Quoting on Risk

Managing financial risk has always been important, but it’s taken on increased significance during the recent economic recession. One major challenge is to manage the insurance quoting process. This is of particular concern for intermediaries responsible for pricing, product development and overall profitability of creditor insurance and reinsurance lines of business.

Ensuring the accuracy of insurance quotes is a challenge faced on a daily basis. To this end, a unique conversion of an innovative Excel spreadsheet into a Web-based application became a means for one intermediary to assess the accuracy of the large volume of quotes that reinsurance intermediaries process every day.

CASE STUDY: RMA

Reinsurance Management Associates (RMA) is a Toronto-based reinsurance intermediary and third party administration (TPA) firm. It specializes in managing portfolios of creditor insurance policies for some of the largest insurers in Canada. RMA serves clients in underwriting and administering insurance, reinsurance and retrocession business for a broad spectrum of life, accident and health risks. For their creditor clients, RMA manages the entire business, providing a complete outsource infrastructure for administrative processing.

Many of RMA’s clients, like car dealers and mortgage brokers, use industry-specific software packages to help them run the business; many of these include a quote module. Others have developed their own software tools for quotes, loan origination and so on. In light of the proliferation of quote-generation tools used by its clients, RMA looked for some way to know whether or not its clients were using the most up-to-date rates and eligibility criteria. In the absence of such a tool, an RMA team verified all of the quotes themselves internally — a tedious and time consuming process.

SPREADSHEET APPROACH

Ed Yeung is RMA’s director of creditor products. He first came up with the idea of using Excel spreadsheets to develop quoting tools that his team used for creditor insurance premium quotes and quote verification. He incorporated filters, calculations and algorithms to ensure quotes were always accurate, complete and calculated using the most current applicable rates. The team quickly came to rely heavily on the spreadsheet tools.

Since the spreadsheet tool was developed by and for people who process volumes of client insurance premium quotes every day, the tool also addressed a variety of common issues specific to RMA’s client base. One mortgage broker client that didn’t have industry software asked if he could get a copy of the tool for his company’s internal use. Yeung made a few modifications to transform the spreadsheet into a tool that could be used in the field, and then sent the broker the revised spreadsheets.

Word of the quoting tool spread throughout RMA’s client base. Before long, many RMA clients had requested copies of the spreadsheets. RMA set up a facility that allowed clients to download the spreadsheets. Quite a few clients took advantage of the free download and were using the spreadsheets.

At first, this was great for RMA because it standardized and improved the quality and accuracy of a significant percentage of the quotes coming in for processing. But it wasn’t long before the downside became apparent: every time RMA updated a spreadsheet, or whenever rates or eligibility criteria changed, RMA had to post the updated version online and notify all of the clients using the tool to download the new version.

The responsibility to maintain and provide updated downloadable versions, as well as to notify clients, frequently put an added burden on the RMA team. More problematically, though, RMA didn’t have the ability to control outside use. They had no way to guarantee clients using the spreadsheets downloaded each new update, or that everyone was using the most current version. In fact, they found that people often weren’t downloading the changes in a timely manner — indeed, if at all.

RMA’s data entry staff and customer service group now spent extra time following up in the field. They looked for the source of inaccuracies, fixed incorrect and outdated rates and sorted out problems caused by missing or incorrect eligibility filters and controls. Dealing with the situation was a growing nuisance. It was tedious, time-consuming and error prone. The team was back to the same problem it had been trying to solve in the first place.

FROM SPREADSHEET TO WEB APPLICATION

While visiting vendor booths at an actuarial conference, Yeung discovered a product that converts Excel spreadsheets into fully functional, professional looking, interactive Web-based applications that did not require any programming.

After a 30-minute training walkthrough over the phone, the RMA team downloaded and started using the product, SpreadsheetWEB. Within a matter of hours, they had successfully converted several spreadsheets and posted them online as Web applications on their own, with no help from IT.

Using this tool, RMA can now quickly and easily post as many spreadsheet-based applications online as they choose. RMA clients simply go online to use the Web applications that replicate all of the functionality of the Excel spreadsheet tools.

Thus far, the spreadsheet tool has been able to handle all of RMA’s quote generation and verification requirements. It supports more than 330 of Excel’s built-in formulas, so the RMA team can integrate complex, compound calculations and business rules into their Web applications.

SpreadsheetWEB also uses Excel’s data input validation function, so that valid data is entered into SpreadsheetWEBgenerated applications. The RMA team specifies in Excel whether a particular cell requires entry of whole numbers, decimals, dates, times, etc., and sets data acceptance criteria where appropriate (i. e. such as numerical ranges between a low and high value). These validations are automatically implemented in the online data entry function of the Web applications.

FLEXIBILITY AND CONTROL

The new spreadsheet tool is designed with flexibility and control in mind. Now when RMA staff members create a new spreadsheet, make a change or update a rate table, the new version is available to clients as soon as the application is posted on the Web — and this is the only version that users can access. As a result, RMA doesn’t have to notify clients, or have any concern that someone might be using an obsolete version.

RMA can control who uses the Web applications, and which users can access which functions. Using the Web applications, RMA can manage user IDs and passwords to grant, change and revoke access privileges for individuals and groups of users as needed. For example, car dealers can access only tools designed for them. Bank A may use different tools than Bank B. An employee might be allowed to view and modify only those quotes that he originated, whereas a manager would be able to update any of her department’s entries. RMA can also set defaults so that, for example, someone based in Quebec may be able to see only those customers or addresses in Quebec. None of this was possible using the downloaded spreadsheets.

COST SAVINGS

RMA makes its spreadsheet Web applications available to clients free of charge. Its basis for doing so is that, in a competitive market, offering such a service is a clear differentiator that helps attract and retain clients. But without the new solution in place, providing these valuable online applications would have been prohibitively expensive. Without this technology, RMA would have needed to hire programmers and Web experts to design, develop, maintain and update the applications. Now, however, the RMA team can focus on their core competencies -building spreadsheet functionality in Excel.

The new spreadsheet solution also saves RMA money in day-to-day operations. The intermediary can now process higher volumes mo re quickly and efficiently. It no longer has to invest staff resources in tedious and time-consuming data checking, rate and eligibility validation to ensure the accuracy of quotes.

Faster, more efficient and more accurate quote processing is helping RMA save money and manage risk.

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As a result of the new technology, RMA doesn’t have to notify clients every time it posts a spreadsheet online, and it doesn’t need to be concerned about clients using an obsolete version.