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