ISO issues hundreds of circulars every year updating product filings relating to loss cost trends, rates and rules, which are necessary given the complex nature of P&C insurance in the United States and dynamic nature of insurance coverage. Without these updates, insurers run the risk of losing market share due to over-pricing or experiencing premium leakages due to underpricing. These updates ensure that insurers’ products are compliant with the latest filings.
However, ISO publishes 75 plus circulars every week on an average supporting 26 lines of business in 50 states. The challenge for insurers is to convert this enormous amount of data into actionable information. A typical process of manually analyzing, interpreting, and implementing circulars with company specific deviations takes a lot of people and many work days, in fact 30% of the total time on analysis and 40% on implementing changes into insurers’ system, according to a Novarica report. Insurers need to find a solution to implement latest ISO rates & rules quickly and cost effectively to reduce premium inaccuracies and improve speed-to-market and self-sufficiency.
ISO Electronic Rating Content
ISO launched ISO Electronic Rating Content to help its customers simplify implementation of ISO circulars. ISO ERC provides electronic feeds for ISO-interpreted rates, rules, and form attachment logic. With ISO Electronic Rating Content, the implementation steps got reduced to just three – receiving the circulars, applying the company specific deviations and testing, and implementing the changes to production. The analysis and implementation that constitute the 70% of the work in manual implementation have already been taken care of in ISO ERC. ISO ERC includes:
- The rating data for the ISO Commercial Lines Manual (ISO advisory loss costs, limits and deductibles)
- The rules for acting upon the rating data
- Automated Maintenance Feed to import just the changes to rating data and rules into insurers’ rating engine
Newer rating engine technologies for ISO implementation
Leveraging a modern rating engine, insurers can automatically import and consume ISO ERC digitally with just a few clicks and keep their loss costs, rates and rules current with the market trends. It can also help insurers automate their rate or rule making processes, reduce operational costs, accelerate product development and maintenance. A modern rating engine comes fully loaded with library of ISO lines of business out-of-the-box with all states and territories via integration with ISO Electronic Rating Content.
Speaking in a recent webinar, Anand Rajaraman, Director Product Development, ValueMomentum highlighted some of the capabilities of a modern rating engine solution:
- It must enable insurers to easily extend the ISO definitions and create proprietary rate and rules.
- It must help define complex business logic without any programming effort.
- It must provide tooling for analysis that would help business iteratively analyze the impact of various rating strategies on their book of business and take informed decision whether to adopt a change, deviate, or decline. The engine would allow tracking of entire history of changes along with an audit trail.
- A sophisticated rating engine would have the ISO state and multi-state exception plans already in the system. Insurers just have to focus on their own proprietary innovation and deviation if at all needed.
The information about rates and rules that the insurers have adopted or deviated from ISO is also tracked, so that next time an ISO update comes in, the rating engine would automate the adoption decisions to adopt an ISO rate and rule. Insurers can keep their proprietary innovation without needing to lose the changes every time they adopt an ISO change.
The benefits of ISO Electronic Rating Content can only be realized fully when powered by an advanced rating engine solution. By investing in a sophisticated rating engine technology, insurers can fully automate the implementation of ISO advisory loss costs, rules, and forms and gain benefits such as rapid roll-out of new products and product changes, higher productivity by automating manual processes, rapid rollout of new programs, regulatory compliance, and lower cost of implementation.
View this on-demand webinar: Insurers Can Now Update ISO Rating Content Digitally to find out how ValueMomentum’s customers benefit from such advanced rating engine solutions with support for ISO ERC.