In 1996, while most carriers were trying to understand what to do with the Web and many agents were expecting to be disintermediated, Zurich Small Business (ZSB) decided to take a chance. They saw the Internet as an unprecedented opportunity for growth.
They reasoned that by making it very easy for agents to do business with them, through the Internet, to quote, submit, and service small commercial lines business, they could leverage their small business expertise into a much larger and highly profitable business. Through hard work, listening to their agents, and the emergence of a hardening market, Zurich Small business is collecting on their bet — and their agents are as well.
Last year a number of agents told me they were enormously pleased with the Zurich Small Business Web site. They said they could complete a small business transaction in minutes rather than the weeks or months it took beforehand. I also had a chance to listen to Ray Thomas, Zurich Small Business CEO, describe the carrier's strategy and experiences to an audience of agents, and have had several conversations with Steve Slizewski, VP e-Business, about the Web project and process. This March I had a chance to interview Bill Griglock, chief marketing officer, about eZSB, the Zurich online service as well as to test drive the Web site.
Overall I was interested in finding out what ZSB had done and why, how it could help agents, and where it posed problems. I was curious about what ZSB intended to do about the multi-carrier workflow problem, for instance, as described by Laura Nettles in the March issue of Sounding Line. What plans did ZSB have for their Web site? If ZSB was using technology as a competitive advantage, what would happen when similar technology became commonplace? How would ZSB compete then? What follows is a report on the answers to these and other related questions.
What's especially interesting about the eZSB experience is how quickly it has caught on with agents. This industry is notoriously slow to embrace what seem on the surface to be obviously good ideas — as more than one vendor has found while starving to death. Zurich is a dramatic exception to industry inertia. Why have agents gravitated so willingly to new technology that, in fact, disappoints their desire for uniform, cross-carrier workflow? What are the lessons in the ZSB experience?
Background
For some years now carriers and agents alike — across the industry — have complained about small business insurance. The premiums and commission increasingly couldn't justify the effort of sales and service. Some agents have de-emphasized small business. Some carriers have begun to offer service enters to take over the agency service burden. But small business is a $38B market that is substantial and difficult to ignore. It has seemed for a while that if someone could write and service small business profitably, they could make out very well.
Zurich Small Business decided six years ago to take up the challenge of selling and servicing small business insurance through independent agents — profitably — by using the Internet. Today, about 12,000 agencies and 34,000 users are registered to use the eZSB service. Last year the carrier saw 40% growth to about $1.3B and expects 35% growth this year. ZSB covers about 450 classes of business, with special emphasis on builders' risk. It writes in all states but Hawaii. According to Griglock, ZSB has improved its combined ratio, growing its staff only modestly while increasing policy count significantly. Agents' commissions are competitive, falling into the 15% range for package and auto policies.
The process in general
Griglock told me that agents can learn to use the system in less than an hour, and once they do can produce quotes in five minutes. The quoting process produces proposals agents can use to close the business. Submit-ting the quoted business may take only a few seconds ("click to issue"), and in most cases the policies are printed out and mailed the next day from Baltimore. Quote-to-sale-to-policy issue with a few minutes' work — what's not to like?
How does this all work? Agents have binding authority. Online submissions are underwritten automatically - with 73% flowing through the system automatically today — untouched by human hands. The carrier believes that it can improve the fully automated ratio to 90% by improving their underwriting software and bringing in more information from third party sources.
Interestingly, Zurich's current fully automated submission ratio is probably higher than many carriers experience with personal lines upload submissions. Part of the reason certainly is that the eZSB process is only one step long, with the agent being informed real-time about errors or deficiencies in the submission that he or she can immediately correct. On the other hand, batch submissions with other carriers are multi-step processes, with each step potentially introducing or discovering problems that result in return to a previous step.
What happens to submissions that fall out of the automated process? They're flagged and then reviewed by ZSB underwriters. While many carriers have centralized commercial lines business operations, consolidating branch offices, ZSB has done just the opposite. ZSB has about 300 staff in 51 field locations, some operating out of their homes, tied into the ZSB system via the Internet. Internet access to the central system allows ZSB to establish a new office very quickly in response to changing opportunities and corporate initiatives.
