Customer Story: How CHES Special Risk uses Insly software to run and grow a profitable underwriting business
In the extensive interview, Gary and Insly CEO Risto discuss how software can help increase operational efficiency and cope with increasing compliance requirements. They go on to discuss the role data plays in turning an underwriting profit and why MGAs should pay more attention to data to be successful in their business.
As a long-time Insly customer, Gary also shares his experiences working with Insly and why CHES decided to move to the new Insly MGA software.
The gentlemen conclude the chat by zooming out and speaking about the bigger themes in insurance and what sort of innovation they would like to see in the next 5 years.
Watch the full video below:
Please tell us about your work at CHES and your background
I'm the President and Chief Executive of CHES Special Risk. I am now in my 38th year of working in insurance. We've been building out our company over the last six years, even though CHES is 17 years old this year. The new management took over in 2016 and we've set about expanding the business. We now have four offices in Canada, over 55 people working in the company and are offering over 250 different insurance products.
What was extremely important to me, when I first started with CHES, was the ability to find a good, efficient insurance software system. I spent a great deal of my career - over 30 years - looking at various software programs. I think Insly is now my sixth insurance software system that I’ve actually installed in the company in which I've worked. I must say it is one of the better software systems that I've worked with over that period of time.
How do MGAs choose insurance software? Where do you begin and what do you look for?
There is a lot on offer and the competition in the insurance software market is tight. I did a lot of research within the Canadian marketplace. When we were looking for a software system, we tried to learn from all of the feedback that we had from Insurers over the years, but also think how the system can help us develop the company in the future.
What to look for when choosing insurance software for your MGA?
Whom the software is built for. an MGAs function is completely different to an insurance Broker. Many of the insurance software systems designed for brokers are not well suited for the MGA business model.
Who built the system and what their experience is. A lot of the software systems in Canada are built by programmers who think they know what an insurance entity requires from the software. Insly was different in that it was founded by an individual who had previously run an insurance business.
Other things to consider
- One-time entry and reducing keying errors. One of the biggest problems is the duplication of entry of data into a system. Every time you're asking a new person to put data concerning the same policy into a system, you're potentially running the risk of a keying error. What we found very good within Insly is that it is basically a one type system. You put the details of the insured into the data capture window and that is propagated throughout the system, from entry to documents to bordereaux.
- Speed and efficiency of data capture. In order for us to make money in the business of being an MGA, we need speed and accuracy. Speed of transaction is one of the magic recipes.
Insurance software comes with a cost. Have you tried to quantify the wins you get out of it?
Primarily, what is driving a lot of the business nowadays is compliance. Frankly, it's got nothing to do with actually trying to make any money as an MGA. It is the rules and regulations that govern insurance companies, MGAs, Brokers, etc. We found that the Insly system provides us with:
- data security - we know that our systems are compliant with the requirements for data protection;
- very accurate record-keeping;
- an enormous amount of data that enables us to make high quality presentations to our Insurers and help us analyze our portfolio to improve underwriting results
We were looking for a system that would give us a great deal of data, which we could manipulate to help us achieve a better standard of underwriting profit. That's what we're doing now - we provide very detailed reviews of our customer base to our insurance companies. This is telling our insurance companies where the risk is located. We can do that with a great deal of accuracy, using postcode, longitude, and latitude. That's important in the use of various earthquake and flood deck aggregates.
If we can provide really detailed information, we can use the aggregates that are given to us more efficiently, and that increases profitability for the Insurers. It also enables us to undergo a very detailed review of the profitability of each class of business that we write, we're able to look at each individual Underwriter that works at CHES, and we can monitor what their capabilities are in terms of profitability, but also link profitability to various class codes.
A lot of the MGAs have stopped doing business over the last five or six years, because they haven't paid attention to the quality of data that's required by their capacity providers. A huge amount of the Insurers that we deal with have actually said that the quality of our presentations are some of the best that they've seen in the marketplace. That will ultimately win a contract from an Insurer.
Ches has been Insly’s customer for five years and is now moving to our new no-code product version. What benefits do you see in it?
The one lesson that I've learnt over the years is that software is constantly evolving and improving. We've spent a considerable amount of money in developing the current version of Insly that we operate with. And it’s very efficient. However, as a company, we have always taken the view that we must have the best that we can possibly afford when it comes to a software system on data capture.
Primarily, we're looking at this as an opportunity to provide our team with a far better system than we currently operate. We're aware that the new Insly system provides an easier way of transacting business through the system, as well as a great deal more data capture. It will enable us to do a lot more simple changes in-house. It will include improved efficiencies that I guess will translate into cost savings. It helps us to maintain that high standard of quality of data delivery to the Insurers that we represent.
What's your take on opening a self-service to Brokers? Is it a direction where MGAs selling through Brokers should move?
We're talking about the ability that the Brokers could have online quote and bind. Can they go into our domain and create quotes themselves? It's a very complex question for a number of reasons. One of the reasons is sub-delegation of authority as the authority to quote and bind is given to MGAs by Insurers. We're not allowed to give that authority to somebody else.
There are ways of providing that ability to a Broker and that is by creating a “square box”. The box has a number of industry codes in it, a number of extensions in coverage and two or three deductible options and the system can provide a price according to that.
One issue with that is as these Broker Portals become more common, Brokers may have access to several online quote and bind systems, but they will have to enter the same information many times. And Brokers are getting fed up with that.
Our business model at Ches is not really providing a product that a Broker can go and get somewhere else. We're in the business of creating solutions. That said, there can be efficiency in pricing by providing online access to a certain part of the portfolio that the Brokers can quote. That is something we are looking into and understand is more easily available on the new version of Insly.
Let's zoom out. What's your take on insurance innovation in the next few years?
I have followed various insurance innovations over my career. You hear so much about the disruption and new entities coming in to provide disruption to the way that insurance is either delivered or transacted. Ultimately, in most cases, after two or three years it turns out, that they're not doing anything different as there are some fundamentals of insurance you cannot change. The industry is still about trying to create an insurance product that reacts to a customer's issue at a premium that the customer is willing to pay.
What I would like to see is a true mutualisation of risk. Let’s say there’s a group of 100 policyholders who all own a similar house and decide to properly mutualise their risk. They all agree to put in X amount of money. During the course of a year, there is loss or damage and the pool of cash is paid out. The inherent problem of insurance is that you could have two or three of those mutual benefactors putting in more claims than the others. That's where the whole thing starts to disintegrate, because some people haven’t put in a claim for five years, but their premiums are still going up. And vice versa.
The current hard market is making customers aware that there is a cost to insurance. Insurance companies can’t continue to offer a really low level of premium, because the claims are there and they can’t risk going out of business. Insurance is a difficult industry to try to change, because there have to be some rigid conditions in place that allow the service provider to make money, but at the same time give the customer added value. That’s an extremely fine balance.
We hope you enjoyed the conversation. If you would like to find out how Insly can help your underwriting business, contact us below.