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AAIS president looks to the future

Initiatives in data gathering, product development broaden market for agents

By Joe Hunter-Lattak, CPCU, AIM

Edmund J. Kelly became president and CEO of the American Association of Insurance Services (AAIS) in July 2012. AAIS is a national insurance advisory organization that develops policy forms and rating information used by more than 700 property/casualty companies throughout the United States.

Before assuming his current position, Kelly had numerous years of executive experience in organizations that developed product platforms for property and liability lines. That experience included two years as CEO of Paris Re America Insurance. Co., seven years as president and COO of ICAT Holdings LLC (a catastrophe risk entity), four years as chief financial officer for a specialty division of Royal Sun Alliance, and three years as vice president of finance and operations for a workers compensation company.

Prior to his insurance career, he worked for 11 years as a senior manager for Ernst & Young; he is a certified public accountant.

Rough Notes Assistant Editor of Technical and Educational Products Joe Hunter-Lattak asked Kelly about his vision for AAIS and what agents should know about the organizaation.

Rough Notes: Ed, bring us up to speed by telling us a little about AAIS.

Kelly: Let me start by saying that AAIS is a product resource for hundreds of property/casualty carriers that rely on independent agents. Without AAIS, independent agents would have fewer markets for coverage, especially for risks in distressed areas and specialty markets.

More formally, AAIS is a national insurance advisory organization—a bureau, to use a more traditional term—that develops policy forms and rating information used by more than 700 P-C carriers throughout the United States.

Insurers of all sizes, from small mutual companies to several of the largest national carriers, use forms and/or manuals provided under one or more of over 25 AAIS programs of personal, commercial, farm, and inland marine insurance.

AAIS is the successor organization to a former inland marine rating bureau and continues to be a market leader in inland marine product design.

Since being reorganized as a multiline advisory organization in 1975, AAIS has become a market leader in agricultural insurance products. We have also introduced several product innovations in personal and commercial lines, most notably our Homeowners By-Peril Rating Plan, the first such plan filed countrywide and generally available to insurers.

All the while, AAIS has remained a nonprofit association devoted exclusively to serving its member companies, almost all of whom, as I said before, rely on independent agents.

Rough Notes: Ed, you officially took the reins of AAIS at the beginning of 2013. Tell us about the transition.

"The over riding importance of data analytics is changing everything." —Edmond Kelly, President & CEO AAIS

Kelly: Under our previous CEO, who retired after 25 years at the helm, AAIS earned its reputation for product leadership. I was brought on with a mandate from our board to accelerate our growth and expand our capabilities.

To this end, we have made substantial investments in staff resources and infrastructure to expand our data collection efforts. We are determined to deliver on the promise of establishing a Data Resource Center, a repository of statistical data that would allow participating insurers to access data and analytical tools for underwriting, pricing, and market analysis.

At the same time, we are engaged with third-party technology and service vendors to make it easier for carriers to adopt and implement AAIS programs, and to incorporate their agents into the use of those programs.

While much has changed at AAIS, there is much that hasn't changed—and will not change.

Most important, we remain committed to providing our member companies with personal access to staff specialists they get to know on a first-name basis. That commitment has always distinguished AAIS among advisory organizations, and it will continue to guide our actions going forward.

Rough Notes: What important issues do you see that are significantly different today than in the past? How does this affect your strategic plan?

Kelly: The overriding importance of data and data analytics is changing everything.

Large carriers are utilizing ever more refined, ever more "granular" processes and systems for selecting, underwriting, and pricing risks. Smaller carriers are under intense competitive pressure to respond in kind, or risk being adversely selected against.

AAIS responded on behalf of its members with its Homeowners By-Peril Rating Plan. We are developing greater capabilities to put data, analytical tools, and predictive models in the hands of our members, so they can more effectively execute their operating strategies.

Agents play a valuable role here. The better agents are at gathering and sharing information, while protecting the privacy and maintaining the trust of their clients, the stronger the independent agency share of the market will be.

Rough Notes: We understand that AAIS has always worked closely with insurance agents and agent organization as well as insurance companies. How can agents benefit from AAIS's products and services?

Kelly: As I said above, AAIS was organized by carriers that relied almost exclusively on independent agents, and our member base today is overwhelmingly composed of independent agency companies. We never forget that it is independent agents who ultimately sell what we produce.

The principal benefit agents get from AAIS is the preservation of markets for coverage among carriers who might not otherwise be able to maintain competitive products.

In highly standardized personal and commercial lines, AAIS provides forms that are clear and easy to understand. In agricultural and inland marine insurance, AAIS forms are distinct but, again, easy to understand and highly competitive.

Agent input has long been an important part of product development at AAIS, and will continue to be.

Rough Notes: Tell us how the rapid and frequent changes in technology affect AAIS and the products and services it offers.

Kelly: Traditionally, technology has been an enabler, something that made ideas originating outside of technology into practical realities. For example, Internet connections allowed us to make our traditional forms and manuals available online.

The accelerated evolution of technology has made it as much of a driver as an enabler of change. We see that advances in technology are driving exponential growth in data, creating competitive demands to gather, manage, and analyze that data for business purposes.

To us, these observations mean two things. Our products and services must be adaptable to a wide range of technological delivery platforms, and our programs must be flexible enough to incorporate new and changing types of information.

Rough Notes: What does your crystal ball tell you about the future as it affects AAIS, both in the near future and beyond?

Kelly: I don't have a crystal ball and I'm skeptical of the crystal balls that others are reading. There is much that we know and much that we don't know about the challenges and opportunities facing us. We will have our share of good luck and bad luck.

There is one thing I am certain about: Our ability to deliver services that meet the growing needs of our member companies will continue to be dependent on our people, specifically our quality team of dedicated AAIS staff members.

With that, I don't need a crystal ball to feel very confident about our future.

Rough Notes: Do you have any final observations?

Kelly: AAIS continues to be an organization focused solely on serving the needs of our member insurers. Every dollar paid to us is invested in product resources that support a competitive insurance industry.

Everyone—carriers, agents, and buyers—ultimately benefits from that competition.

Rough Notes: The leadership of AAIS is in excellent and competent hands as it continues to offer a variety of state-of-the-art products and services in multiple lines of business.

For more information:

Web site: aaisonline.co

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