Introduction

The principles and methods described here are relevant for all Lines of Business. Emphasis here and examples assume that the goal is to implement Personal Auto Insurance through Binding including use of MVR, credit and related look-ups.

In most cases a complete solution will use one rating engine to allow uses to estimate and choose coverages anonymously and another rating engine to get to-the-penny accuracy.

In the next several years, others will be reaching new distribution channels and rapidly lowering all operating costs by improving use of the internet and cooperation among companies. The right, open design will provide a platform that will allow you to move ahead of competitors, making careful, safe improvements more rapidly, differentiating and serving all of you constituents more effectively,

The costs of distribution are lowered while sales and marketing effectiveness is increased. You can still maintain as much or more, underwriting control and personal contact with the insured. The costs of underwriting and policy issuance are lowered even without making any changes to where, why and when underwriting and producer experience and judgment are involved.

You can use the Internet and systems that integrate carriers with distribution via XML and other practical methods to improve today's process. Using the internet can leave underwriting rule Make the same human judgments while making the process more efficient.

You might want to implement one pathway for users who are ready to start by providing their private information (like VIN and License Number for Personal Auto), and a separate process where you want to allow the potential insured to remain anonymous.

Generate more "good business" by making sure that underwriting selection and tiering are accurate. You can lower your operating costs in several ways. For low risk profiles the process through issuance can require zero labor by the agency and the carrier. By having the website gather quotes that would have been left undone because of the labor prospects will receive more alternatives and more business should be closed.

Thorough, Integrated Solutions are Needed

Rating  that can be web accessible can now be implemented in MS-DOS, on a Mainframe and anything in between. 

Comparative rating or Specific? Both. 

In most cases you will want to implement an invisible interface to support the point where the switch is made from the Estimating rating engine, perhaps Comparative, then to the Accurate rating engine, the Specific, when real to-the-penny accuracy is needed.

Before rating, Risk Selection is implemented. For some risk profiles the result is a denial. For others, a particular program. For most a tiering choice needs to be made. Similarly, after rates are calculated and before display to a potential insured, Risk Selection again is made, this time to reflect the priorities and commitments to carriers made by the Sponsor of the website, an MGA or Agency.

Full support for company specific questions, credit score use and all external look-ups is also supported. 

The web based process should be more efficient than today's agency process, with no duplicate data entry, support for work flow and the ability for the Underwriter, the Producer, the CSR and the Insured to each see the same content at the same time using only a web browser. Of course, an audience can be set up to see less than others see. And, underwriting attachments can be easily stored and viewed whether only as scanned images or as computer files.

All capabilities can be implemented on a  “private label” basis where the Sponsor does not need to reveal its identity. Instead the insured might see that the website originates from their employer, an association or some other client of the Sponsor. The Sponsor's customer can do none of the installation and support while it looks like the are doing so. Where appropriate a Sponsor can let the Group install, operate, maintain, and modify certain portions of the website and rating process while keeping other aspects not changeable.
 

Today's Rating Software should be Used

The property and casualty industry supports rate quoting in each of several different ways:

1. The Carrier's internally used, "the only real", rating. We can do that, in all of its forms. We're not saying it is easy, but we make it easier on the carrier. XML, AL3-extended, tilde delimited, via MQSeries to the 3270 mainframe screens and each of several other methods are considered and the "best" is used. We understand system load and performance issues and can help design appropriately.

2. The Specific Rating CDs shipped to agencies. When they are not out of date, they are usually pretty accurate. Usually implementation is possible with no time or cooperation from the software supplier or the Carrier's IT department. Cooperate is preferred and can make it easier. 

3. The Comparative Rating products. Some are more thorough than others in their support from Policy design traits and for Underwriting risk, that is company specific, questions.

For a somewhat more technical view of the many rating interface alternatives, see below  Rating Interface Methods.

What are some of the Rating Issues?

For an Agency or Broker the choice of carriers and rate plans and the enter Risk Selection are critical variables. Generate a healthy loss ratio for their carriers requires careful choices. Risk Selection, Tiering and Rate Plan selection should, in most cases, be implemented to follow today's underwriting process exactly. 

If a senior producer reviews a certain class of risk before quoting, then it will appear in that person's Pending Work screen. If unattended to for your chosen length of time, who should it be presented to next? Should we send a message to their pager, phone or fax machine?

Risk selection also needs to align with the commitments between the agency and the carrier, like "25% of your home owners needs to be placed with us."

Rating Accuracy can be a very complicated subject. 

Using software designed for to-the-penny accuracy is the first step. Giving that software access to any required external look-ups is the next step. 

Absolute, thorough auditing and visibility of the rating process is required when to the penny accuracy is expected. Our rating process stores and reports on where the data moves in the process, and what rating software and rating table version was used. Before development a set of test cases are created and used to make sure the process is accurate. At acceptance testing time many more cases are created and a set of automated user session scripts are created to be able to re-run those rates again and again to see if any software changes might have caused something to become inaccurate.

