Carrier Reaps the Rewards of MSB's Enterprise Decisioning Solution
December 10, 2007
New Berlin, WI December 10, 2007 How do you know when a technology solution makes a true impact in your business? Perhaps when the measured benefits turn out to be far greater than anticipated, as MSB, the leading provider of home replacement cost data and underwriting information solutions recently demonstrated.
As part of its standard co-management process to implement solutions, measure impact and optimize business performance, MSB routinely performs analysis of carriers' data using its ExpressTM solutions. Isolating 12 months of point of sale decisioning and geospatial data from one such customer resulted in a decisive finding.
"Our analysis identified 72 declined risks that were located within the burn perimeters of the Angora and Witch fires," says Steven Brewer, Assistant Vice President of Underwriting Services at MSB. "These declined risks were definitely written by this carrier's competitors who now feel the impact of adverse selection. This is what makes us tick - the satisfaction of seeing our customers gain measurable competitive advantage through a successful marriage of premium data, advanced decisioning technologies, and process improvement."
Automated Solution Bypasses Potential $18 Million Fire Loss
This story began in October, 2006. The carrier was providing an on-line quoting process to its agents that included MSB's Residential Component Technology® (RCT) for calculating home replacement costs. To increase efficiency and accuracy for these agents, MSB and the carrier partnered to automate risk-selection processes and push them out to the point of sale.
According to Brewer, the decisioning system automatically placed homes into two different categories: those that complied with the carrier's underwriting rules and homes that did not. During setup, MSB delivered premium hazard exposure data and also loaded some of the carrier's own proprietary hazard exposure data files into the system. Then, MSB partnered with the carrier to optimize and load all associated underwriting guidelines.
The system was then ready to identify homes that were within the proximity of known geo-spatial hazards such as earthquake fault lines, coastal exposure areas, tsunami inundation zones, and brush or forest fire risk. The integrated MSB solution immediately declined homes that failed to comply with the carrier's underwriting rules. This step greatly reduced the time and effort of the busy agents and underwriters and implemented a consistent, defendable process for managing risk exposure at the point of sale.
The story flashes forward to October, 2007. By that date, over 500,000 acres and 2,000 homes had burned in San Diego County and the Lake Tahoe area. Property owners had filed an estimated 14,000 claims and the industry projected insured losses reached $1.6 billion
MSB's geospatial data specialists, armed with 12 months of new business data archived through the carrier's secure MSB Express Web site, began their process to measure the impact of the solution.
Seventy-two homes fell squarely within the perimeters of the San Diego County and Lake Tahoe area burn zones. (See maps 1 & 2) "We used an assumption of $250,000 as the average replacement cost per home," says Brewer. "That generated a potential claims exposure of $18 million for those homes directly within the exposure areas. This figure did not include many other potential partial losses just outside the burn area that were also declined. This timely study shows how integrated data and technology and MSB's unique approach to co-manage business with our customers offers measurable and material reduction in loss expenses."
Co-management and Enterprise Decisioning Open the Door to the Future
MSB worked closely with the carrier to optimize and implement underwriting guidelines into the MindBox® system. MindBox is known as a leader and an innovator in automating mortgage and other lending processes for banks and financial services. Now, MSB has harnessed the power of the MindBox's engine and PowerEditorTM as an integrated extension of the Express platform. PowerEditor is an award-winning interface that allows business users to easily implement, modify, deploy, and test business rules without requiring coding or technical experience (see figure 3). It puts the power of rules management back in to the hands of the business owners who are responsible for them.
In this study, the carrier simply set the rules to decline any risk in an area with a High or Very High Brush Fuel rank. The rules also declined risks in areas with a Low, Urban, Agriculture, or Moderate Fuel rank if the homes were within 1500 feet of High or Very High fuel rank areas. Fuel ranks are designations given to areas based on a proprietary combination of vegetation and topography features that directly affect fire risk. Because these features can vary greatly over relatively small distances, MSB's technology identifies each rank to within a 30-meter cell. This tool was put to the test with the recent wildfires in Southern California and accounted for more than 90 percent of all homes destroyed when compared to published damage reports.
Over 800,000 applications were submitted to the carrier by agents from all across the United States in the period from October, 2006 to October, 2007. Overall, about 2 percent of risks were declined due to exposure to geospatial hazards. By further studying risks declined in California due to brush or forest fire exposures, MSB pinpointed the 72 homes within the fires' perimeters.
Ultimately, the carrier received a number of financial benefits from the solution:
- Reduced loss expenses
- Productivity savings from streamlining hazard systems within the normal underwriting workflow
- Virtual elimination of errors from manual lookups or inexact maps
- Flexible rules management for immediate and consistent underwriting action
- Consistent risk selection and pricing accuracy
Preparing for the Future, Today
Today, as pundits increasingly predict climate changes that can lead to more frequent and severe events, property insurers are looking for new strategies to strategically navigate their businesses. By embracing MSB's co-managed approach to technology solutions, carriers optimize their potential for success and profitability. As Brewer adds, "It the MSB approach that brings our powerful technology to life and makes the difference our customers rely on get ahead in today's market. This solution, while powerful, only scratches the surface of what can be done. We are seeing even more measured impact through expanding our approach, data and technology assets into areas of segmented rating and enterprise decisioning."
Marshall & Swift / Boeckh (MSB), an MDA company, is the leading supplier of local building cost information, residential and commercial property valuation technology and services for the property and casualty insurance sector in the United States and Canada. MSB has five offices throughout the U.S. and Canada. For information, please contact Marsha Berenson, Media Coordinator, at 800-285-1288, Ext. 2828, e-mail Marsha.Berenson@msbinfo.com, or visit MSB's Web site at www.msbinfo.com.
MindBox® is an information solutions company focused on financial services organizations. MindBox provides solutions that leverage company and industry best practices in order to automate common lending practices such as underwriting, pricing, product best fit, deal structuring, debt reparation and cross sell across multiple origination channels. The company's products and services have a proven track record of reducing cost and increasing revenue by automating knowledge-intensive business processes using sophisticated decisioning systems and award-winning rule and case-based reasoning software. MindBox technology integrates internet interfaces and other client contact channels with back-end business operations into one streamlined, efficient system that provides individually-tailored, optimized customer interactions. More information can be found by visiting www.mindbox.com or by calling (877) 650-MIND (6463).
MindBox is a wholly owned subsidiary of MDA (TSX:MDA)
MDA provides advanced information solutions that capture and process vast amounts of data, produce essential information, and improve the decision making and operational performance of business and government organizations worldwide.
Focused on markets and customers with strong repeat business potential, MDA delivers a broad spectrum of earth and space based information solutions, ranging from complex operational systems, to tailored information services, to electronic information products.
MDA employs more than 3,000 people in locations across the United States, the United Kingdom, and Canada. The Company's common shares trade on the Toronto Stock Exchange under the symbol TSX:MDA.