CEA: Cre­at­ing a Com­pelling Of­fer At­trac­tive to In­sur­ers of All Sizes

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The Cal­i­for­nia Earth­quake Author­ity (CEA), through its par­tic­i­pat­ing in­sur­ers, is fo­cused on pro­vid­ing earth­quake in­sur­ance to pro­tect as many Cal­i­for­nia homes as pos­si­ble from dam­ag­ing quakes. The not-for-profit or­ga­ni­za­tion pro­vides res­i­den­tial earth­quake in­sur­ance through prop­erty and ca­su­alty car­ri­ers that choose to par­tic­i­pate.

This unique ap­proach to sell­ing and ad­min­is­ter­ing poli­cies and pro­cess­ing claims prompted CEA to ex­plore in­no­va­tive tech­nol­ogy so­lu­tions to make it eas­ier and more ef­fi­cient to part­ner with in­sur­ers. A new pol­icy ad­min­is­tra­tion sys­tem would be key to reengi­neer­ing how CEA de­liv­ers res­i­den­tial earth­quake in­sur­ance to the mar­ket and in­creases take-up in Cal­i­for­nia. Todd Coombes, CEA’s chief in­sur­ance and tech­nol­ogy of­fi­cer, was given the task of cen­tral­iz­ing CEA’s pol­icy pro­cess­ing so all the or­ga­ni­za­tion’s par­tic­i­pat­ing in­sur­ers could use one sys­tem.

CEA has 24 par­tic­i­pat­ing in­sur­ers—rep­re­sent­ing 80 per­cent of Cal­i­for­nia’s home in­sur­ance mar­ket—sell­ing earth­quake cov­er­age on its be­half. The par­tic­i­pat­ing in­sur­ers range in size from small car­ri­ers to some of the largest in the in­dus­try. Some were pro­cess­ing the CEA earth­quake pol­icy man­u­ally, some hired third par­ties, some were us­ing their in­ter­nal ad­min and claim sys­tems, and some have legacy sys­tems tightly in­te­grated with CEA’s pol­icy. Putting one sys­tem to­gether and get­ting the par­tic­i­pat­ing in­sur­ers in­ter­ested in us­ing it of­fered tremen­dous ben­e­fits and big chal­lenges.

When CEA de­cided to pur­sue a cen­tral­ized pol­icy pro­cess­ing (CPP) sys­tem, first it cre­ated a work­ing group of par­tic­i­pat­ing in­sur­ers to dis­cuss pain points and re­quire­ments. The next step was to is­sue an RFI to see what vi­able pol­icy and claims ad­min­is­tra­tion so­lu­tions ex­isted. About 40 ven­dors re­sponded, and CEA sent out an RFP in Fe­bru­ary 2015.

“Our num­ber one cri­te­rion was it had to be af­ford­able,” said Coombes. “If we couldn’t of­fer this to our par­tic­i­pat­ing in­sur­ers at a rea­son­able cost, we were prob­a­bly dead in the wa­ter. Sec­ondly, we needed an or­ga­ni­za­tion that un­der­stood our strat­egy. Our ap­proach is unique. You can imag­ine the chal­lenge of putting con­tracts to­gether be­tween us and the ven­dor around soft­ware and ser­vices, con­tracts be­tween CEA and the par­tic­i­pat­ing in­sur­ers to de­fine the pro­gram and obli­ga­tions, and con­tracts be­tween the ven­dor and the par­tic­i­pat­ing in­sur­ers to put a use li­cense in place.”

In­sure­soft, lever­ag­ing the Di­a­mond Sys­tem for trans­ac­tion pro­cess­ing—along with its part­ners Red Hawk for im­ple­men­ta­tion and sup­port ser­vices and Covenir for BPO ser­vices—was able to pro­vide the func­tion­al­ity and con­fig­ura­bil­ity re­quired by CEA. More­over, it was able to pro­vide all of the re­sources and ser­vices un­der a sin­gle con­tract struc­ture. A con­ver­sion process was put in place, which Coombes be­lieves is one of the most dif­fi­cult things to do in IT. CEA cre­ated an ap­proach that was con­sis­tent from in­surer to in­surer but still ad­dressed the in­di­vid­ual needs of each. While per­form­ing the con­ver­sion work, the team dis­cov­ered a way to use ex­ist­ing in­for­ma­tion the par­tic­i­pat­ing in­sur­ers would send to CEA to keep the or­ga­ni­za­tion in­formed about pol­i­cy­hold­ers, pre­mi­ums and claims.

“Par­tic­i­pat­ing in­sur­ers would not have to cre­ate and im­ple­ment unique con­ver­sion pro­grams,” said Coombes. “Sav­ing time and ef­fort for our par­tic­i­pat­ing in­sur­ers dur­ing the con­ver­sion process was a pri­or­ity.”

CEA funded con­ver­sion work and the stan­dard im­ple­men­ta­tion con­fig­u­ra­tion, as well as tran­si­tional sup­port ser­vices. As the par­tic­i­pat­ing in­sur­ers move from their old sys­tems and as they iden­tify data qual­ity is­sues or re­port­ing needs for the tran­si­tion, CEA will help in those ar­eas, too.

“We try to be fair and equal across all our par­tic­i­pat­ing in­sur­ers but make sure we have things in place to con­duct busi­ness and process our pol­icy and claims ap­pro­pri­ately,” said Coombes. “The sys­tem had to be able to deal with not only P&C busi­ness, but the par­tic­u­lars of the earth­quake line and state re­quire­ments.”

What was go­ing to be a project span­ning sev­eral years has been sig­nif­i­cantly ac­cel­er­ated with the con­tin­ued sup­port from In­sure­soft and Red Hawk and with ef­fi­cient con­ver­sion pro­cesses in place. Coombes is pleas­antly sur­prised that three in­sur­ers are al­ready in pro­duc­tion and sev­eral more are sched­uled for the re­main­der of this year. Oth­ers are on the sched­ule through 2018, and some have in­di­cated in­ter­est in 2019 or 2020.

“We knew there would be ac­cel­er­ated de­mand once we an­nounced our rate and form fil­ing for 2019,” said Coombes. “In ad­di­tion, once the ini­tial par­tic­i­pat­ing in­sur­ers in pro­duc­tion gain ex­pe­ri­ence, fully com­plete their tran­si­tions and share their suc­cesses, I think you will see more of the oth­ers … come aboard.”

Coombes gives a great deal of the credit to the In­sure­soft staff who worked on the project.

“We are like­minded in our ap­proach to things,” said Coombes. “I’m thrilled to work with … the In­sure­soft team. They are knowl­edge­able about the in­dus­try and are good tech­nol­o­gists.”

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