How to implement ISO circular updates efficiently?

Insurance Service Organization (ISO), a Verisk Analytics company, has been at the forefront of providing rating information since 1971 for Property & Casualty insurance industry. Since then rating content delivered by ISO has become an industry standard and indispensable source of information for Property & Casualty insurers.

Significance of ISO rating content for P&C insurers

ISO rating content helps P&C insurers to stay on top of the loss costs trends, new products forms, and regulatory changes for both personal and commercial lines. ISO content bundles all necessary rating information on industry developments and ISO activities including ISO filings for loss costs, rules, forms, and statistical plans, as well as actuarial data and analysis and other important insurance topics.

The content is critical for insurers to keep their existing line of products current with the market trends and launch new products rapidly ensuring regulatory compliance.

Manual method of ISO circular implementation

Initially, ISO would publish the rating information in PDF format, which are referred as circulars. A team of skilled insurer’s resources would manually analyze and interpret the circulars, and then incorporate the necessary changes into their products.

The manual method of interpretation and implementation of ISO circulars is extremely inefficient in meeting P&C insurers’ business goals. Mark Sheehan, head of ISO Rating Solutions at Verisk, presenting in a recent webinar, stated that the typical manual process that insurers would go through involve the below steps.

  • ISO circular information received, tracked and disseminatedManual Steps of ISO Implementation.png
  • Product area analysis of ISO circular begins
  • Product area changes submitted
  • System analysis begins
  • Business logic built with product area input
  • Company deviations built and tested
  • Product area tests new logic to ensure correct interpretation
  • Changes moved to production

Shortcomings of the manual method

Maintenance and management of ISO rates, rules and forms using the manual method is complex, labor-intensive, time consuming, and expensive. Besides, the number of circulars released by ISO is tremendous. On an average, ISO publishes over 75 circulars a week.

Novarica, an industry leading analyst, who did a study of this lengthy manual method stated in their report that it takes over 560 hours, i.e. more than 23 days for an insurer to process a single circular.

A considerable share of the total time i.e. 30% is spent on analyzing and interpreting the changes in the circular and 40% of the work effort is spent on implementing the ISO changes into insurers’ system.

Another distressful finding of the report is that insurers who work with ISO manually are at least two years behind their effective dates to respond to circular changes. Running behind on the effective date impact insurers’ productivity negatively due to premium leakage and loss leakage.

The Solution - ISO Electronic Rating Content

A few years ago, ISO set out to solve this problem by digitizing its rating content and came up with the solution called ISO Electronic Rating Content™ (ERC).

Presenting in the webinar ISO ERC Success Story: Ryder launches and stays current with ISO, Mark Sheehan stated that ISO ERC enables insurers and vendors receive pre-interpreted and pre-defined content electronically from ISO. This is a significant leap in speeding the process of interpreting and implementing ISO changes.

Using the electronic method, the number of processing steps came down from earlier eight to now just three.

Electronic Method of ISO Implementation.png

Step 1: ISO circular received, ERC downloaded and integrated

After receiving ERC, insurer can pick and choose which changes to adopt. A modern rating software can fully automate this and help insurers visually select, which circulars they would like to adopt and automatically update the system with just those circulars and the associated changes to rates, rules and forms.

Step 2: Company deviations built and tested

In this step, insurer can apply the company specific deviations on top of ISO base rates to retain, enhance or modify company exceptions.

Step 3: Changes moved to production

In this step, the changes are propagated to a test environment for user acceptance testing and subsequently to production. Insurers need to note that this step does not involve coding the changes as was the case in the manual method.

How the electronic method fare against the manual method?

ISO ERC when combined with right technology, can help P&C insurers overcome all hurdles of the manual method and significantly speeds up the adoption of ISO to successfully meet producer and policyholder needs.

Mark further elaborated that a comparison study done by Novarica between insurers who support ISO content manually versus those who support ISO content electronically led to show that the electronic method reduces average work hours by 39%.

The biggest cost savings is in IT modification, which stands at 58% and a cut down of 35% in the overall cost. Furthermore, insurers who work with ISO electronically were on average 7 months more current than those using ISO with a manual process.

Mark stated that the key strength of the ISO ERC solution is that it includes ISO’s

Novarica Study on ISO ERC.png

 own interpretation of the rating content.

ISO ERC bundles up-to-date definition of the rating rules interpreted by ISO’s actuarial and insurance line experts.

Content of ISO ERC

ISO ERC provides automated electronic representation of the following:

  • The rating data from the ISO Commercial Lines Manual (ISO advisory loss costs, limits, and deductibles)
  • The rules for acting upon that rating data for:
    • premium calculations
    • forms attachment logic
    • statistical code assignment
    • validation messages
  • Automated Maintenance Feed to import just the changes to rating data and rules into your rating engine

Subscribers of ISO ERC receive the content in Excel (for business users) as well as XML (for IT department) formats.

Key features of ISO ERC

Here are some of the key features of ISO ERC solution as stated by Mark Sheehan:

  • Timely updates via ISOnet: Ensures delivery of up-to-date rating content to insurers and vendors, which incorporates vital information on industry developments.
  • Precise details on ISO implementation update: Interpreted and defined by ISO improves accuracy of rating.
  • Automated maintenance feed: Ensures that insurers and vendors can identify and selectively implement latest ISO rating information directly into rating systems.
  • Automated release notes: Clearly indicate the changes to rating data and rating logic through easy-to-understand business documentation describing the changes.
  • Sample test cases: For each LOB/State.
  • ISO circular tracking extract: Provides a handy compilation of important circular information — all in one consolidated Excel file.

Lines supported by ISO ERC

ISO ERC provides support for a broad spectrum of commercial lines of insurance along with worker’s compensation. Rating solution with out-of-the-box commercial lines leveraging ISO ERC can bring significant advantages for P&C insurers and MGAs to launch new products and enter new markets quickly.

ISO Commercial Lines:

  • Businessowners
  • Commercial Auto
  • Commercial Inland Marine (filed/non-filed)
  • General Liability
  • Commercial Umbrella
  • Commercial Property
  • Crime and Fidelity
  • Commercial Package Policy

Workers Compensation:

  • Bureau States
  • Non-monopolistic (independent bureau) states


No doubt that ISO ERC has been a breakthrough in technology for insurers with its ability to automatically and fully consume ISO Electronic Rating Content while saving significant time and effort in interpreting ISO releases. Some of the key benefits of ISO ERC are:

  • Improved time-to-market with new products and product changes
  • Higher productivity with automation of manual processes
  • Cost reduction with analysis and implementation of ISO changes
  • Regulatory compliance

Unfortunately, full benefits of ISO ERC still seem elusive to many insurers primarily due to the lack of appropriate companion technology. Insurers must carefully consider various technological and business aspects when procuring or upgrading to new technology for implementing ISO ERC.

Watch the below on-demand webinar where one of the panellists Sue Tribby, Sr. Director of Ryder's insurance product lines team, transformed their insurance operations and achieved growth and profitability with the adoption of ISO ERC.

ISO ERC Success Story: Ryder launches and stays current with ISO

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