The interesting lesson here is that ZSB is combining high touch (local field staff) with high tech - advanced Web site quoting and submission. Some carriers expect technology alone to carry the ball. That isn't likely. The eZSB Web site is replete with offers of human-to-human communication via online chat and telephone. Zurich Small Business clearly wants to make it easy, rather than difficult, for agents to get responsive personal help.
ZSB turns the renewal process into a non-event by making the policies continuous. The insured can be billed in installments and pay in a variety of ways. The billing and payment process can be completely electronic with presentments and payment through the Internet. With the policy available to the agent via a PDF file (later this year), and submission, billing, and payment already electronic, ZSB has significantly reduced the amount of paper flying around.
Improvements to come
Zurich Small Business keeps track of and responds to agency requests and suggestions. Interestingly, rather than depending on agency principals solely for input, the carrier has organized a group of about 40 CSRs, the people who actually use the service on a day-to-day basis, to provide advice. This year the group will review the entire eZSB service screen by screen to help improve the service.
Zurich Small Business plans a number of improvements to eZSB this year. Agents will be able to request electronic rather than paper copies of policies though the carriers will continue to supply the insured with paper copies. An online claims status report will make it unnecessary for agents to call in to find out where things stand. The endorsement process will be simplified and proposals enhanced, making them more customer focused.
Over time, Zurich Small Business intends to extend its eZSB platform to support other products. Thus agents will have the advantage of the eZSB technology applied to other lines of business and the opportunity to cross sell as well. For example, today agents can access Zurich Life's term life product online.
Technology and competition
How important is eZSB to Zurich Small Business? According to Griglock, today it offers them a "huge competitive advantage." What about the future? Griglock acknowledges that over the next few years other carriers will attempt to duplicate the eZSB technology, though he believes that will be difficult for regional or smaller companies that don't have access to the resources Zurich Small Business can call on.
Once similar technology becomes more common in the industry, how will ZSB compete? Griglock points to the carrier's high touch strategy today with 300 people in the field close to the agents they support. Zurich Small Business will continue to nurture relationships with agencies and provide excellent products and service, besides continuing to improve its technology.
By the way, Griglock cited Zurich's IT department as being an especially important and effective business partner in the development of eZSB. While some carrier IT departments seem to focus more on technology details and may be passive relative to the use of IT in the larger business strategy picture, Zurich's IT department played, and continues to play, a very active role in the process, often contributing strategic suggestions as well as tactical technology plans.
The multi-carrier conundrum
No one can argue that Zurich Small Business agents working with eZSB don't have an easier time than they did with the carrier's traditional process. Zurich Small Business has made it much easier for agents to work with them than in the past. But that's not the whole story either. What many agents want is an environment that has two elements — 1) electronic ease in working with each one of their carriers, and 2) the ability to work with each in more or less the same way with one workflow and single entry for multiple quotes.
Will Zurich Small Business cooperate with multi-carrier efforts? Griglock says yes. The carrier is talking with a number of vendors about integration with some sort of multi-carrier front end or portal, but he says that the vendors are finding that the process of putting together such a service is much more difficult than was initially imagined.
As I looked at the eZSB site and all the resources it provides agents, it occurred to me that it would be a challenge for a third party to create a multi-carrier front end that honored and offered the richness each carrier provided about its products and services. When carriers have suggested that their proprietary "user interfaces" are or will be superior to what might be offered by a third party service, I've been skeptical. I can now see why carriers might want to make that claim. On the other hand, some services, Superior Access Insurance Services for instance, do a pretty good job at providing standardization for the agent while recognizing carrier-by-carrier differences.
The carrier does participate in the ACORD standards process, though because its efforts were underway before ACORD promulgated its XML standards, Zurich Small Business uses its own internally formulated XML schemes.
Will Zurich Small Business participate in the IVANS Transformation Station initiative? The jury is still out, as the carrier looks into the details of the process and attempts to assess the potential advantages to itself and its agents.
Even though eZSB is not today part of a multi-carrier solution for agents, the service does provide for download to Applied, AMS, and Doris agency management systems. That means that data entered into eZSB doesn't have to be re-keyed by the agency. But download doesn't solve the problem of duplicate keying for agents that want quotes from multiple carriers.
