BOP Carrier No Longer Needs a Legion of Staff

For small policies with tight margins, any help in reducing cost can make the difference between a handsome profit or an ugly loss. Legion Insurance Co. ($858 million in admitted assets, Philadelphia), a property-and-casualty carrier that mainly writes business-owners (BOP) and workers' compensation policies, found that its inefficient processes were eating into profits.

"We were having reconciliation nightmares," says Gary Roche, vice president of service operations at Legion, of the policy issuance procedures that required "double data entry" at Legion and at its managing general agent, Lockton Risk Services (Kansas City). "There were coding errors, data entry errors and everything was on paper. Sometimes even boxes of files were misplaced or lost."

Seeking Efficiencies

Legion and Lockton both needed a more efficient way to process the approximately 5,000 polices per year that the two companies exchanged. "We were looking to automate the process, in part because Legion does not have its own policy issuance system," says Marianne Sears, executive vice president, Lockton Risk Services, of Legion's outsourcing model. "The policy was issued at one place, rating done somewhere else, then it was sent into our policy management systems. Then we had to print out a policy and send it to Legion."

Lockton already was having success with one vendor, Instec, and it recommended the technology company to Legion, Sears says. Instec (Naperville, IL) was chosen, in part, because its product did not require either company to purchase new hardware. "We didn't have to invest in new hardware because everything is PC-based," Sears adds.

"As far as the interface between our systems and Lockton's," says Legion's Maryellen Przybyla, associate vice president of premium processing and electronic compliance, "there were no additional requirements. We had the Microsoft SQL Server for storing data, and we had the Internet servers." Policies that come to Legion from Lockton are forwarded to CSC's (El Segundo, CA) AS/400 systems for policy processing as part of an outsourcing arrangement.

The development of the technology with Instec and Lockton was "probably one of the smoothest projects we have ever done with a technology vendor," says Legion's Roche. "Instec was very involved with us," Roche says. "Instec didn't just take the requirements and go off and build the technology. We were constantly in touch with Instec and Lockton." And the development of the technology did not require an extensive labor commitment from Legion. Two of Legion's technical staffers were assigned to the project for three months, in addition to the staff members' normal responsibilities, according to Roche. "It probably totaled about one-quarter of their total work time," approximately six weeks of man hours, Roche adds. "Instec's approach was very important. Instec understood what we wanted to accomplish and understood what we needed. They had a business analyst who would conference with us and go over development issues."

Extending Benefits

The resulting system is working exceptionally well for both Legion and Lockton, says Legion's Przybyla. "The goals have been exceeded and the quality of the process with Instec and Lockton exceeds what we had hoped for," she says. In fact, Przybyla hopes to not only add more products to the interface between Legion and its largest MGA, but she also hopes to extend the functionality to some of Legion's smaller MGA partners.

As far as quantitative results, Legion's Roche says that with the interface with Lockton, data entering Legion's systems is more accurate. "We have very few errors that come from the policy processing systems," he says. "The data is 99 percent error free." As a result, Lockton is able to issue more accurate policies immediately. "Although it's difficult to put a dollar amount on the actual cost savings, policies are being processed faster and more accurately with no duplication of effort," Roche says. Since the information comes to Legion from Lockton electronically , it can be fed immediately through Legion's Premium Control System (PCS) and through CSC's systems, where some "rigorous and high-level edits are run," according to Roche.

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Case Study Closeup

COMPANY
Legion Insurance Co., Philadelphia, $858 million in admitted assets.

LINES OF BUSINESS
BOP and workers' compensation policies.

VENDOR/TECHNOLOGY
Instec (Naperville, IL); CSC (El Segundo, CA) policy processing/outsourcing.

CHALLENGE
Automate data transfer between carrier and MGA to reduce errors and issue policies rapidly.

Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio