PegaWorld: Mhayse Samalya, Farmers Insurance

The next keynote was Mhayse Samalya, EVP of Farmers Group and president of Farmers Business Insurance, discussing how to create agility in small business insurance. They write a lot of insurance business in the US, operating under various brands including Farmers and Zurich. They’re better known for their personal insurance and larger commercial business, but have been building their commercial lines for small businesses of less than 50 employees: a $96B opportunity that is not dominated by any particular insurer. Samalya took this as a challenge to become #1 in small business insurance through a number of factors:

  • Good product lines
  • Expertise in the small speciality businesses
  • Predictive analytics to understand and model the market
  • Improve underwriting sophistication relative to small business
  • Create targeted offerings by agent segments (captive versus independent)

A big part of this was creating the right agent experience: simplifying and demystifying it with pre-filled forms that eliminate some questions, and automate the pass-through rate with automated underwriting decisions and automated pricing. This dramatically reduced the time required to achieve a bound policy, and freed up the underwriters’ time for dealing with more complex interactions.

They focused on incremental success, and achieved a number of significant milestones in agent expansion and new business growth during 2007 and 2008:

  • Restaurant product: reduced time to bind a policy from 14 days to 14 minutes
  • Auto product: increased close rate by 5%
  • Umbrella product: increased new business by 70%
  • 1000 new agents writing commercial business

Next, they’re focusing on improving efficiencies by rolling out endorsements and renewals processes directly to the agents in the coming quarters, with an expected pass-through rate of more than 60%. It’s important to note that they focused on building their business first, then on efficiency.

Their lessons learned have relevance far outside of insurance, and could be applied to any BPM initiative:

  • Focus on the desired business results
  • Eliminate the non-value added business steps, noise and red tape
  • Put business change in the hands of the business
  • Rapidly prototype and iterate the targeted solution
  • Test, monitor and respond quickly to the market

They found it critical to build the right team, with a single empowered owner across business and IT (they had a VP-level position here that was actually part of the team, not a distant oversight position), a dedicated cross-functional core team, and in-depth participation from agents and underwriters. He also alluded to a relationship with Pega that had part of their compensation linked to Farmers’ business success metrics (e.g., pass-through rate).

The result: small business commercial insurance has gone from being a non-starter to the fastest-growing, highest-profile product line at Farmers; they’ve moved from a 2% market share to a 3-4% market share, which ties them with the biggest players in this market.

I work a lot with insurance so found all this to be fascinating, but Samalya made it interesting for everyone. If this is an indication of the caliber of presentations that we can expect at PegaWorld, it’s going to be a great conference.

I really like the presentation screens: most of the screen is taken up with the slides, but there’s a window near the top with the live video of the speaker in case you can’t see him directly at some point. This will also make it easy for Pega to publish these presentations with slides and video feed; it would be great to have some of these publicly available on demand.

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