The executive team at Norfolk & Dedham Group includes F. Timothy Hegarty, Jr. (seated), president and CEO; and (standing, left to right) Gerard T. McDermott, executive vice president; Timothy J. DelGrande, vice president, marketing; and Robert J. Wychulis, vice president.
When you think of insurers that are making heavy investments in sophisticated computer technology, your mind might not leap immediately to a group of small regional mutual companies whose oldest member was founded in 1825. It should, though, because the Norfolk & Dedham Group, with annual premium volume of $67million, is putting automation to work in some surprising and highly effective ways that much larger insurers are not yet using. Perhaps even more surprising, the group's technological initiatives serve not to distance it from its agents and clients, but rather to solidify and enhance these key relationships. In this article we'll talk with several Norfolk & Dedham executives to learn why and how the group is using cutting-edge technology to continue a commitment to service that began more than 150 years ago.
The executives gather in front of one of the company's six automated claims vans.
Based just outside Boston, the Norfolk & Dedham Group consists of three property/casualty insurers, each with its roots in the early 19th century:
1. Norfolk & Dedham Mutual Fire Insurance Company, founded in 1825
2. Dorchester Mutual Insurance Company, established in 1837
3. West Newbury Mutual Fire Insurance Company, which dates back to 1828.
The three insurers participate in an intercompany pooling arrangement and operate in four New England states: Massachusetts, Maine, New Hampshire, and Rhode Island. Norfolk & Dedham writes primarily personal lines and is the largest homeowners insurer in Massachusetts. The group also writes commercial package, commercial auto, and workers compensation business and is seeking to build volume in these lines.
A change in culture
Until the early 1990s, Norfolk & Dedham had been using automation in essentially the same ways as other insurers, says Bob Wychulis, vice president of information technology. "Then we discovered imaging as a way of replacing paper files. That was a very small step, but it was the catalyst for a complete upgrading of our automated systems and a total re-engineering of company operations. It changed our culture from a company that reacted to change to one that was driven by change."
In committing itself to new automation initiatives, says Executive Vice President Gerard McDermott, Norfolk & Dedham sought to achieve three goals: (1) improve service, (2) reduce expenses, and (3) increase productivity. "We were--and are--interested in using technology wherever possible," says the group's president and chief executive officer, Timothy Hegarty, adding, "We might be driven more than other companies to experiment with new technology. We're in a high-cost area where we can't afford to be labor intensive, so we have to be technology intensive. Our employees tend to be highly skilled decision makers, because we use technology to perform more routine tasks."
The first step in Norfolk & Dedham's automation "revolution," McDermott explains, was the creation of automated workflows through the use of imaging. Every incoming paper document is scanned and then stored electronically. Indexes of scanned documents facilitate retrieval. It's important to note that at Norfolk & Dedham, imaging isn't just an electronic filing system. It's integrated with the policy processing system and is thus fully linked with the insurer's workflow.
As the result of a huge reduction in paper files, Norfolk & Dedham no longer has a file room. The space has been put to good use, McDermott comments: "It's now an exercise room." How else has the use of imaging technology affected Norfolk & Dedham's operations? "Since we began to use imaging to automate our workflows, our service has improved, expenses have come down, and employee retention is high," McDermott declares. "And there are no missing files, ever. In most insurance companies, X number of files are always out of file--they're with the auditor, the reinsurer, or somewhere else. At Norfolk & Dedham, when a document comes in, it's scanned that day, so it's always available electronically to whoever needs to see it."
Hegarty points to another benefit of adopting imaging technology: "Imaging not only reduces paperwork, but it also has introduced our employees to new technologies and has taken their fear and anxiety away. As their confidence in their ability to use technology has increased, our employees have come to see it as challenging, and even fun."
Expert systems free employees
Norfolk & Dedham's 140 employees enjoy much more challenge and responsibility than would be possible if they were bogged down in paperwork and forced to handle endless low-level, routine tasks. That's because the insurer has installed expert systems in its personal lines operation that automatically review applications, process those that are routine, and kick out those that require an underwriter's attention. "When an underwriter looks at 100 homeowners applications, 50 of them are what we call vanilla," McDermott explains. "We let the computer handle those, and policies can be processed the same night. We want our underwriters to work with agents on the 'exception' policies and give their full attention to building agent relationships."
