As the Great Recession ground down the trucking industry, the first companies squeezed out were high-risk truckers, those with marginal or poor experience, the very companies that formed the core of Canal Insurance Co.'s client base. By 2009, the company's business shrank from $500 million in 2007 to less than $200 million.
Simply said, the commercial trucking insurer needed a new strategy, one that diversified the company's portfolio while leveraging its expertise in "specialty wheels," a niche that includes trucking, towing, waste, construction and repossession. At the same time, Canal sought to take a more personalized, service-oriented approach to dealing with its policyholders while improving claims management, loss control and loss mitigation.
To expand its portfolio, Canal developed a relationship with a large managing general agent (MGA) that was looking for a new carrier to manage a $25 million book of towing and repossession services, waste haulers, construction vehicles, taxis and limos.
"This was an opportunity for Canal to diversify our product," says Adrian Brown, Canal's CIO. "One of our goals was to get into other business lines. What's more, the amount of premiums was not insignificant. It represented more than 10 percent of our premiums."
But there was a catch-a big one. Discussions about the new business took place in January 2011, while the April 1 renewal quotes had to start by March 1, otherwise the new book of business would likely be jeopardized. With its existing proprietary technology and business processes, Canal was not able to move swiftly enough to grab this new business, Brown says.
One reason Canal's management doubted it could react swiftly enough to handle the new book of business was that the company historically had created its own insurance products, which it processed on its homegrown systems. A typical new product implementation took anywhere from six months to a year. "We could not have done it with our existing systems," Brown points out.
Clearly, if Canal were going to take on the new business, the company would have to take a radically different approach. With two weeks to make a decision and six weeks to get quotes out the door, management was looking for other ways to get the job done.
Crunch Time
After reviewing competing technology solutions, Canal management decided to go with AQS and the ISO Rating Service. To help ensure a faster implementation, Canal elected to use the AQS team as its consultant on the project and was able to get the quotes processed on time.
"By the time we were brought in, we had five or six weeks to get something up and running for Canal," says Larry Stern, VP of strategy and marketing at AQS. "We worked with them to put together a very focused plan for implementing the solutions they would need to meet their business needs within the deadline."
Instead of trying to adapt its existing proprietary quote and rating systems to the new business book, Canal started from scratch using AQS' Access Product Suite, which is integrated with the ISO Rating Service of Verisk Analytics. The ISO Rating Service offers a comprehensive policy-rate maintenance and management system. For many insurance firms that don't have a broad spectrum of ratings data, the ISO Rating Service is an attractive default rating solution.
Canal used AQS' Quote Access and Designer Access modules to configure the new products for the new line of business. With the AQS system's native integration with the ISO Rating Service, Brown says Canal was able to quickly deliver all the ratings involved in the rollover of the new business book.
Being able to quickly build and configure the new products to handle the new business lines was essential, Brown explains. "We used the ISO Rater product, which utilizes an XML feed in and out," he says. "The output is a rated quote with all coverages and breakdowns. Then we pass that information into our proprietary policy administration system."
The geographic reach of the new products also posed a daunting challenge for Canal. "Usually, you take a new business line over two or three states to start," Brown says. "In this case, though, we had a week to bring in 46 states that had this business. By the end of the week, we had all the states up on that platform."
All told, the project took about a month from start to finish. Canal's IT staff, which numbers about 30 professionals, put in a total of about 75 hours each on the project, Brown figures.
Of course, some new business expertise was critical for handling the new policy lines. "Our underwriters didn't have the background in these new areas, so we brought in an underwriter who knew this business," Brown says. Having an underwriter on staff who was familiar with the coverages and associated risks was a big plus for Canal in getting up to speed with the new policies and policyholder base.
Canal also was able to use the ISO Rating Service, which has rate books going back to 2006. "We were able to adopt those older rates, so there was no rate shock to our new policyholders," Brown says.
Canal has since worked with a second MGA to acquire a different book of new business. Again, Canal used AQS' Access Quote Module and Active Designer to configure the new products to serve the latest market addition. Similarly, they used the ISO Rating Service to deliver the ratings for the new policies. Canal used AQS' technology for rating and quotes to process the renewals for the new business it was taking on.
For Canal, the new business represents the company's first forays into diversification beyond its traditional business. From a financial perspective, the new business enabled Canal to reverse the recent premium slide. And it gave the company a morale boost, demonstrating that it could build competency in the new products that are part of its strategic plan. "By having the new rating tool in place, we could do commercial property or ocean marine if we want to expand into those areas," Brown says. "We want to diversify, and this technology gives us the opportunity to do so."
Doug Bartholomew is a freelance business writer based in Berkeley, Calif.
