Until 1995, Republic was a national (38 states) all-lines carrier that had problems showing a profit. Then Winterthur Swiss Insurance Group, its parent, embarked on a regional strategy for its North American holdings and installed a new CEO, Bruce Milligan, at Republic. The carrier began a consolidation process and today it writes in only five states (TX, NM, CO, OK, and LA). Other Winterthur carriers (General Casualty - Midwest and Northeast; Southern Guarantee - Southeast; and Unigard - Northwest) round out Winterthur's regional strategy. By the way, in 1997, Winterthur became part of the Credit Suisse Group.
Today Republic, headquartered in Texas, enjoys a Best's A rating and a combined ratio of 101.5% on about $300m in direct written premium (2000). Given that the industry average for 2000 was 110%, Republic is doing a creditable job in a challenging environment. The carrier writes personal auto, homeowners, and dwelling fire, as well as commercial lines (but not BOP) with some specialty programs. Republic has about 400 employees and some 550 independent agents as its sales force.
Over the last five years, Republic has been able to reduce its policyholder service staff from 75 to 18 while handling about the same policy count. As we'll see, those savings are the result, in part, of a business philosophy that delegates underwriting authority to its agents while at the same time providing the technology that makes it easier for agents to do business with Republic. According to Glenn Headley, VP & CIO, the carrier enjoys great loyalty from its agents.
Direct Web services for consumers?
The Republic Web site, www.republink.com, is unusual in that it makes virtually no concessions to consumers. Consumers can't buy insurance. They can't find out much about it, relative to their needs and what Republic sells. They can't check their billing status or perform any kind of self-service. Consumers can't even look up a local Republic agent near them; there is no agency locator functionality. (In fairness, Republic does provide information about how to contact their 24x7 claims centers.)
Almost certainly Web ranking services, like Gomez, would put Republic somewhere near the bottom. Consulting services like Conning who claim the industry is lost in cyberspace might point to Republic as a prime example. And dotcom entrepreneurs (if they're still in business) would point to Republic as a dinosaur headed for extinction.
So what's the story? Does Republic have its head in the sand? Is it staffed by troglodytes? Does Republic management fail to "get it?" Where have they been the last five years, for pity's sake? Actually, they've been using technology to make their agents successful and the carrier profitable. Not a bad idea. Perhaps Republic and carriers like it will have the last laugh when the last insurance dotcom turns out the lights.
Why doesn't the Republic Web site court consumers? According to Headley, consumers aren't interested in the carrier. They're interested in their agents. Republic does not and cannot have the local brand recognition their agents do. There's no point spending much money trying to develop a consumer brand through their Web site. It would just be a waste of resources. For Republic, it's clear who their customers are. It's their agents. And they do use their Web site/extranet to provide services to their agents.
Though I think it would make sense for Republic to provide an agency locator on its Web site (and Headley reports that will happen in the future), I have to marvel at the carrier's common sense. Though vendors and consultants besiege Republic regularly with offers to bring its business strategy and Web site into the 21st century (meaning direct consumer services -- among other things), "they don't," as Headley points out, "understand our business." The agent is Republic's sales and service force and the carrier has no rational reason to consider changing that arrangement.
Technology evolution
Some years back, Republic began supplying its agents with personal lines quoting software via floppy disk. The agent could do a quote, prepare an app, and then electronically upload it to the carrier. In most cases, the submission could move through the Republic system unattended with a policy going into the mail the morning of the next business day. Agents could then download the new policy detail into their agency management systems. Republic also cooperated with Applied Systems so that agents with that vendor's system could comparatively rate within the management system and then upload the application to Republic. And at least in some cases, Republic rates were supplied by third party rating vendors on comparative quoting systems.
With the appearance of the Internet, Republic began to ask how it could take advantage of the new technology to improve on the technology it had in place. Replacing its local quoting with an Internet-based version seemed an obvious candidate. Republic now provides a personal lines online Quick Quote service to its agents. They can quote a piece of business, print a proposal, complete an app, print temporary auto insurance ID cards, and submit the app electronically -- all through the Republic Web site.
Seventy percent of the Quick Quote submissions are processed automatically -- with the policy printed and mailed and policy detail downloaded to agency systems the next day. Because the online quote system uses the mainframe policy system quote engine, the quotes are exact -- to the penny. No need to explain to the consumer why the policy shows a different premium than the quote.
Why do 30% of the apps fail to flow through automatically? In some cases the submitting agency is on an underwriting review list. Complete VIN and address checking, not possible during the point of sale process, sometimes raises questions that result in apps being kicked off the automatic track.
Republic uses the PMSC Series 2 policy management system as its Internet site rating engine. Though initially worried that response time would be unacceptable to agents, the 15 to 20 second round trip to submit information to the mainframe and then get back a quote isn't a problem for most agents. Republic uses the wait time to market agents about its other products and services -- so perhaps the agents don't notice the passage of time. Or perhaps they're grateful for getting a to-the-penny quote.
Underwriting the agent
On its own, the extranet service provided by Republic wouldn't change traditional insurance business practices. It would still be necessary for the carrier to do a great deal of work to process and underwrite the submissions. But Republic integrates its useful but fairly basic technology offering with a powerful business principle called Policy Issue Authority (PIA) and about 70% of its agents have it.
The combination of online Quick Quote and Policy Issue Authority make it possible for Republic agents to do single-step processing (once-and-done) with personal lines submissions. The customer wins because of the greater convenience of immediate completion. The agent wins by providing more responsive service and by saving time (and thus money) on the transaction. And Republic wins through greater agent loyalty and reduced internal expenses.