What's the ZSB message?
Heretofore, Zurich Small Business has marketed eZSB primarily on the basis of agency convenience. The Web site lists advantages like eliminating the need for second and third follow-up requests, quick processing, knowing changed premium immediately and so on. While convenience is very important, Griglock says that eZSB can actually have a very positive effect on an agency's bottom line and that's a message the carrier will increasingly try to spread this year
Zurich Small Business has employed Marsh-Berry to study the potential advantages of eZSB over traditional small business handling in agencies and the effect on agency profitability. Early results point to some rather dramatic advantages eZSB has over traditional processing. By using eZSB, a CSR can handle more accounts than through traditional processing methods. That can translate into more time in the agency for account rounding and marketing generally.
Griglock pointed out that for many agencies small business insurance is a breakeven proposition. On the other hand, were an agency to have its entire book of business with ZSB and were those policies to flow through the whole system in a fully automated way, the agency might realize an 18% profit ratio, performance many agencies would be very happy to see — rather than the 1% they see today with small business insurance.
More than one carrier is sensitive to the problems agents face in making small personal lines profitable. So one approach is to provide carrier sponsored service centers to relieve agencies of the service load. Does Zurich Small Business intend to provide small business service centers for its agents? Not for now at least. Griglock reports that Zurich Small Business agents just haven't shown any interest in it. And my guess is that carrier-sponsored service centers would be contrary to a ZSB philosophy of helping the agent stay right in the middle of the process.
Zurich Small Business has its focus squarely on providing services to its agents through the Internet, and then depending on those agents to sell and service the business. They're using technology to support the traditional carrier-agency business model and division of labor. ZSB isn't interested in selling direct through the Internet in competition with their agents, and they don't seem very interested in helping agents provide what we call out-facing services to their small commercial lines customers out through agency Web sites.
Using eZSB
Zurich Small Business was kind enough to let me take a look at the eZSB Web site. It's a rich environment that shows good sensitivity to the realities of agency small business sales and service needs.
Once you log into eZSB, you're presented with a main menu as well as support resources. The main menu offers the ability to do a quick quote (that can be converted to a submission); new business rate, underwrite, and issue; endorse an existing policy; list existing transactions; and do direct bill inquiry.
Help resources include the ability to talk with a live person, look at underwriting and pricing guidelines, coverage descriptions, a forms library, and notices about the system and products. I found the explanation of why out-of-order endorsements can't be done through eZSB (but must be done via fax in) particularly useful and the first time I've seen that kind of explanation made available to agents. On the other hand, the notices/news items were stale and hadn't been added to for many months. One ancient memo said that ZSB had put a temporary moratorium on residential contractors in New York State, but then no updates or additional explanations were offered. The lesson here is that someone must be responsible for and regularly tend to secondary Web site content or it will quickly lose credibility and be ignored.
Conclusion
I'm impressed with eZSB and Zurich Small Business generally. They formed a prescient vision in 1996 — early in the Internet age — and then took a big chance both on their ability to execute and the willingness of agents to use the service once it was offered. The bet paid off, though some other carriers and vendors haven't been so lucky. Zurich Small Business was at the right place at the right time, and is taking advantage of the opportunity.
What lessons might other carriers draw? Perhaps most important is the enthusiasm agents have to begin using a carrier sponsored Internet service that is precisely focused on their needs. If agents hold back with some Internet initiatives, that's more a statement about the initiatives than about agents' willingness to do something new.
Another lesson is that small commercial lines can be profitable provided all the tools agents need to sell and service the business are made available to them right at the point of sale. Agents value control, speed, and accuracy — and ease of use.
Finally, though Zurich hasn't participated in an ideal solution (e.g., multi-carrier sales and service through a portal or out of an agency management system) what they've done is a marked improvement over the past and benefits the carrier, its agents, and the customer. Since small business, multi-carrier, real-time sales and service solutions don't, for all practical purposes, exist today, ZSB can be excused for not participating in them. Should the picture change and ZSB fail to participate, then it would be open to criticism and likely lose out to carriers that both automated their processes and participated in an agency-side standardized environment.
For more information, visit www.zurichna.com.
Copyright 2002 by Sound Internet Strategy. All rights reserved