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In Zeus we Trust

In Zeus we Trust

Between the harsh realities of the new global order, higher staff turnover rates and the transition to a knowledge-based economy, companies everywhere are grappling to create a comprehensive organisational memory.

The idea is to somehow capture, analyse and organise employee know-how to make it available anywhere, any time, in the interest of competitive edge and risk management.

Life insurance companies know all about that risk. Insurance companies that do a poor job of managing risk go to the wall, yet managing risk well is no easy matter. Since most insurers rely on intermediaries to sell their products - financial planners, life insurance brokers and agents - much of their corporate health can lie in the hands of those more interested in making commissions than in the long-term survival of the insurance company in question.

For Norwich Union Risk & Savings, knowledge-based technology has proved the key to minimising both data entry errors and poor assessment of risk. Norwich has developed an expert underwriting system called Zeus, based on the AionDS application development environment for logically complex business applications, to sit behind its newly redeveloped quotation and proposal system. Together, they form a system Norwich calls ESEPOS, which the company says will give it both a major competitive edge and massive dollar savings.

Knowledge management is frequently touted as the means to help organisations boost productivity, keep workers informed and gain major competitive advantage.

In theory, effective knowledge management should ensure staff make fewer mistakes and better decisions while enjoying better relationships with customers, even while solving problems faster and working more independently.

But it has generally proved difficult for implementers of knowledge-based systems to demonstrate bottom line advantages. When Arthur Andersen surveyed 80 companies attending a US knowledge conference last year, more than 75 per cent described knowledge management as an important - if not a vital - part of their business strategy. Yet more than 90 per cent said they had so far failed to find meaningful ways to link knowledge management to financial results.

Not so Norwich Union Risk & Savings. Not only is Norwich confident the newly developed system will help it avoid accepting bad insurance risks, it anticipates saving $2.1 million during the first year of implementation alone.

And that can't be bad, for a system which cost perhaps $0.5 million in total to develop.

According to general manager systems, Phil Wilson, the system is expected to save Norwich $300,000 in printing costs per annum. Another $1 million saving will come through reducing the number of staff spending their time in key data entry of proposal forms.Norwich also anticipates other major benefits from automating the data entry process for insurance policies, a task that has been performed in the past by manual workers with little understanding of the ramifications of accepting a bad insurance risk. One such benefit is vastly reduced scope for error.

Under the existing manual entry system, there are 12 points of data entry per application form, making at least 12 opportunities for error. Data entry workers deal with 60 applications a day, or some 1,200 per month. The new system will improve accuracy substantially.

Another benefit will be a huge reduction in imaging costs.

"Currently we image all our new proposals, so that's 20,000 images a year with at least 16 pages per proposal. The savings there are absolutely massive," says Wilson.

"In fact my estimate of a $2.1 million saving in the first year, when you add it all up, is a pretty conservative estimate."At least two other major insurers have tried to implement field data capture systems for agents in Australia, and both have failed dismally. When Norwich Union began its project two years ago, it was determined not to make the same mistakes.

Wilson first employed his comprehensive insurance knowledge and understanding of his company's business needs to devise an OS/2-based model of an expert underwriting system as a proof of concept. Then in the early 1990's he began looking for a solution which would provide an effective front-end graphical user interface (GUI).

When he read about the expert system developed by Lincoln National, a large reinsurance company based in Chicago, he felt he had his answer. Lincoln had used AionDS as a basis for its expert system, developed to handle the management of applications that typically involved either a high degree of medical complexity or a high-risk situation. Some 48 companies were already using Lincoln's system across the USA.

In 1994, Norwich Union sent Wilson to Chicago to study Lincoln's system, where he quickly became convinced AionDS would easily handle the needs of Norwich Union. Giving him confidence was the fact that the Lincoln system contained some 50,000 rules dealing with medical issues alone. That made Norwich's demand for a system involving just 5,000 rules altogether, including templates and charts, and between three and four thousand medical terms, look pretty small beer.

The decision was made even easier by the fact that Norwich Union's own parent company, Norwich Union UK, was also using AionDS.

It's a decision that has paid rich dividends. Some two years in the making, Wilson says Zeus will not only provide massive cost savings and minimise underwriting risks but also improve customer service.

According to manager, corporate systems David Stinton, the new system was born out of a business process reengineering exercise that involved a careful re-evaluation of Norwich's basic new business process.

"That process is fairly traditional, in that we conduct business out in the field via agents, who get the business and fill in a proposal form which is then faxed or mailed to our regional centre. There the form is imaged, the image is brought up at head office in Melbourne, and then we have people who key from that image into our New Business System - a traditional mainframe 3270 system.

