In mid February, Mike and I spent an afternoon at SeaTac airport in Seattle discussing his new ChoicePoint initiative aimed at solving the perennial multi-carrier new business problems agents face now increasingly manifested as carrier rating and submission Web sites.
JA: Mike, in the past ChoicePoint has not been very interested in having agents as customers, and some agents that deal with ChoicePoint feel under-appreciated as customers. With ChoicePointAgency you're clearly focusing on agents. So, why the change?
MM: First of all, we actually provide services today to about 60,000 agents of all kinds, on behalf of their companies. Generally, we bill the carrier, but we deliver the information to the agents. We want to strengthen those agent relationships. Second, as you know, the underwriting process has changed over the last several years and now happens at the point of sale, that is with the agent and close to the customer, so it became clear to us that we needed to pay more attention to agents and better understand what they needed to be successful.
JA: What problem is ChoicePoint-Agency intended to solve? What value will it provide? Why should an agency be interested in it?
MM: In a few words, we want to improve the personal lines new business process. Over the last year, we spent a great deal of time doing research in agencies. We sat and watched what CSRs did, what their workflow is, and especially where they run into problems and inefficiencies that we might be able to help with. Probably as no surprise to you, we saw that the personal lines new business quote and submission process doesn't work well for many agencies or companies for that matter.
Comparative quoting software doesn't provide accurate rates in part because credit scores often aren't included and some agents don't keep up to date with the latest versions of the rates vendors provide. Up-loaded submissions, when agents can do them and companies can accept them, are full of errors we think 25% of the time. Company Web site rating and submission overcomes some of these problems but creates others. They may be accurate, but then agents have to do multiple-entry, keying data into several Web sites to get comparative quotes. There's lots of talk about real-time rating being connected with agency management systems, but it's more talk than reality. And even if it did work, agents tell us they would rather quotes stay out of their management systems until the business is sold.
We intend to provide one place agents can come, ChoicePointAgency.com, to get fast accurate quotes and then submit the business. We intend to provide a solution to the problem the industry has been struggling with for years, single-entry, multi-company quoting and submissions.
JA: So, you're intending to provide some form of SEMCI?
MM: Well, I don't know whether I want to call it SEMCI. That concept is too tied up with one particular way of doing things. We think the point is to improve the business process in whatever way makes practical business sense, not to create standards and implement them because in an ideal world that seems to make sense.
JA: The SEMCI concept is intended to apply beyond personal lines new business, for instance to renewals, policy changes, and so on. Will Choice-PointAgency address those areas?
MM: No, our focus is specifically on new business for auto first, then homeowners. We think it's where help is needed the most. Again, we're trying to be very practical. If you try to do too much, you never get it done.
JA: Other people have tried to solve the problem you've identified and have failed or are still in the process. For instance, Transformation Station, an IVANS' service, is intended, in part, to solve the new business problem. Do you intend to compete with IVANS?
MM: To the extent that Transformation Station tries to handle personal lines new business, yes. But not for commercial lines, policy changes, or other transactions Transformation Station might handle. You have to understand that we're taking a very different approach from Transformation Station for new business. As I understand it, the Transformation Station idea is that agency management systems or maybe WebSEMCI modules will communicate on a real-time basis with carrier mainframe systems and bring back quotes to display for the agent. We don't think that real-time rating, as IVANS envisions it, will be broadly available for a long time. As far as we can tell today, only a few companies seem ready to do it. So if the multi-company problem is going to be solved anytime soon, it can't depend on the widespread adoption of real-time rating. It will have to use what already exists.
JA: So, if you're not going to depend on a real-time rating solution, how are you going to come up with accurate rates across multiple carriers?
MM: We'll use a variety of techniques whatever is available to provide the quotes. Where real-time rating is available, we'll hook up to that. Where carriers have Web site rating, we'll dummy in keystrokes and then reformat the HTML pages coming back. Where a company doesn't have anything online, we'll use Windows or even DOS-based rating contracted for by carriers from rating vendors. We'll work with rating vendors who can make their rating available as an ASP that's hosted on the Internet, and our software will go to those sites in the background, get the rates, and then reformat all the information so that it's consistent for presentation to the agent.
JA: If you take the primary rating position and move rating vendors into the background as services subsidiary to your Web site, you'll be denying them their relationship with their agency customers. Why would they do business with you?
MM: That's a fair question. Here's what I tell prospective rating partners. First of all, we'll share revenue with the rating suppliers that we do business with so they'll be making money. Second, they may find it advantageous to have us handle the sales and support tasks so that they can continue to improve and perfect their rating technology.
JA: How much of the country do you expect to cover and how deeply?
MM: We'll be nationwide, but not necessarily in every state. We'll have at least five carriers in each state, and to start with we'll do auto and then follow on with home. Then we'll have to see what else it makes sense to do.
JA: I haven't heard enough yet to quite understand what's especially unique or special about what you propose. And I'm not certain where ChoicePoint brings any special value to the project. Help me understand.
MM: Actually, I think we have something pretty special to offer in this environment that would be missing from others trying to do something similar. I'll try to explain it.