External look-ups are another important part of the underwriting process for many lines of business. In some cases you might want a credit score even to generate a rough quote. In most cases, before binding, or at least during final underwriting you'll want to look up and evaluate claim history, perhaps the legal history of the commercial or individual insured, whether the insured is properly licensed or any of a number of underwriting steps.

Back-end efficiency means that you want the data passed along and usually reformatted to fit right in to your agency management and carrier policy systems.

It also means that there must be high respect for the impact on system load and on the length of time a user could be caught waiting for an answer.

Adding and updated data on a computer system needs to be done carefully, usually it requires interfacing directly or indirectly to the software that posts the data now, not some new approach. We understand the many operating environments that could be involved and the software tools that can reduce the development effort and deliver high reliability. And, as always, when an Online Transaction Processing System is involved, we take great care with both design and testing to make sure that the system load impact is low and acceptable.

Rating Interface Methods

We have done work with over 20 different rating engines and we've discussed the technical details for several times that number. It is relatively easy to implement an approach that first makes sure the rating program is ready, using the Queue Manger, then send and receive from it a file.

A file is most likely to be AL3-Extended, Custom to the Carrier, or XML. The format matters but we can support any format. Just about every rating engine can produce a file of some kind as output, but not all take a file as input. That's OK. We advocate no use of "screen scraping", which is where to computer pretends that it is the human entering what the software expects, but we'll do it. Even when the rating engine does not take a file as input we often find that it is possible to input to the file(s) that the rating engine uses to do its processing. In some cases, to generate a fast enough response for an online user, it becomes necessary to do a relatively small amount of programming to make the rating engine become able to allow its internal files to be used or even to take an external file as input.

The carrier's "real rating program", whether online or batch, can be interfaced to each of several ways. In an order that does not reflect preference they are::

1. passing files back and forth, that is Custom, XML, AL3 or whatever 

2. interface via an existing Agency Dial-in whether Internet, IVANs, or Dial-up. Such a solution is likely to use Screen Scraping at the terminal.

3. interface via IBM MQSeries or similar software to either the executing program's 3270, 5241, VT100 screens

4. interface to the file formats used by an existing batch job. Consider installing a version of that same program as an online job.

5. store the result to the file that is used by the program. Typically there is a Data Collect or Transaction Log file that can be considered.  This same principle can be carried further with some rating engines. If the rating engine uses a file or set of files that can be made securely accessible, then it is sometimes practical to interact with the rating software by using its files in several ways.

6. use the software for Upload/Download to agency management software like AMS For Windows, Applied or Instar.

7. Pretty much whatever else is proposed.

Related Non-Rating Issues

As part of any Rating solution, we  can provide software to support any combination of several aspects. Here are some issues to consider.

Q: Will my users want to use it and like what we implement with your help?

A: Yes. The content of the screens and the screen sequence can be entirely in your control. We also advocate that early users should be presented with 2 sets of screens. This will allow you to determine what is more popular and effective.

You can be in complete control of every aspect of every screen the user ever sees. Our experience in insurance, with customers and our user interface engineers will help. In addition we suggest implementation of ways that will measure which and how many users abandon the process and when, how long each screen was loaded, etc.

Q: What security do you provide?

A: All of the normal Internet security and more. We can implement for you or advise about implementation of firewalls, secure sockets, certificates, virtual private networks, etc. We'll help you design what data is physically accessible and when and what gates and other controls will be implemented for protection. Where needed, we call on large and small business partners to help.

Q: How do you protect the privacy of the insured?

A: Very specifically. Our product plans include more security and privacy control than any other company we have encountered. The intent it  to allow you to determine exactly how much protection you want to implement.

Q: Is your rating solution designed for use by Agents or by the Insured?

A:  You choose. You are in control of that choice. How much do you want the insured to see and when? You control how the Workflow is implemented. Your workflow can be one that has no involvement at all by the insured, just improving productivity of producers and CSRs. You can implement with the insured doing the input but seeing no rates. When and if practical in support of all underwriting issues, and if you choose to, then you can implement a workflow that brings a very low risk insured through to a Binder with no producer intervention and refers those with even a moderate risk profile to a licensed producer before proceeding. From there the producer can relay the Quote or Application to others including the company underwriter, on the browser or by email or fax.

Q: Is there an interface to the carrier policy administration system and agency management system?

A: Yes. The Rating-Database supports ‘all aspects needed to get through binding.’ From there you will want an automated interface to your management system and to the carrier's system. We've done work with four different management systems and five carrier systems and are familiar with many more.

Q: What happens if the Rating Engine is not ready?

A: The use of Queue Manager software makes it practical to handle both the situation where the rating engine does not respond fast enough and to make sure that the rating request only reaches the rating engine when it is ready.

Q: Where can learn more?

A: Contact Bruce Lynch at bwlynch@techie.com or 617-834-3145.