But what about underwriting reports, tiering and other elements of the sales process? Agents order MVR, claims history and other underwriting reports important for rating and underwriting - and Republic pays the bill. The agent doesn't need to submit the underwriting reports to Republic (except to key in violations) though if the agency doesn't have PIA status then the carrier will order another copy of the underwriting reports once the application shows up. It's up to the agent to decide on tiering and they can up or downgrade an applicant based on what they know about him or her. Of course, agents that have issue authority are audited by the company annually and their practices and performance put under scrutiny.
How successful is the Web site/Policy Issue Authority combo? In July 85% of new personal lines apps came in through the system (90% in Texas). The carrier is still in the process of rolling out the service to all five of its states. Eight-four percent of those apps went through the system without intervention.
Perhaps the most interesting statistic is the reduction in upload from Applied agencies. Before the online service became available, 20% of personal lines new business came via Applied upload. That made sense since agents could stay within their management system to do the quoting and submission work -- presumably more convenient than having to deal with multiple systems (quote vs. management).
However, with online Quick Quote now available, the Applied upload percentage has shrunk to 3% of the total submissions. For some reason agents are abandoning the single workflow of a management system for a carrier-proprietary Web site with download on the back end. What's going on?
Though Headley doesn't pretend to have all the answers he is confident that the Republic online software is extremely easy and convenient to use and that must weigh in agents' counterintuitive decision to move from what appears on the surface to be a more desirable environment to one that is less. It may also have to do with the accuracy of the carrier site generated quotes versus comparative rating quotes. As is often the case agents gravitate to the path of least resistance -- even if that path doesn't match a theoretical ideal.
Real-time rating?
What about agents who want to use comparative rating? Will Republic cooperate with third party rating vendors who want to access the Republic mainframe rating engine just as the carrier Web site does? According to Headley, the answer is a qualified yes. He's not convinced that his agents really want or need comparative rating. Most of the time they know where they're going to put a piece of new business, he says.
But there are implementation issues as well. The problem, he says is that comparative rating vendors fail to fully understand the key differences between comparative quoting and multi-carrier rate-to-issue.
Vendors are able to do the former because they simplify the process. They leave out some key carrier-to-carrier differences and data collection tasks in order to be multi-carrier. But in doing so they don't generate accurate policy rates but only approximations -- that compared to true rates might be off by as much as $100.
There are other issues as well. It's not enough to have just rates that are current today. Any real rating system must support the possibility of storing multiple sets of rates and applying the one appropriate to the effective date in question. And further, maintaining and updating rates isn't as simple as it looks -- because rate changes are usually part of a larger picture in which data collection, underwriting, and other substantive changes must be implemented.
According to Headley, if a vendor came to him with a convincing story about how they could offer both real-time comparative quoting and the accuracy his Web site delivers, he'd take a look.
Because the interaction between the Republic agency Web site and mainframe is an internal process, Republic has not felt the need to use ACORD XML standards. Headley is holding his options open and will look at the XML standards once they've become more mature and when he has business motivation to use them.
Inquiry and other services
Besides personal lines new business, Republic provides inquiry and information services on its Web site. Agents can retrieve forms and underwriting guidelines as well as do billing and claims inquiry. The claims function allows the agent to inquire into claims history by policy. Billing inquiry delivers back the open balance for a policy (a limited functionality Headley agrees needs improvement). Agents can also order underwriting reports from ChoicePoint through the Republic site.
Future
What's on tap for next year? First, Republic intends to round out its personal lines functionality and offer policy inquiry, endorsements and renewals. The carrier is already working with its agents to design these functions.
But the big project for next year is to offer commercial lines services similar to those offered for personal lines. The carrier has been working with Star Solutions to create a full-featured commercial lines rating system for internal and agency use. Agents who have looked at the system believe that it is too complex for them to use as is, so a project is underway to design a Web-based front end that is as accessible and as easy to use as the personal lines Web site offerings.
What about first notice of loss? The Republic IT department had the project on its to-do list until it talked to the claims department. What would claims do with a FNOL? They'd print it out and then enter it into their claims system. How was that better for the agent or claims department than the current popular FAX-an-ACORD-form method? Right now not, so the project is on hold. Headley thinks too that agents with management systems often have FNOL functionality so there's not much reason for him to offer it as well -- at least until the inflow of information can be integrated into a more automated claims process.
Agency Web sites and out-facing services
Republic aspires to be its agents' regional carrier of choice and wants to make it easy for its agents to do business with the carrier. It's fine to offer Web-based services to agents but what about agents who want to offer self-service functionality, that is, out-facing services, to their customers? Does Republic have any plans to help out?
Republic does today encourage its agents to provide links on their sites to relevant pages on the Republic site, for instance relating to financial strength, history, or products. As it fills out its online agency offerings will the carrier make them available (perhaps in a different form) for inclusion into agency Web sites for consumer use? Headley says yes. It wouldn't be difficult to do so today but from his perspective most of his agents are not ready to provide out-facing services through their Web sites.
Minimalist -- or just practical
One could claim, with some justification, that Republic lacks vision. It fails to appreciate how the proliferation of carrier Web sites, no matter how well-intentioned, will ultimately play havoc with agents' workflow -- just as proprietary carrier terminals did years ago. The more there are the worse it will get for agents. One might insist that the carrier should be using ACORD XML and getting ready to integrate with agency-side multi-carrier management and rating systems and integration platforms.
But there's another point of view as well. Republic, like every other carrier, is in business to make a profit, not to develop or acquire technology for its own sake. Republic listens carefully its agents to find out what they need right now in their day-to-day environment and then implements a solution. It is taking baby-steps perhaps, but it isn't taking mis-steps. Republic is committed to its agents and wants to serve them. It's not trying to pursue multiple distribution systems in parallel -- and doing a bad job with both.
Is Republic technologically exciting? Not very. Is it sensible? Indeed. For more information see www.republink.com.
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