Insurers looking to successfully stay in the game over the long haul must create a flexible, responsive business environment - one that can sense change in the environment and respond accordingly. Opportunities arise quickly and they are gone just as quickly. Communication and information technologies are exploding and putting consumers in the driver's seat with the gas pedal floored. Insurers are progressively turning to automation as they look for ways to grow, reduce cost, rapidly bring more appealing products to market, deliver a better customer experience, keep loss expense and exposure under control, and increase profits. Put it all together and it is a very tall order demanding a full set of sense-and-respond capabilities.
According to recent SMA research, insurers are focused on strategic initiatives that address product mix, growth, and profit. The majority report that profitable growth is a priority objective that has leadership consensus throughout the organization. However, many find it a formidable challenge to make it happen. One of the central obstacles to progress sits squarely in the land of rates and rules. Keeping up with ISO content is expensive. The effort requires major resource and time commitment. For most insurers, staying on top of rate and rule changes, even those that just apply to existing business offerings, is a real challenge. It can hamper the organization's ability to rapidly respond to market needs. It can impede the organization's ability to capitalize on ripe opportunities.
The industry needs a new way of managing rates and rules - one that will align to the flexibility, scalability, and responsiveness of a contemporary insurance company. Fortunately, there is a new ISO Electronic Rating Content offering that has real transformational possibilities. Those able to capitalize on it will be able to make giant strides forward.
The ISO Electronic Rating Content offering provides a platform independent method for receiving ISO interpreted rules. It simplifies the ongoing maintenance and update efforts involved in using ISO's rating content while affording users the flexibility to employ their own tools and systems. ISO provides the requisite rating data, such as rating algorithms, valid limits, deductibles, advisory loss costs, classification codes, and relationships of the data. The service spans a total of 11 lines of business, including both commercial and personal lines, along with other non-ISO lines of business.
There is no question that it is time to start thinking of rates and rules in a broader context. Insurers should be analyzing where rates and rules fit in terms of their current differentiators, as well as what they would like those differentiators to be. State-of-the-art policy administration systems can and should do more than just quote, issue, and manage policy records. Systems that have long been viewed as transactional workhorses should be able to deliver genuine strategic advantage with capabilities that enable rapid product development intelligence.
With a mountain of business priorities demanding attention, the subject of rates and rules often gets relegated to future discussion with the assumption that there is little room for real impact. Insurers and policy administration system providers with solutions based on the foundation of a modern architecture and with a sophisticated insurance product configurator at the core are able to use this electronic content to support both policy administration and product development. Because of the way the new ISO Electronic Rating Content is structured and delivered, insurers and vendors will develop and utilize adapters to import the information, and then use that information to make sophisticated insurance product configurators even more fluid and responsive. Technology that preserves interpretations electronically rather than requiring a rekeying effort will help insurers stay ahead of the game.
Those insurers that are making decisions about core policy administration systems should make certain that the management and integration of rates and rules is one of their top evaluation criteria. Insurers who have been hesitant in the past about implementing a new policy administration system might find this a good time to take a look at advantages that extend beyond the traditional system of record administration.
The new alternative to managing ISO rates and rules capitalizes on ISO interpretations, enabling companies to use those interpretations as a base and bring new insurance products to market more quickly, less expensively, and with less risk. The industry is being presented with transformation capabilities that can impact how insurance companies are able to develop and deliver products. The concept of being able to use one interpretation of a rule that originates at the source, coupled with the ability to use that interpretation and the rates in a rating tool, is something to shout about. For many insurers, it can mean a real leap ahead in creating a nimble organization. It is indeed innovation - innovation that enables the sense-and-respond capabilities so necessary in today's marketplace.
(Karen Furtado is a partner at Boston-based SMA Strategy Meets Action, a strategic advisory firm offering research, advice, and consulting exclusively to the insurance industry. This article is based on ongoing research on Policy Administration Core Systems Solutions. For a review of SMA's research reports and services, visit www.strategymeetsaction.com/our-research or contact Karen Furtado at 978.239.2741 or [email protected].
Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader
Your access to unlimited PropertyCasualty360 content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking insurance news and analysis, on-site and via our newsletters and custom alerts
- Weekly Insurance Speak podcast featuring exclusive interviews with industry leaders
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the employee benefits and financial advisory markets on our other ALM sites, BenefitsPRO and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
