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Proprietary Money

Affiliated FM uses proprietary technology to grow past the $500 million mark in under five years.

Affiliated FM (Johnston, R.I.), a business unit of the FM Global Group, specializing in mid-market commercial property insurance and loss prevention expertise, quintupled its earned premium from $94 million in 1999 to surpass the $500 million corporate milestone in 2004, and its proprietary business management system is getting some of the credit. The insurer offers its products and services through a network of independent insurance brokers and has relied on proprietary technology for the flexibility to innovate with the needs of brokers and middle market companies.

"Our business management system is the cornerstone of our business delivery systems to brokers and policyholders," explains Michael Lebovitz, vice president and manager of operations at Affiliated FM. "Even though we use an independent broker distribution model, we are customer focused. And having our own system allows us to invest in technology more efficiently, providing new products and services to our policyholders in a smaller time frame with more value," Lebovitz continues.

The system was built in 1998 using VB6 (Microsoft Visual Basic 6.0), according to Lebovitz, who explains that although proprietary technology can be a challenge, it also can provide a business advantage. "We do constantly have to reevaluate our platform based on changing technology but the proprietary system allows us to focus on the needs of our customers." The insurer hosts several forums each year to listen to its brokers to get an idea of what features are most important to them and their clients. "The problem is finding the resources to meet the things we would love to do with the system," says Lebovitz. "As users go through renewal and new business processes, they are constantly finding ways to improve the business system," Lebovitz continues.

The first feature built into the system -- an application that is used to produce new business and renewal proposals, then automate the steps that take the proposals to policies -- was the one that Lebovitz thinks had the largest impact on the company's quickly following success. "Taking proposals to policy is a big piece of automation," says Lebovitz. "We are typically able to deliver policy documentation within ten days of proposal."

Second to speed, accuracy adds an edge for the company. "When you think of Affiliated FM and FM Global, you think of a measured calculative approach to engineering and technology expertise," reports Richard Kerr, chairman and CEO of MarketScout (Dallas), an online distributor of commercial property and casualty insurance. "The existing marketplace may not always understand what an account is about, resulting in misunderstood business and a loss that crashes the carrier's book. But it is doubtful that this company will ever severely misjudge an account," continues Kerr, who also attributes some of Affiliated FM's success to its parent company, Global FM. According to Affiliated FM, being a member of the FM global group aids in having financial strength, significant underwriting capacity, and the ability to offer mid-size companies unparalleled property loss prevention engineering services throughout North America, Australia and Europe by leveraging FM Global's $78 million research facility and over 1,500 engineers.

That kind of researching capability is important for mid-size companies that need to prevent losses and stay operational, according to Lebovitz. "If you can eliminate any surprise coming out of the underwriting process, then that enables you to have a steady market and grow over the long term," said Kerr. "This way insured and agents that use a particular carrier will gain more confidence in that carrier and continue to increase business with them," Kerr continues.

Leveraging technology is seen as a way of creating a leadership role for Affiliated FM, according to Lebovitz, who says that when deciding on technology, the company focuses on feeding into it's value proposition in four key ways: acting as an insurance specialist and customized loss prevention solutions provider, creating an ease of doing business, delivering transactional speed, and providing prompt professional claims service. "We rely on our system and the policy processing function to be customer focused and invest in technology that allows us to partner better with brokers and plug back into our value proposition," says Lebovitz. "Part of understanding the property market is engineering risk properly along with underwriting more intelligently, and Affiliated FM's technology gives them an advantage for such an exacting process," comments Kerr.

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