies and made it easier to respond to statutory reporting requirements. Senior management dashboard reports-part of the automated report distribution tools-push key reports to senior executives.
Finally, key indicator alerts and notifications tools highlight data anomalies, which helped focus effort on crucial tasks only.
According to Smith, this system provides XL with the means for managing its TPA book through monthly management reports that explain where the underwriting book is and how it's performing. Then, internally, XL speaks with various departments-underwriting or actuarial-to quantify results and update them on the overall status.
Another important feature of XL's new system is how the company enhances claims audit efficiency. Using the STARS audit toolset, the company can create quantifiable audit scoring for its network of TPAs. XL can monitor audit results and remediation efforts of its TPAs, who all are mandated to use this STARS Audit program.
REALIZING SUCCESS
Utilizing this broad network of TPAs has resulted in benefits to XL. Not only does it afford XL's customers greater options, the cost benefit to the company is also significant.
"There are positives associated on two aspects-from our customer's perspective, the positive has to do with flexibility," Smith says. "The customer is able to decide which TPA to utilize. The customers are able to manage the vendor relationship in association with us to ensure claims are being handled to their satisfaction, because, at the end of the day, we realize our customers know their businesses and they know their claims.
"From our perspective, there's a positive associated with not setting up a claims office structure. There's been a dramatic cost benefit to XL by just having six people manage 40,000 claims as opposed to having an adjuster network that would require setting up claims offices around the country."
In the wake of XL's expansion into the U.S. casualty marketplace a few years prior, the company's total portfolio, after acquisition and organic growth, now stands at more than 130 accounts across multiple business sectors. Client retention also has improved, as technology investments have pushed it above 90%, exceeding industry standards. In addition, XL has reported a record net income in 2006 of more than $1.7 billion, and a combined ratio from general operations of 88.5%.
"The results have been very positive for us," Smith says. "We are in a position now where we are able to market our claims management abilities, which is something that is pretty unheard of in the industry."
2007 INNOVATORS AWARDS
Insurance Networking News received a number of nominees for its 2007 INNovators Award, a special designation intended to advance the spread of business technology acumen in the insurance industry. Their "innovation" was required to have been in production long enough to have returned demonstrable, tangible results.
A panel of distinguished insurance industry experts, including industry analysts, consultants and members of the INN Board of Advisers, selected the winner from the nominees chosen by INN readers.
Below is a list of the winners. Look for their stories in upcoming issues of INN.
* First Place: CUNA Mutual Group, Madison, Wis.
(Mumbai, India-based MajescoMastek provided consulting services.)
* Second Place: Mutual of Omaha, Omaha, Neb.
(Document Sciences, Carlsbad, Calif., provided the document management system.)
* Third Place: XL Insurance, New York, N.Y.
(Chicago-based CS Stars provided support in the development of data transformation processes and edits to support the data needs of XL Insurance's book of complex, often customized programs.)
* Honorable Mention #1: Midwest Insurance, Springfield, Ill.
(Through its acquisition of InsureWorx, Fiserv Insurance Solutions, Cedar Rapids, Iowa, provided the PowerComp software, and HTC Global Services, Troy, Mich., provided policy administration software and implementation services.)
* Honorable Mention #2: Insurance.com, Solon, Ohio
(Acxiom Corp., Little Rock, Ark., acted as vendor, consultant and business partner to a project that improved the quoting process.)
* Honorable Mention #3: Genworth Financial, Richmond, Va.
(Document Sciences, Carlsbad, Calif., provided software and services that enabled the company to standardize its customer communications onto one platform.)
