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P/C Insurers: Defining a strategy for staying current with ISO content

Rapidly becoming the new normal - ISO interprets their own circulars and state manuals and comes up with an electronic format known as ISO Electronic Rating Contenttm (ERC) for distributing the advisory loss costs, rules and forms changes to licensees of ISO ERC.

As a long term strategy for adopting ISO changes, insurers need to invest in a rating engine solution with automated support for ISO ERC. This can bring unprecedented level of self-sufficiency and control for insurers in managing ISO changes.

Insurers piggyback on bureau content like ISO’s advisory loss costs, rules and forms to gain momentum in developing and introducing new products into the market, filing changes for the existing products and staying compliant with regulatory changes. If a insurer has products based on ISO bureau content in the market, they would need regular updates to this ISO content, available periodically via circulars. Moreover, insurers deviate on the bureau content and create their proprietary products in order to differentiate in the market and calibrate risk appetites. In both these cases, insurers would need to stay subscribed to ISO’s rating content to keep their loss costs, rates and rules current with the market trends.

Exploring a long-term strategy for ISO (what is my ISO strategy?)

If a insurer relies on ISO content, it has to deal with a large number of changes and the complexity of understanding the ISO changes. ISO releases an avalanche of circulars every year. Most insurers miss out on ISO filing by effective dates because they just cannot get the changes implemented on time. This process involves reading manuals and circulars and understanding what those mean, analyze, and provide specifications for their IT teams. This approach could potentially introduce errors, increase time and costs to keep up-to-date.

Alternatively, insurers have the option of completely outsourcing the implementation of ISO changes to a vendor. But this would mean complete dependency on such a vendor for implementing changes. This may impact insurers’ ability to stay current with ISO changes or introduce new product offerings into the market on time.

Let’s look at another alternative for insurer compliance and control. If self-sufficiency with reduced vendor reliance is what the insurer is looking for as a long term strategy for ISO implementation, then insurers need to invest in a modern rating engine platform with the ability to import ISO Electronic Rating Content automatically and the advisory loss costs, rates and rules to easily extend or deviate ISO base content as necessary. Such a system should also integrate with insurers’ other systems e.g. Quote and Policy Management Systems. When it comes to evaluating a rating engine, insurers have two broad options to set up operations to benefit from ISO Electronic Rating Content:

  • Develop a custom rating system and corresponding quoting system that can leverage ISO Electronic Rating Content
  • Procure a commercial off-the-shelf rating system from a vendor that is a member of the ISO Electronic Rating Content Associate Program

Finally, if insurer decides on a modern rating engine with support for ISO Electronic Rating Content, subsequently, it needs to choose between cloud or on-premise deployment. While cloud deployments can provide significant speed-to-market and cost benefits, insurer needs to ensure that the vendor meets security, availability and privacy requirements. Below are five key considerations for evaluating a vended rating engine solution that integrates with ISO Electronic Rating Content:

  • Breadth and depth of Lines of Business supported: Ready availability of all lines of business and territories and the ability to rapidly launch ISO-based commercial lines with out-of-the-box ISO content
  • Timely access to ISO updates: Ability to automatically and fully absorb ISO ERC as-is
  • Support for company deviations: Ability to manage company specific deviations
  • Ability to assess changes: Identify the summary of differences across versions of changes
  • Ability to extend online rating & quoting: Online quoting should instantly be aware of ISO changes

insurers utilizing a modern rating engine solution with support for ISO Electronic Rating Content can rapidly develop their rates and rules without any dependency on the vendor or IT team. And they would only need to focus on exception and proprietary innovations; no need to spend time interpreting the ISO circulars. Insurers or their vendors would be implementing ISO changes with just a few clicks.

You can watch Anand Rajaraman, Director Product Management, ValueMomentum, presenting a live demo on ISO implementation using iFoundry rating engine solution in a recent webinar by playing the video below:

 


You can watch the complete recording of the demo by playing the on-demand webinar titled,  You Can Now Update ISO Rating Content featuring speakers from Celent, ISO and ValueMomentum.
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