2011 Ward Group Symposium Highlights

An outstanding group of industry leaders from property-casualty insurance companies networked with their peers and gained valuable industry insight at the 2011 Ward Group Symposium for Operational Excellence in Cincinnati, Ohio on November 2-4, 2011. The event showcased thought leadership on key operational issues affecting insurance companies, highlighted trends at high performing companies, and provided real and actionable data to help with budgeting and strategic planning.

"Every year presents new challenges for companies and 2011 was no exception. This was a great opportunity for industry leaders to network, discuss challenges faced by their organization and share ideas about how to strategically plan for the future. We were very pleased to host such a meaningful event for the industry," said Jeff Rieder, President of Ward Group.

The Challenge

The economic environment remains a major concern for insurance company leaders. In his opening presentation, Jeff Rieder, President of Ward Group, provided perspective on the state of the industry. He noted that 2011 will not be a good year. Combined ratios will rise primarily due to the massive catastrophic events (earthquakes, wildfires, hurricanes, tornados, and snow storms) and nearly every sector of the industry will end with worse results than in the past seven years. Companies continue to have difficulty linking pay to performance and compensation increases will remain low.

Although results were poor overall in 2011, companies are seeing signs of improvement. Companies appear to be more optimistic about the industry outlook, taking on new initiatives at a greater rate, substantially investing in infrastructure and focusing on long-term operating models. While the road to recovery will be long, knowing where to focus and having access to meaningful and actionable data will help keep companies moving in the right direction.

What to Do About It?

At the Symposium, Ward Group explored four areas on which insurance companies can focus to develop fact-based solutions and maintain profitability: employee compensation, claims processing, technology and underwriting profitability.

Develop better methods to link employee performance and pay and focus on activities that can be measured and managed. Brian Dunn, CEO Global Compensation at Aon Hewitt and Chairman of McLagan, presented and lead discussion on the changing world view of executive compensation, driven by economic, political and social factors. As executive compensation becomes more transparent, it is important to link pay for performance and have the right metrics for meaningful evaluation. Measuring performance requires the right risk adjusted measures, benchmarks and peer groups, as well as the right performance period.
Continually evaluate claims processes and systems, particularly with unique CAT events, growing severity and need to access information. With volatile claims and catastrophe activity, managing the process and evaluating the outcomes are critical to reducing waste. In his presentation, Quin Netzel, Director of Ward Group, discussed claims management and how companies are challenged to balance customer service, expense efficiency and loss containment for optimal performance. Rising loss costs are disrupting this balance and companies are engaging in strategic evaluations of process and technology to manage the loss costs. Traditionally, property-casualty organizations lack a comprehensive approach to monitor claims performance and continuously improve claim outcomes. As a result, overall claim quality suffers, impacting both financial results and customer service. Poll Results: 44% of attendees use independent adjusters to backfill front-line/daily claims. [View more poll results for claims.]
Align technology with corporate strategy and build processes to regularly evaluate expected achievements. Contrary to popular opinion, investments in technology do not guarantee improved operating efficiency or more robust business intelligence. It is important to align technology plans with corporate strategy and measure how successful you are throughout the process. In her presentation, Ms. Leah Hollstegge, Manager of Ward Group, focused on key information technology benchmarks that measure the efficiency and effectiveness of IT operations, discussed what technology issues companies are addressing and how they manage information technology during changing market conditions. Recognizing you cannot do everything, simple is almost always better. Complex models can lead to disaster. Poll Results: 81% of attendees think an insurance company can actually differentiate itself with technology. [View more poll results for IT.]
Don't lose sight of the goal, underwriting profit must be achieved in order to have long-term viability. In the current market climate marked by reduction of exposures and aggressive underwriting strategies, companies are challenged to achieve underwriting profitability and stay competitive. While some companies rely on technology to differentiate and others focus on niche groups, most must be able to provide broad services to a diverse range of policyholders and agents. In his session, Charlie Gall, Senior Director of Ward Group, discussed underwriting trends and best practices, including sales, marketing and agency management. Benchmarks that measure underwriting show that efficiencies with automation are real, without the negative results of losses. Poll Results: 80% of attendees believe personal automated underwriting leads to better underwriting results. [View more poll results for Underwriting and Marketing.]

Managing the Change

While change is inevitable particularly in these volatile times, success is not. Ward Group was please to have a dynamic line up of guest speakers and panelists attend the Symposium and share their experience with managing change at their organizations.

Recognizing that old ways don't always work and external factors have greater influence than in the past, Steve Ricco, Chief Financial Officer, PEMCO Mutual Insurance Company, talked about how PEMCO successfully executed change initiatives. His presentation included examples of PEMCO's efforts to modify areas of their organization such as expense management, growth strategy and technology.

A panel of executives from diverse companies discussed planning for change and accountability within their organizations. The panel presentations showed that, with a bold and thoughtful approach, creative methods do exist to solve problems. John Schapperle, President and Chief Operating Officer, Island Insurance Company, highlighted the details of a unique intern program implemented at his company and discussed how the program had helped the company attract and screen top level hiring prospects. Dianne Lyons, Vice President and Chief Financial Officer, United Fire Group, recounted her experience as a key player in the acquisition of company. She addressed the lessons learned during the acquisition and in the integration process. Robert DeOrsey, Vice President, Underwriting and Loss Prevention, Beacon Mutual Insurance, summarized a project they had recently competed to restructure the underwriting operation. He presented examples of challenges they faced and provided perspective on how they resolved the issues.

In Summary

The financial results in 2011 will not be good for most insurers with nearly every sector of the industry experiencing worse results then in the past seven years. While the road to recovery will be a long, at least the industry appears to be on the road. Insurers will need to be responsive to ever changing market, economic and regulatory environments. The companies that can maintain focus on operating performance and organizational efficiency will be positioned to achieve superior financial performance.

Contact Ward Group to learn more about how we can help you to overcome the challenges facing your organization.