Tomorrow's commercial lines today

According to consultants Watson Wyatt, commercial lines insurers are increasingly applying techniques employed by personal lines insurers when setting premiums.

The firm has launched Pretium 3.1, an adaptation of software used previously in personal lines, which includes a function allowing layered claims models to be combined, giving an overall cost of claims. James Tanser, senior consultant at Watson Wyatt, said: "The main driver is a better understanding of risk and underlying levels of cost. You can use more information than just looking at a table in order to price. The move came as the quantity of information insurers are holding has improved with more reliable and better data."

Advance on all fronts

The consultants are not alone in attempting to change the commercial lines technology market. Allianz, with software house Edge IPK, has developed QuoteSME, an online - and imarket compatible - software suite that integrates with Allianz's systems.

QuoteSME is designed to ensure that brokers receive instant quotes and documents; with four million variables and up to 30 million combinations, the software's approach is deeper than a standalone quote-and-buy system.

Its combination of layered rating technology and data sets gives, according to the insurer, wider product range and acceptance offerings. Currently, it offers each of Allianz's Complete-brand SME non-motor products and over time the program's reach will be expanded.

David Martin, head of small and medium-sized enterprise affinity and broker markets at Allianz, explained: "These models could take you into some pretty high-end commercial business. With a granular pricing engine, trade may become irrelevant because the customer scoring methodology is completely different. You could find at granular level that a postcode is more important than the trade."

Martin continued: "It takes what we would regard as the more routine tasks away from the underwriters and gives brokers quicker access to highly skilled underwriters who can make decisions. What we are not trying to do is to take away customer contact."

The need for technology to marry with underwriter access has also been a key motivator for MMA Insurance. As reported in November's PB (p.10), its Broker Online service, which offers a dedicated team of underwriters in Reading, is well regarded by brokers. Each broker has a named contact that can deal with referrals and, where suited, make changes to the system immediately. Derek Plummer, commercial director at MMA, said: "Swift delivery from insurer to broker to client is paramount for relationships and efficiency. At the end of the phone line, we have experienced underwriters who ask the right questions and don't work from a script. The conversion rate on business involving a referral is over 50%."

Cross platform

One area that has yet to truly flourish has been comparative functionality. Ken Smith, commercial underwriting manager at Fortis, stressed that the insurer is committed to giving the broker choice and believes that imarket is moving technology towards helping commercial lines. He cited packaged products as one example of Fortis' commitment and imarket's capabilities, confirming that "in 2010 we will be full cycle".

Smith explained that program code issues and the complexities of making multiple brokers' information available to many insurers had meant that commercial lines felt slow to progress but, through work done on structure and data directories, the future looked to be one full of choice for the broker. "It is getting us to the stage where the means of communication can be narrowed down to the most cost-effective for brokers and insurers," he said.

For brokers, one of the most common software complaints is re-keying. Graeme Newman, business development director at CFC Underwriting, commented: "Insurance lends itself best to invisible distribution. Bizarrely, the insurance world has been slower than other sectors to embrace new technology although, in the UK, we are at the forefront compared to other countries."

The company has devised a system to remove not only re-keying but also inputting in the first instance. It offers a bespoke package to brokers with groups of micro-SME clients aimed at reducing or removing the time taken by processing where the risk is repeated and the premiums are low. In essence, the company builds a white-labelled system that sits on the broker's website, ensuring that clients do the typing and so leaving the broker at the heart of the operation. Newman explained: "The system is branded as the broker's and customers type in information so the broker can spend their time on relationship management and advice."

Technological advances across the board are attempting to rescue underwriters and brokers from unnecessary tasks, leaving them free to concentrate on where they can best add value. It is a feat worth pursuing.