From the brink of the dustbin to the brink of a bright future, it’s been a bumpy ride recently for MI-Assistant, the Eleva, Wis.-based agency solutions provider. In the cutthroat world of comparative rating and agency management systems, the company has experienced a kind of rebirth with its acquisition by Fiserv Inc. and the implementation of an aggressive strategy to move into real-time rating.
The company was founded by James Deetz in 1984 after Deetz’s brother (with whom he worked at the Deetz Insurance Agency in Eleva) asked James to work on way to calculate rates automatically rather than out of the manual. What James Deetz came up with worked so well that he started the company (the “MI,” by the way, stands for “more insurance”) to sell it to other agencies.
Now 7,000 agencies use MI Comparative Rater, according to Scott Deetz, James’ son and president of MI-Assistant. James still works for the company as senior vice president of operations. Proving it’s a family affair, Scott’s brother Stephen is MI-Assistant’s senior vice president of information technology.
Fiserv announced the acquisition of MI-Assistant in November 2003 and said it would add $6 million in annual revenues, though the added capabilities that have come about thanks to the acquisition may soon outpace that figure. MI-Assistant is now a division of Fiserv FSC (formerly Facilities and Services Corp.), which has 3,850 agency users in California, an 85 percent share in the competitive-rater market in the state, and is the leading rating vendor in Arizona as well.
Scott Deetz told IJ that the acquisition has gone well, saying “Fiserv only acquires companies to leave them alone.” This is not exactly true, though, as Deetz clarified later.
“The goal of Fiserv is to acquire the company to provide technical, financial and back-office resources,” Deetz said. “We can now work with FSC to solve problems in the rating industry in joint fashion. We tripled our capital expenditures and bought dual monitors and faster computers. And they take away your payroll and HR problems that companies can get bogged down with. They leave you to focus on growing the business.”
The importance of market share
In the five states where it operates the business seems to be going pretty well. MI Comparative Rater is a market leader in Wisconsin, Minnesota, and Iowa with an estimated 75 percent, 60 percent and 54 percent market share, respectively. In Illinois, MI has about a third of the market and about 11 percent in Indiana thanks to the recent acquisition of Applied Systems Inc.’s rating product.
According to Deetz, market share within a given state is crucial in the comparative rating segment. “Our belief is that successful comparative rating is a function of dominant market share,” he said. He explained that the accuracy level for a product within a given year is a function not only of the number of errors but the number of errors the average user experiences and reports in a given year. The larger the user base, the more quickly errors get reported and the lower the error rate is for any particular user.
“We feel we’ve added what we call a differential on both sides,” Deetz said. “We certainly see the market dynamics as being that because we’re so focused we get more expert at doing rating in Wisconsin, for example. We get better carrier relationships as well. Carriers are limited in their resources. When General Casualty makes a rate change, they’ll take more time to make sure it’s done better on MI’s rater. There’s a major market impact in that 75 percent of your agencies will be quoting your product inaccurately the day it’s effective.”
In addition to the greater accuracy, Deetz argues, MI stands out because it guarantees its rates and reimburses the amount difference for the first term of the policy. “As far as I know MI is the only who does this,” said Steve Anderson, editor of The Automated Agency Report. “That says a lot about standing behind what they’re trying to do.”
The comparative rating bell curve
The biggest challenge MI-Assistant and other comparative rating vendors such as national leader AMS-Rackley and Web-based vendor PriorityRate.com have faced is the introduction of proprietary carrier Web sites along with point-of-sale, third-party underwriting tools such as credit-based insurance scoring, motor vehicle reports and loss-history databases.
Chris Garson, agent IT business leader for vehicle insurer Progressive, has described the utility of comparative rating engines as kind of a reverse bell curve. The left end of the bell represents the era before proprietary Web sites, credit scoring and CLUE, the bottom of the curve represents comparative rating without integrated third-party reports and the right end represents where vendors, including MI-Assistant, have now begun to move. But it wouldn’t have happened without some serious strategic thinking, according to Anderson.
