Growth and retention have taken the top spot amongst business issues driving IT investments in 2017. This is across property & casualty insurers of all sizes, according to a Celent survey. The next top business issues are process efficiency and innovation. To achieve growth, a key lever for property/casualty insurers is product innovation and maintenance. In our interactions with insurers, we are constantly hearing their need for refreshing legacy products, tailoring products to attractive niche segments and developing new products to meet the needs of growing markets.
According to a Celent research report titled North American Rating Engines, “carriers are looking to grow, differentiate themselves, navigate the regulatory environment, and do all of this efficiently.”
Product Innovation & Management
Refreshing legacy products is similar to your favorite smartphone company adding new features to their existing phones. Apple did this with iPhone 7 when it added Portrait mode to apply a depth-of-field effect for beautiful pictures. Similarly, insurers are constantly adding new coverages like an Employment Practices Liability (EPL) for small businesses as part of a BOP product. Tailoring products to attractive niche segments is another popular method to achieve growth. Here, an insurer may identify an underserved growing segment such as addiction treatment clinics that are growing in response to the opioid epidemic. Tailoring a package policy to this niche makes the insurer more attractive to such businesses. Similarly, insurers are also developing new products to meet the needs of new risks like Cyber Liability and Drone coverage.
However, launching new products or programs or refreshing such products is no simple task. There are several activities to be considered across the value chain – ranging from:
- Developing or marketing to distribution channels
- Developing, designing and testing the product and ensuring rate adequacy and establishing underwriting guidelines
- Filing the products with regulatory authorities
- Setting up operations to underwrite and service policies and claims
- Implementing information technology systems to process the business
- Analyzing the results and modifying the rates or underwriting guidelines
- Keeping the products updated by assessing the impact of changes (for instance – ISO circulars) on the book of business and determining the appropriate course of action.
Product development, implementation in IT systems and the role of bureaus such as ISO
While each of the activities in the value chain have their own challenges – developing, designing products and underwriting guidelines and implementing these in insurers’ information systems – in a timely manner can make all the difference in achieving the business objectives.
Insurers, often adopt bureau based products such as those from ISO to serve as a starting point. This is to ensure that they are accessing the most up-to-date advisory loss costs, rules and forms. This can be a means to speed up the product development process and with the right vended solution that supports such bureau-based products out-of-the-box, also the technology implementation process.
With this baseline, insurers can then analyze key elements of risk not addressed in the ISO rate plan, review industry statistics for those key elements and develop their exceptions from ISO by adding such elements and removing those that are contradicting industry data.
Vended solutions that support ISO, NCCI and other bureaus out-of-the-box often have rich capabilities for rapidly configuring such exceptions. Moreover, vended solutions that support these bureaus using electronic means, for instance with ISO Electronic Rating ContentTM (ERC) not only support most commercial lines out-of-the-box, but they also support updates from ISO in an automated manner – eliminating the tedious processes associated with reviewing ISO circulars, interpreting them, developing specifications and implementing and testing the specifications in their IT systems. The erstwhile manual process is often the reason why many insurers are unable to keep their products refreshed in the first place – (to learn more, read the report “Reduce Costs & Stay Current With ISO - A Guide to Modernizing Rating, & Benefiting from ISO Electronic Rating ContentTM”
Four examples of insurers who launched new ISO-based commercial products in weeks
National E&S Carrier Keeps Product Refreshed
One of our clients, a national excess & surplus lines carrier underwrites risk for some of the most innovative US companies. This E&S carrier’s legacy rating software was unable to meet new operating needs and the process for keeping their products and rates refreshed through ISO updates, was largely manual.
The carrier evaluated options and selected ValueMomentum’s iFoundry Rating Engine with support for ISO Electronic Rating Content (ERC). This enabled the carrier to avail of General Liability line of business from ISO out-of-the-box. Within a few weeks, the carrier’s loss cost modifiers and exceptions from ISO were configured and made available to underwriters.
With their previous system, carrier’s IT staff would extract data from the ISO circulars, load it into spreadsheets and provide it to the business. Today, that tedious manual work is gone, as the carrier was able to stay current with ISO updates by accessing ISO ERC releases which bundle multiple ISO circular updates. As a result, all updates from ISO were available with virtually no manual intervention.
Additionally, iFoundry is giving the carrier’s analysts new insights into underwriting data. Carrier’s analysts can now view current and prior rating data quickly and easily.