With the imaging system and expert systems in place, Norfolk & Dedham was ready to establish electronic interface with its agents. "We're strongly committed to SEMCI (single entry, multiple-company interface)," Gerard McDermott emphasizes. "We want to give our agents one system they can use with multiple companies." As it did before launching its other automation initiatives, Norfolk & Dedham conducted extensive, painstaking research to identify the best approach to agency-company interface. Information technology Vice President Bob Wychulis set up briefing sessions for senior management with key players such as ACORD, IVANS, APT, and agency management system vendors. To ensure that its interface approach would work with the majority of its agents, the insurer also surveyed its agency force to learn how many were automated and what kinds of agency management systems they were using.
Based on its findings, Norfolk & Dedham elected to establish full SEMCI between itself and its agents. To accomplish this, the insurer implemented ACORD AL3 Standards for upload and download and installed APT's Company and Stand Alone Modules for upload. By subjecting each agent's input to the company's edits, the APT modules allow the agency-company interface to behave like an expert system.
Some 80 Norfolk & Dedham agents can upload auto and homeowners data from the insurer's database, and later this year they'll also be able to upload BOPs, McDermott says. Once the agent enters an application, it goes through the system's edits and, if it's routine, is processed that night. From there, the company can either print the policy and deliver it to the agent in two or three days, or it can download the policy into the agent's system that night.
The challenge of change
Although Norfolk & Dedham is firmly committed to using automation to streamline as many procedures as possible, the group doesn't make a grab for every glitzy new technology that comes on the market. As with imaging, expert systems, and interface, every proposed initiative is meticulously researched before management decides to adopt it. Once it approves a new system, however, the insurer wastes no time in implementing it. "We know we can master new technologies," Hegarty says. "Our employees are ready to accept the challenge of change."
Wychulis adds: "Everyone at Norfolk & Dedham has been taught to love change, and that has fostered a sense of empowerment and involvement in the re-engineering of our entire operation. We emphasize accountability on the part of automation users, and we encourage them to come up with their own ideas for using technology to improve workflows. People from all over the world come to observe our systems. The employees who use a system demonstrate it, and over time they've come to feel a strong sense of pride in what they do. If employees are proud, you can get them to do almost anything."
Commitment to insureds
Proud, satisfied employees are also motivated to provide a high level of service to policyholders, and that's definitely the case at Norfolk & Dedham. "Automation helps us make good on our commitment to doing the best possible job we can for our policyholders," says Tim DelGrande, vice president of marketing.
A key element of Norfolk & Dedham's commitment to its insureds is its fleet of six automated claims vans, each manned by a company adjuster and supplied with a two-way radio connected to the home office. Gerard McDermott explains how the system works: "A loss notice comes in to the company, is scanned, and goes to the supervisor's queue, where the supervisor decides if it should go to the automated claims unit. A dispatch unit handles all the scheduling for the claims vans and knows where they are at all times. The dispatch unit calls the insured to set up an appointment, for that day if possible, and then contacts an adjuster with information about the location and type of claim." Each van serves as a mobile office, equipped with a computer, two printers, and the rating software needed to process personal auto and homeowners property claims.
"The vans are attractive and make a positive impression on insureds," McDermott notes. "They also make the agent look good, because after the 30 to 40 minutes it takes the adjuster to process the claim, the insured has a check, whereas if we used independent adjusters, the insured might have to wait for days, or even weeks." The vans also are equipped to go into disaster areas after a major storm or other catastrophe.
