Streamlining
Auto Claims
by Bridget
McCrea
Not many companies can boast that they have a rocket scientist
on their executive team, but eAutoClaims Inc., of Oldsmar
can.
The
company's chief information officer, Gaver Powers, was recruited
from the National Aeronautic and Space Administration, where
he worked for 21 years. Prior to joining eAutoClaims, Powers
served as lead programmer for the space shuttle at Cape
Kennedy. "We often joke about having a 'real' rocket
scientist in our ranks," says Eric Seidel, company
president and CEO, who knew Powers previously and was responsible
for recruiting him to his startup. "After 21 years
over at the Cape, he took the plunge with us and built the
architecture for our first system."
|
|
| Eric
Seidel, president and CEO of eAutoClaims, is also one
of the founders. It was Seidel who hired rocket scientist
(really) Gaver Powers, to develop the system for automating
auto claims. photo by:Tom Berndt |
Founded
in 1999, 125-employee eAutoClaims (www.eautoclaims.com)
is a business services company that provides the insurance
industry with claims management services through both application
service provider (ASP) and integrated outsourcing solutions.
The company's clients are insurance companies like Royal
and Sun Alliance and Vision Insurance, as well as fleet
management and insurance services companies.
Developed
by Powers, eAutoClaims' solutions streamline the claims
handling process, decreasing the overall time and cost required
to process a collision claim and reducing average paid losses
for its clients. According to Seidel, the company handles
repair estimates, repair audits and claims systems administration
services for automobile claims that are processed and tracked
via the eAutoClaims Web-based platform and network of service
providers. Powers may have brought it to life, but eAutoClaims'
system is actually the brainchild of three businessmen:
Seidel; Jeff Dickson, chairman; and Vick Grechniw, executive
vice president. Seidel was working in the fleet management
industry and Dickson in the insurance industry when they
noticed that the average paid loss or "severity rate" of
a vehicle was about $400 less when a managed fleet approach
was used, rather than the traditional consumer insurance
repair process.
Seidel
and Dickson's entrepreneurial spirit kicked in, and both
realized that they could provide a better system for all
parties involved in the process from the consumer to the
body shop to the insurance firm. The pair teamed up with
Grechniw and started up a traditional claims management
service in 1997, relying on a network of auto body shops
to do the work. But the trio's early efforts didn't do much
to affect the way the typical auto claim was traditionally
handled: consumer gets in accident, calls insurance company,
is directed to one or more local auto body shops, takes
their car in for an estimate, gets approval from the insurance
firm and finally gets it fixed. The process could take 17
or more days from start to finish, and frustrated the entrepreneurs.
"We
just couldn't provide the kind of service that would make
the concept work using our existing processes," says Seidel,
who in November 1999 began looking for a better, more streamlined
way to process the claims. He found it on the Internet.
"I approached our equity partners," says Seidel, "and shared
with them the concept of managing the process online." With
the Internet coming on its own and dot-com mania well underway,
Seidel snagged an initial $1-million investment from a brokerage
house in Toronto. The founders used the money to build the
initial system, create the infrastructure to support it,
hire employees and a sales force, and start early marketing
efforts.
On their
side was a pool of insurance companies that were already
using the company's earlier system, but who were eager to
speed up the auto claims process. As such, getting their
first customer was a snap. "We had some relationships from
our previous company," says Seidel, "so it wasn't hard to
find a client to roll out and beta test the product with."
Breaking
In
After that first customer was on board, eAutoClaims set
out to grab its share of the nationwide $60-billion automobile
and truck collision repair market. According to securities
analysts Dirks & Company, Inc., of New York, eAutoClaims
actively targets about half of that market, and works with
a percentage of the 150,000 professionals in the insurance
claims settlement field who deal with about 120 million
new claims each year for a total of $180 billion in claim
payments. With an average payment of about $1,500, each
of those professionals settles about three claims per business
day, or 750 per year.
For
those professionals, eAutoClaims' eJusterSuite, an ASP
that streamlines repair claims for the automobile insurance
industry, makes life more bearable. The time from accident
to repair has shrunk from 17 days to a svelte three days
and 10 hours, according to eAutoClaim's internal records.
Each month, roughly 2,500 consumers call the company to
report their accidents and are connected to an insurance
claims professional who has the specific insurance firm's
claims form right on the computer. After typing in the vehicle
address, the rep pulls up a list of 20 of the closest body
shops and offers directions and distance to the consumer
all during that first phone call.
The
need for the service is already obvious in eAutoClaims'
significant growth over two years. During its first fiscal
year – which was only seven months long – the
company brought in about $7 million. The following year,
it posted over $20 million in sales. This year, eAutoClaims
brought in $16 million in revenues between August 1 and
January 30, 2002. eAutoClaims gets most of its revenues
from client fees and discounts provided by contracted network
shops. The company shares the discounts with its insurance-company
clients and uses part for incentives to encourage car owners
to use the network shops. The per-claim handling fee ranges
from $35 to $50, and averages $40. eAutoClaims also receives
"click fees" and portions of discounts under agreements
with parts distributors and other vendors.
Reaching
Out
By the tender age of two, eAutoClaims had already made its
first two acquisitions: Premier Express Claims, Inc., which
provides auto glass insurance claims management services;
and SalvageConnection.com, Inc., which allows eAutoClaims
to offer clients an online auction site for the sale of
so-called "totaled" vehicles, those damaged beyond repair.
In September, the company also signed a joint-venture agreement
with Global Now, Inc., a technology and e-commerce development
company that specializes in the auto salvage and used auto
parts industries.
According
to Ray Dirks, director of research for securities analyst
firm Dirks & Co., eAutoClaims is both unique and ahead of
the curve in the auto claims industry. The company has few
competitors that are using similar processes, he says, and
has established a "real" business with significant revenues
that will reach profitability soon. "eAutoClaims is an example
of a real success in e-business," says Dirks. "The company's
clients are insurance companies with major capital and money
to spend, and for them the company provides a valuable service
that would not be economical for them to handle on their
own."
At least
one of the insurance companies provided a major milestone
in eAutoClaims' growth, according to Seidel, who says a
5-year deal inked with Royal and Sun Alliance in January
2001 gave the startup its first big, national client. "We
rolled our product out to 33 offices, and that gave us a
real jump-start in terms of revenue and credibility," says
Seidel. "We were already doing business with a number of
regional carriers, but this was our first big, national
carrier." Along with its insurance company clients, eAutoClaims
also has agreements with organizations like the California
State Automobile Association (CSAA), the second-largest
member of the AAA family, with 4 million members in California,
Nevada and Utah. Under an annual contract, eAutoClaims processes
the auto repair claims of CSAA members through its national
network of body shops, which includes more than 400 in California.
Focus,
Focus, Focus
eAutoClaims recently left behind its "sprawling campus,"
comprised of several 3,000-square-foot buildings added as
the company grew, into a new 30,000-square-foot facility
that looks much like an insurance company. The company,
which went public in April 2000, is currently raising about
$2.5 million, a round led by vFinance, Inc. Seidel says
eAutoClaims will use the money for technology development
and to support the firm's continued, accelerated growth,
much of which can be attributed to its executives' ability
to focus on what the company does best.