“I’ve had an opportunity to know Scott for a while now and I’ve been very impressed with his thinking for the future,” Anderson said. “He wrote an article for us asking, ‘Is comparative rating really relevant anymore?’ He has been quite honest in saying that in the last couple years it’s been harder to justify. He had a vision for what it could be and should be and especially recently they’ve been making some real progress.”
In March of this year, MI announced a new version of its comparative rater that included third-party report ordering for insurance scores, MVRs and claims losses.
“They’re making it more usable for the agents again,” Anderson said. “Being able to provide a bindable rate—that, technically, has been the problem. Being able to integrate those third-party reports into the same workflow process is the challenge.” The Fiserv acquisition gave the company the final push it needed in terms of resources to achieve the goal of making its rater viable again, Anderson said.
Kathy Mulder, principal of Nolan Insurance Agency in Brandon, Wis., said her agency uses both MI Comparative Rater and MI Management System. She said MI is “definitely making progress” on integrating third-party reports. “I’m not 100 percent sure that it’s always MI we’re waiting for. It’s the companies who need to get on board.” The succeeding months since the March release have seen a stream of announcements from MI-Assistant as carriers agree to make insurance scoring and loss-history databases available for the comparative rater.
Mulder, whose name was provided by MI-Assistant, said the change has made a huge difference. “Before, we would go out to ChoicePoint directly and try to make a determination about which company to go with. Companies would not like it if you had too many reports and you didn’t write any business with them. By doing it through ChoicePoint we feel our ratio of reports ordered to business placed is better. We run them through the rater and get the quote. … It’s absolutely a real regular part of the workflow.”
The real-time revolution
The next challenge appears to be how to do comparative rating in real-time. On that score, AMS-Rackley—a division of leading agency management system-provider AMS Services Inc.—appears to have the edge. At its annual users group in April, the company announced the roll out of SETWrite for later this year. The company touted the product as the first solution that will allow agents to get real-time rates back directly from carriers (the ultimate guaranteed rate) on one screen.
Deetz dubbed the approach AMS-Rackley is taking “screen-scraping,” which he said is prone to more errors in complex rating transactions as compared to a “handshake” true integration of data.
“That works great for simple transactions like billing inquiry,” he said. “Where that breaks down in rating is if I have three drivers, four vehicles, auto and homeowners, I’m actually sending 150 to 200 fields—all the vehicle info, driver info, MVR info. What ends up happening in the screen scrape world is every time the carrier changes its site, I have to change my script. What happens is I don’t send the new question to the appropriate field, and either I have to ask the user to fill in additional fields or leave that field blank. Then when the carrier returns the premium it could be inaccurate. …
“They feel you can get away with it,” he added. “We don’t necessarily want to be in most states, we want to be the most accurate. When we do real-time rating, we want to do the handshake.” Whether this under-the-hood difference will matter to the end-user—the agent—remains an open question.
There’s no question, however, that Deetz and the other 75 employees at MI-Assistant will certainly have their work cut out for them to keep up with powerhouses like AMS. Deetz said that the three areas where MI and FSC look to synergize is customizing the MI Management System for FSC’s California customer base, the present capability of MI to utilize FSC’s batch rating products for carriers, and using Web services to eliminate duplicate efforts such as vehicle symbol codes.
In the meantime, the company prides itself on a level of service that its competitors of a certain size struggle to match. As Nolan Insurance Agency’s Mulder put it: “One of the reasons we do business with MI-assistant is that they are parallel to our agency. They’re in a small town; the way that they handle their business. I can call up and talk to somebody, and I know them. There’s just a comfort level.”
Anderson said the last six months have been a turning point for the company.
“A year ago I would have said there’s substantial doubt” about MI’s future, he said. “Today, with movement to real-time interaction, they have the potential for a bright future. I think there’s a real change taking place now.”
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