Building bridges to agents
In its four-state territory, Norfolk & Dedham is represented by some 300 agents. "We're very selective; we turn down more agents than we accept," DelGrande says. "We want to grow, but we're not interested in having an agent on every street corner. There's real value in an agency contract with Norfolk & Dedham." What qualities does the insurer seek in agents with whom it does business? "We're looking for a stable, profitable 'marriage'--not a short-term arrangement," DelGrande responds. "We ask, 'What are the agent's goals? Can they be mutual?' If so, we work together to attain them. We look for a trusting relationship based on open communication," he continues. "We're honest with our agents; we tell them where we're going and how we plan to get there." The insurer seeks to do business with agents who strive to enrich themselves professionally, and it offers educational subsidies to agents and their employees who want to pursue the CPCU, CIC, CISR, and other industry designations.
"We try to add extra value to our agency contracts," Tim Hegarty says. "We offer products that make account underwriting attractive to agents. Our agents see us as a valued partner," he continues. "At our June agents' advisory council meeting, an agent said to me: 'When it comes to service, I compare other companies to you.'" Adds DelGrande: "We're focused on writing the total account, because doing so increases retention for our agents and increases profitability for us."
"We're strongly committed to independent agents and the independent agency system," Gerard McDermott asserts. "Independent agents are giving us good business, and we want to repay them with good service." Adds Bob Wychulis: "Our service is very focused compared to national companies. Because of our cost structure and the fact that we pay higher commissions than the direct writers, our agents are able to produce better business."
"The insurance industry today is experiencing a great deal of change and turmoil," DelGrande observes. "Banks are moving into insurance, companies are buying agencies; understandably, agents are worried about the future. Norfolk & Dedham represents some 500 combined years of experience with agents, and we're committed to using technology to bring us and our agents into the 21st century. An agent who is worried about the future couldn't do better than to partner with Norfolk & Dedham."
As part of an ongoing dialogue with its field force, Norfolk & Dedham asks its agents what they need and how the company can improve its service. "One thing that came up over and over was easy access to information about account billing," McDermott says. "We installed an automated voice inquiry system that both agents and insureds can access 24 hours a day. They can find out when the next payment on a policy is due, the last check we received from them, when we issued a cancellation notice. We used to get between 2,000 and 2,500 calls on direct bill business; now the automated inquiry system handles 4,000 calls."
Because of its dynamic, can-do approach to automation, Norfolk & Dedham serves as a model for other small companies that seek to benefit from adopting new technologies. In 1997, Gerald McDermott explains, Norfolk & Dedham established Newbury Corporation, a general purpose corporation that is wholly owned by Norfolk & Dedham Mutual. Newbury provides policy processing services to the three companies in the Norfolk & Dedham Group, and it performs the same services on a contract basis for other insurers. Newbury's target market, McDermott says, is "mostly smaller regional companies, or larger insurers that want to write a single line of business in Massachusetts." Staffed by five employees from 5 a.m. to midnight, Newbury also offers automation consulting services. Newbury, he says, offers an alternative to insurers that otherwise would have to invest heavily in technology. For Norfolk & Dedham, he notes, this arrangement has two key advantages: "First, it's an opportunity for us to realize a return on our investment in technology. Second, it challenges us to stay current with technology."
The bottom line
In the traditional equation, automation is only as good as its capability to reduce expenses and increase profits--a fact of which Norfolk & Dedham's management is keenly aware. Reviewing the group's operating results, President Tim Hegarty notes, "We're the only New England mutual with five consecutive years of operating profit. We're now looking to increase growth, primarily in commercial lines, through solid account underwriting."
Clearly, Hegarty is pleased to be presiding over a small regional insurer that's enjoying significant benefits from using technology in a big way to maintain strong relationships with both agents and policyholders. "We're proud of our history," he says. "We like being a mutual company and not being answerable to stockholders, not pursuing short-term strategies at the expense of long-term planning. We're focused on the geographical area we serve; our strategy is to diversify by product, not by territory."
In today's volatile insurance environment, Bob Wychulis points out, smaller actually may be better. "We're a small company," he says. "With all of today's merger mania, creating insurance giants, we can move faster and do things they can't do because of their size. With technology, we don't have to be big." *
Elisabeth Boone, CPCU, is a copy manager for a major health sciences publisher based in St. Louis. She is a former member of the editorial staffs of Best's Review and American Agent & Broker.
©COPYRIGHT: The Rough Notes Magazine, 1998