"From there it goes into the process of New Business where it is validated, and verified, underwritten and signed off. It goes on our file and we are on risk for it, and then the confirmation goes back to the intermediary," says Stinton.

"That cycle is both very lengthy and very prone to error, because the proposal is often incomplete and inaccurate and we often won't find those errors until it gets to head office. Then you get into a loop where you have to go back to the intermediary, and the intermediary may have to go back to the client to get further information. When the underwriter becomes involved he asks for medical tests, then you get back into the loop. It all takes a long time."And even worse than the lengthy delays in processing New Business, Stinton says, were the dangers involved in using agents untrained in risk assessment to accept new business.

The rule-based expert underwriting system, Zeus, is designed to minimise the chance of Norwich accepting any bad insurance risk.

Customers will also be winners with the new system, says Wilson.

"Our objective is to put the client nearer to the mainframe by removing all the hand-written mumbo jumbo and having it keyed in in front of them. We will then download the data directly into our mainframe so that we can eliminate the 10 steps involved in rekeying that client information within our business," he says.

"And, if you can show clients nice graphs and videos and so on, they're more comfortable."As part of the BPR exercise, it became clear the ideal system would move the entire process to the point of sale, says Stinton.

"If we could have a system where the information was not hand-written onto a proposal but was captured on a screen electronically, and we could install validation at point of sale, then we could complete the proposal, ensure it was 100 per cent complete and ensure that the validation was done immediately," he says.

Norwich also wanted a system that would transfer data electronically to head office and interface it automatically with the administrative system.

"But we also took it one step further than that," Stinton said, "by deciding to underwrite it at point of sale. And because of expert system technology this was a possibility."Under the new process, when a client accepts a quote the agent can progress to the next phase of the system without having to recapture the data already obtained for the quote. Agents will complete proposals electronically via the newly developed electronic proposal form that mirrors Norwich's current Customer Information Brochure (CIB). Once the proposal data has been captured it will go into the Zeus underwriting system.

The Zeus expert system is capable of underwriting any risk at all. As an example, an applicant applying to an agent for life assurance might respond affirmatively to the question: "Are you planning to travel overseas in the next six months?"Without Zeus, an agent might not consider this particularly significant. Zeus is designed to prompt the applicant for more information on where, why and for what period he or she will be overseas. Should the applicant be planning to visit an area of the world that the system recognises as a "trouble spot" or high-risk area, Zeus will raise an alarm.

Should the applicant be a missionary or doctor intending to work in that country, the system will recognise this as a bad risk and request more information before assessing the application.

Rule changes will occur as new "high-risk" areas are added to the systems' knowledge base. Since an area considered a high risk this year might not have been considered so in, say, 1986, the system must be able to handle information that is constantly changing.

According to Stinton, the key and primary objective of Zeus is to capture the "clean skin" cases: those where no further information is required, the company insists on no special loadings, where no special conditions apply and where the company is able to take the risk on board immediately.

"Those cases would amount to perhaps 55 per cent of our new business," says Stinton. "At the point where we have established it is a 'clean skin', we can then electronically transport that data to head office."For non-clean skin cases Zeus will prompt the agent to extract further information to forward to head office.

Norwich Union has approximately 200 agents across Australia and is now considering the best way to encourage those agents to accept and use the system. It is also in the throes of devising a plan for communicating and downloading information received at the agent office to the mainframe at Norwich Union headquarters in Melbourne.

Wilson is confident the first task will be helped by the fact that Zeus is designed to make an agent's life significantly easier.

"What is the best way to encourage them to use the system?" Wilson asks. "The expert system itself forms a vital part of that chain, because if we can issue policies in front of the client, instantaneously, then the agent will be able to deliver the client's policy much more quickly than the weeks it currently takes.

"Then, we're talking about issuing a policy document virtually instantaneously, within minutes of the client completing the proposal form. That enables the agent to provide a fantastic service that he has never been able to have before. Apart from that, he can get paid - which is the real issue for the agent," he says.

Wilson says the next step is to develop a facility to download the information directly to head office.

"Once we have our download facility there'll be almost no massaging at this end because we've used Delphi as the database to present the proposal to the agent, and we've replicated the Delphi database at our head office," says Wilson.

"The front end is the other issue. We have to make it so seamless that the agent will have to use it. While the front end is probably not as important technically for us as the download, it is very important for the agent. We will almost certainly use Delphi for that," he says.

Expert system technology has already revolutionised the insurance industry overseas. Here in Australia, Norwich Union believes its Zeus system is well ahead of the pack. And it has no doubt the benefits will be there for itself, its customers and its agents, over the very long term.

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