Global Insurance Carrier Meets Regulatory Compliance
Another client, a leading global property and casualty insurer’s property division was asked by the department of insurance of a specific state to maintain compliance with its filed rates. They had a limited window of time to deploy the commercial property line of business based on the most recent ISO filings in that state. The compliance department initiated a search for a solution which could meet their time-to-market goals and minimize reliance on their internal IT teams, as they had limited resources.
The carrier obtained ISO Electronic Rating Content for commercial property line of business and ValueMomentum’s iFoundry Rating Software. With ISO commercial property line of business available out-of-the-box, the carrier quickly accessed a trial system where their underwriting lead and a business analyst evaluated the accuracy of the system and identified the exceptions that required to be configured. Within a matter of weeks the system was assessed as compliant with their filings and the system was deployed to all the underwriters.
The carrier has since accessed numerous ISO Electronic Rating Content (ERC) releases which bundle multiple ISO circular updates. This has resulted in their remaining current with ISO circular updates well within the effective dates of the circulars. The underwriting teams have also been able to efficiently rate large schedules of locations and buildings with iFoundry.
Leading Commercial Transportation Rental & Leasing Provider Tailors products to Niche Segment
An industry leader in truck rental, fleet management and supply chain solutions for businesses had been offering commercial auto liability and physical damage coverage waivers to its customers in all 50 U.S. states. This was in addition to its core fleet management, supply chain and transportation solutions.
For several years, they had relied on a homegrown underwriting tool for pricing commercial auto coverages. The client’s legacy system lacked the ability to provide location-based quotes. As a work-around, the client priced policies by using more general regional models. Frequently, this rating methodology resulted in two nearby locations having vastly disparate rates. Sales agents were increasingly dissatisfied with the system.
To find a solution, the client began by contacting ISO and eventually investing in ISO Electronic Rating Content™ and ISO Risk Analyzer® for leveraging electronic ISO updates and multiple granular rating components down to the ZIP-code level.
However, the client required a solution that integrated the rating data supplied by ISO ERC. Also, the client’s lean IT staff had limited resources to conduct the needed deployment integrations and support them with ongoing maintenance. Deployment included integrating the client’s proprietary point-of-sale system, automated deal analysis, and review to enable sales agents to provide customers preliminary rate quotes during a vehicle leasing transaction.
The client evaluated and selected the iFoundry™ Rating Software and its availability as a cloud-based subscription. ISO’s commercial auto program, available out-of-the-box via an integration with ISO Electronic Rating ContentTM, was provisioned and configured to meet the specific classes of business and coverages required by this client – for all US states and territories.
Today, nearly 500 sales representatives of the company quickly and easily provide their customers with competitive coverage quotes. Overall, the client’s profitability has improved, and risk exposure has been reduced. Offering customers competitively priced insurance coverage is a major program for the client, and helping ensure that its policies are adequately rated has had a significant positive impact on the bottom line. The client has also availed of ISO circular updates and Risk Analyzer for Commercial Auto updates, via ISO ERC releases.
Mutual Insurance Carrier Refreshes Decades Old Product
A mutual insurance carrier was seeking to transform its operation from a regional mutual insurance provider to a progressive and modern organization able to expand within its current geographic markets and into additional markets with new personal and commercial lines product offerings.
This mutual insurer had legacy products that required a refresh of both the coverages offered to effectively compete in the market as well as provide for adequate pricing to ensure profitability and competitiveness. The carrier was saddled with legacy systems that were not flexible and such product refreshes would have taken a substantial time.
The mutual invested in ISO Electronic Rating ContentTM and after an evaluation, they selected ValueMomentum’s iFoundry Rating Engine with support for ISO Electronic Rating Content. For Business Owners Policy, Commercial Umbrella and Commercial Auto lines of business. The BOP product was provisioned and configured in a matter of weeks along with additional coverages for equipment breakdown, Employment Practices Liability (EPL) amongst others. A significant challenge remaining was integrating the rating for the BOP product with the mutual insurer’s legacy policy administration system and agent portal. Through a collaborative effort between the mutual insurer’s IT team and ValueMomentum’s professional services teams, the integration was successfully achieved, enabling the insurer to deploy the refreshed product to its agents.
Electronic methods provide significant time benefits for launching new products and keeping them refreshed when compared with manual methods – as is evidenced in the case of the four insurers above. Systems that support such electronic methods such as those provided by ISO Electronic Rating ContentTM can enable property/casualty insurers to keep their products refreshed, launch new products targeted at niche segments, remain compliant with regulatory authorities and also innovate new products to meet new market needs.
Looking to hear directly from one of the above insurers? Check out this on-demand webinar: HOW CAN INSURERS BENEFIT FROM USING ISO ELECTRONIC RATING CONTENT?