Current comparative rating systems have some big inadequacies. Two that we think we can address are speed of entry and accuracy of output. When we studied agency operations it was clear that agents want to be able to get a quote very quickly with a minimum amount of data entry at least as the first step in a sales process. They can't afford to spend a lot of time on someone who will be turned off by a realistic premium range that they just don't want to pay. So you have to be fast and reasonably accurate in the first go-round. The first thing we'll do is pre-fill virtually everything the agent needs to get a quote done once we're given a name and address or other identifying information.
We go to our databases and find that individual and then populate the screen with all the household members, vehicles, and so on. The agent then needs only to orally confirm the information with the prospect, not ask a lot of questions and then have to do a lot of detail entry.
JA: In theory that sounds like an attractive idea, but it can have problems as well. In many cases you won't get a hit or you'll bring back inaccurate information. And it could be too expensive for the agent to justify.
MM: You're right; it's not perfect. Our tests show that we get accurate pre-fills about 70% of the time, but even at that rate we can show substantial efficiencies to the agents over the current approach. And we're certain that the incremental cost for pre-fill will be so small that agents won't want to do it in any other way.
JA: Back to your value-add, that is, why the ChoicePointAgency approach would be special. You've talked about saving time. That's a help, but what about accuracy? How will you bring that into the picture?
MM: OK, this is where things get interesting, and as with pre-fill an area where ChoicePoint can leverage its expertise, company relations, and databases. Today, one of the most important factors in tiering and rating is credit scores. Typically, comparative rating systems don't include them. Carrier online rating usually does, but then the agent looses the comparative piece. So, we'll bring the credit score right into the very beginning of the process. Because we already provide this service to so many carriers, it won't be a trick to extend it out to the point of sale rating process. By getting the scores early along with asking questions about driving records, we can automatically direct the rating process to the right companies and the right plans offered by those companies and then generate a quote.
When the quotes come back, company by company, they'll be tagged with an indicator that shows whether the company is ready to write the business given the data already supplied or whether they want more company specific, or an MVR, or whatever. The idea is to be able to get agreement from the prospect to a proposal without having to first order an MVR. Once the prospect has agreed to buy a particular offering of those listed, then the agent can order the MVR. If the prospect has been accurate about his driving record, the quote stands. If not, it will require re-rating and it will be easy for the agent to justify needing to re-rate. It's when all the information has been right from the beginning, but the policy calls for a different premium than the quote typical today that the customer is likely to get mad.
JA: So, you want to complete the underwriting process before you get the quote except to perhaps correct it with an MVR later and you plan to provide quotes that are accurate to the penny via carrier and vendor rating services in the background. What about the submission process itself? That's where carriers currently have to deal with high rejection rates.
MM: We'll provide the submission to the carrier in any way they want it, via ACORD forms with company specific fields, AL3 standards, XML standards whatever they can accept. Since we'll be using data that has already gone through a successful rating process, it should be acceptable to the company system. When we have to prompt for company-specific, extra data, we'll edit as per company requirements before we send it to them. We think we'll be able to provide very clean data in submissions to the company.
JA: I assume then that the completed policy will come back to the agency via download so they won't have to enter the data twice. What about sideload with an agency management system?
MM: We plan to offer that as well and will work with management system vendors to support the integration.
JA: Your plan depends on cooperation from many different quarters, businesses that you don't control, who may in fact consider your efforts a threat not just rating vendors but carriers as well. I assume you are going to see a lot of closed doors.
MM: Well, that's what I thought was going to happen when we started looking into this idea last year. But the response has been overwhelmingly favorable. Of the 40 entities we've talked to so far, we've only gotten a cold shoulder from one, and I'm going to make another effort there to make my case.
JA: Your plan is ambitious, but it does appear to have the virtue of being based on what exists rather than what might exist in the future. The concept makes pretty good sense, but the initial execution and maintenance is going to be a substantial challenge. It may not be easy, for instance, to interact with existing rating software to get what you need or for it to be responsive enough. Carrier systems can be very hard to deal with. I think you're going to need a cast of thousands just to keep the chewing gum and baling wire contraption running.
MM: We'll I don't think of it as a contraption exactly. It is a bit like what people are trying to do with remote Web services, though we'll be working with software that never expected this kind of remote use. On the other hand, we'll be in charge of it and can monitor and exercise some control over the situation. I hope we won't need a cast of thousands, but we do have 250 people today in Atlanta who do nothing but keep our very complex network and interconnections with customers and data sources working. We're not really looking for ChoicePoint to do something very different from what we already do and are quite good at.
JA: I think you've got some interesting ideas. I'm also gratified to see a group look at a business problem agents face and then try to think of a practical way to solve it, rather than falling into the fallacy of needing the whole industry to agree on a particular technology or standard before any solution can be forthcoming. That just doesn't seem realistic. So, when will your service be available to agents and what will it cost?
MM: We're going to be live a year from now. I can't talk about prices yet, but they're likely to be a combination of a fixed monthly fee and transaction charges. And we think we can make them very attractive to everyone involved.
JA: Thanks Mike, for taking the time to explain your initiative. I'll be eager to report on it when you get further along. Now I have to dash up to Anacortes to try to catch the 6: 00 P.M. ferry to Orcas.
MM: I appreciate your taking the time to listen and react. Now, I get to enjoy the red-eye back to Atlanta tonight.
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