Commerce West Makes the Rules

P&C carriers are often plagued with premium leakage that occurs due to careless mistakes at the time of policy renewal. But being overly cautious during this process can be costly, as well. After Commerce West Insurance Co. ($62 million in assets, Pleasanton, CA) recognized that its arduous renewal process was unnecessarily guzzling resources, the carrier decided to update its system with business rules technology.

The previous inefficient process involved ordering a policyholder's MVR (motor vehicle report) each time an auto policy came up for renewal. The MVR was then reviewed by an underwriter who would determine renewal eligibility. Many times resources were wasted because the manual review would take place even when an auto claim hadn't been filed in the past year.

George Jeffers, Commerce West's director of IT, was appointed to head up the business rules initiative. With plans to first attach business rules to areas where manual processing was used, Jeffers awarded the contract to Computer Associates (CA, Islandia, NY), with which he had worked during a previous implementation of CA's CleverPath Aion Business Rules at another insurer.

The CleverPath implementation commenced in January 2002 with the objective of automatically ordering MVRs for certain policies that were up for renewal. "We were spending lots on blanket orders of MVRs and we didn't need to," Jeffers says of the old process, which cost the carrier $50,000 annually. "We got some senior underwriting managers together and talked about MVRs and renewals." Discussions focused on "how often Commerce West would need to review MVRs in the optimal world and what criteria to use." Business rules collected included ordering an MVR when there had been a claim on a policy since the last MVR, and rules that based the frequency of ordering on the product and driver profiles. The next step involved writing and implementing the Aion application.

Samples of the rules were run for the manual processors of renewals, who reviewed the list and added suggestions. This process was repeated for several iterations. "It was a fairly straightforward implementation, and when we were happy with it we went into production," says Jeffers.

MVR Orders Cut in Half

Since the execution of these business rules, the number of MVRs that need to be ordered has been reduced by half, reports Jeffers who adds that the project took only 30 days.

Seeking the same efficiencies achieved in the MVR ordering process, Jeffers then decided to embed business rules in the renewal review process. Because underwriting is a more complex business task, the implementation was more complex, Jeffers, concedes. Approximately 100 business rules were collected prior to the process.

Describing the renewal review implementation process, Jeffers says, "I wouldn't say it was more difficult, it just took longer," because of the complexity of rules. Other than that, the project's implementation was relatively standard, he says. "You gather information," says Jeffers. "The application is developed and then the iteration of steps to tune the application is performed." The project was completed in the second quarter of 2002.

The next project aimed to create efficiencies in the ordering process of MVR and CLUE (Comprehensive Loss Underwriting Exchange) reports for new policy applications. "MVR and CLUE reports are almost always ordered" for new policies, Jeffers says. As part of the ordering process, policyholder information such as the VIN (vehicle identification number) is sent to ChoicePoint (Alpharetta, GA), the provider of ChoicePointLink-a Web-enabled delivery system.

Since 2001 the insurer has grown from $38 million direct written premium to $46 million in 2002. Because of the efficiencies created by CleverPath, the carrier has not had to increase the staff in its underwriting department. "CleverPath is a significant part of the strategy that makes this possible," says Jeffers.

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CASE STUDY CLOSEUP

COMPANY: Commerce West Insurance Co., Pleasanton, CA, $62 million in assets.

LINES OF BUSINESS: Personal and commercial auto.

VENDOR/TECHNOLOGY: Computer Associates' (Islandia, NY) CleverPath Aion Business Rules, ChoicePoint's (Alpharetta, GA) ChoicePointLink.

CHALLENGE: Eliminate manual processes in policy renewal and underwriting by embedding business rules.