Growth has taken the top spot amongst business issues driving investments in 2017, according to a Celent survey. To achieve growth, a key lever for MGAs, program administrators and coverholders is product innovation. 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, “insurers 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, as a niche writer, an MGA or Program Administrator may identify an underserved growing segment such as addiction treatment clinics that are growing in response to the opioid epidemic. Similarly, MGAs s are also developing new products and the underwriting expertise to meet the needs of new risks like Cyber Liability and Drone coverage.
Product development, implementation in IT systems and the role of bureaus such as ISO
However, launching or refreshing new products or programs is no simple task. There are several activities to be considered across the value chain. While each of the activities in the value chain have their own challenges – developing, designing products and underwriting guidelines and implementing these in MGA’ rating 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.
Further, vended solutions that support configuring proprietary rate plans – rates, rules and forms – rapidly in their systems – can assist the rapid launch of programs and support ease of maintenance of these programs. One important distinction is to use rating software rather than excel spreadsheets – such that eventually if the MGA desires to distribute the products via an agent portal, the process is fairly automated.
Three examples of MGAs who launched new programs in weeks
- MGA providing commercial insurance to restaurant franchisees launches new program
Our client, offers commercial insurance nationwide to restaurant franchises. Founded by Quick Service Restaurant (QSR) franchisees and insurance leaders, the MGA brought deep specialization in QSR operations to effectively insure franchised restaurants. The MGA sought to launch a business owners policy insurance offering targeting franchisees of national concepts. Having partnered with a Lloyds syndicate and a fronting carrier, the MGA sought to launch the new program rapidly.
The MGA evaluated several options and selected ValueMomentum’s iFoundry Rating Engine along with a leading agency management system. Within a few weeks, the BOP product was configured in the rating software along with the requisite loss cost modifiers and made available to underwriters. Following this, the system was integrated with the MGA’s agency management system such that all the rating data flowed back and forth into the admin system. With this foundation in place, the MGA plans to roll out ValueMomentum’s BizDynamics solution for agents to submit business, access policies and better serve their franchise insureds. Eventually, this forward looking MGA also plans to engage the end insured with content and services for loss prevention.
The new rating system enabled the MGA to rapidly launch the program and start issuing policies. As experts in restaurant insurance, the MGA is ready to apply its knowledge of the nuances and caveats of QSR franchisees to write profitably business.
- MGA providing equine insurance products adds product breadth
One of our clients is the country’s largest providers of coverage for show and pleasure horses, horse farms, equestrian professionals, clubs and shows. This MGA sought to add breadth to its successful program by adding a new farm property product – based on ISO.
The MGA evaluated options and selected ValueMomentum’s iFoundry Rating Engine. Within a few weeks, the farm property product was configured in the rating software along with the requisite loss cost modifiers and exceptions from ISO and made available to underwriters. Following this, the system was integrated with the MGA’s agency management system such that all the rating data flowed back and forth into the admin system, which was the system the underwriters used to develop quotes and issue policies for all the products offered by the MGA.
The new rating system enabled the MGA to add a new product to round out accounts with related coverages for private structures, additional living costs, owner-occupied dwellings, extra expense coverage for farm barns, buildings, and structures and scheduled personal property. The solution enabled the MGA to add these coverages without disrupting the underwriting workflow in place prior to the implementation. This was accomplished via integration with the MGA’s agency management system.
- 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.
View our recent ISO ERC Webinar to learn about the real-world deployment of a modern rating engine in combination with ISO ERC at Ryder System by Sue Tribby, Senior Director of Insurance Product Lines. In addition, you’ll gain a deeper understanding of ISO automation with an actionable-information presentation by Mark Sheehan, VP and Head of Rating Solutions at Verisk.