Although carriers as a group might not agree on their businessand technology strategies, many are now pursuing the same goal:Web-based rating. Marketing, competitive advantage, and improvedefficiency are among the motivations. But theres anotheradvantageone that may not be obvious at the beginning of theprocess: Pursuit of Web-based rating may generalize into broadersolutions. As is often the case with a responsive marketplace, newneeds encourage the development of new solutionsin this case,rating technology that may finally address issues that have doggedthe industry for a generation.

Rating is central to the insurance process, but it has been oneof the most difficult to solve. Carriers need to rate, but so doagentsand now, perhaps, even consumers. Rating doesnt stand on itsown; its intimately involved with underwriting, tiering,third-party data, submission, policy issuance, and so on.

Traditionally, solving the rating problem took one of two forms.The most common approach was to build batch rating into thecarriers policy administration system, and delegate agency ratingto third-party vendorsby contracting for proprietary PC solutionsor being part of a comparative environment. A second, less-commonapproach was to find a way to create interactive rating and extendit to agentsa single platform solution.

The Internet changed the picture. It was a no-brainer to seethat offering Web-based rating to agents could provide morecontrol, bring underwriting into the process at the point of sale,enforce accurate submissions, and perhaps even create a competitiveadvantage of sorts.

If Web-based rating has promise, though, how do you go about it?What implications does it have for legacy systems? Whatimplications does it have for the agency sales force? A number ofvendors are now supplying promising Web-based rating solutionseachoffered some interesting insights. Twenty-three-year rating veteranRackley Systems (www.rackley.com) suppliessingle-carrier and comparative personal and commercial lines ratingsolutions, and it has recently retooled to use Microsofts .Net.Duck Creek Technology (www.duckcreektech.com) , atwo-year-old startup, is staffed by long-time rating experts anduses XML to specifyrating plans. AscendantOne (www.ascendantone.com), anothernew company loaded with industry experts, supplies next generationrating software as well as a complete front office solution.

What are carriers actually doing?

Duck Creek CEO Doug Roller said about half his companys businesscomes from carriers looking for what he calls tactical solutions,and the other half strategic solutions. The former group wants toget something up and running quickly, without impacting theircurrent systems. The latter is looking for complete, long-termsolutions and doesnt want to take half-measuresthey dont, forinstance, want to maintain two rating platforms in parallel.

Mark Stroop, executive vice president at Rackley, reported thatone of its customers has been working on a strategic solution foryearsat great expensebut may contract with Rackley to providesomething that works now while it struggles with its massiveproject.

And Chuck Boodro, CTO of AscendentOne, said that in a recentexperiment, a prospect was able to attach remote AscendantOnerating services to its legacy system in 10 days. That created thepossibility that they could have their cake and eat it tooleavingtheir legacy system undisturbed but adding Web-based rating, astrategic-tactical blend.

Legacy carrier software often blends the user interface,business rules, and data management into one program. Although thatmight get the job done, its a poor environment for changewhether ofrate plans or new forms of presentation. Many carriers and ratingvendors have found themselves hamstrung by past programming sins.The analysis and intellectual capital buried in the rating softwarecant easily be reused or applied to new needs. At the same time,doing the whole thing over again from scratch may be prohibitivelyexpensiveputting the carrier between a rock and a hard place.

Problems and Solutions

The first order of business is to separate rating from otherpolicy processing, and separate the mechanics of rating from thepresentation and database systems.

As too many carriers have realized too late, the big problemisnt creating a rating system, its maintaining it responsively atmodest cost.

Rackleys approach to the maintenance puzzle is to take onoutsourcing responsibilities. Duck Creek and AscendantOne are happyto accept maintenance responsibilities, but find that somecarriers, at least, both want and are good at developing andmaintaining rate plans using the vendors tools.

Roller said that Duck Creek employs the concept of a manuscriptacollection of everything that makes up a rating environment,including tables, rules, workflow, presentation, documentation andso on. All that information is stored and maintained in XML formatthrough a collaborative authoring system. Nothing is hard-coded.Rating analysts, not programmers, can develop and maintain the rateplans.

AscendantOne, according to Boodro, sees ease of ongoingmaintenance as the crucial test for rating software. The vendorsrate-plan-creation and -maintenance tools provide English-languagedocumentation as a by-product of the process along with before andafter comparison reports to help manage the change process. Andrate plans are based on an inheritancesystemnational/state/carrierto minimize creation time andmaintenance effort.

The Comparative Rating Issue

Few carriers will ever be enthusiastic about the prospect ofbeing part of an agencys comparative rating environment. Its muchmore pleasant to focus on fielding one-company Web-basedratingmaking it attractive, fast, and effectivewith the hope thatagents will use it more than whatever the competition provides. Andalthough agents are happy with penny-accurate, carrier-supplied,Web-based rating and the opportunity to complete the submission andbinding process online, in the longer run agents want comparisonsand standard workflow across multiple carriers.

Carriers canton their owncreate multi-carrier Web-based rating.So how do well-intentioned carriers at least assist the process?One way is by using Web-based rating that has a multi-purpose,modular architecture. The Rackley, Duck Creek, and AscendantOnesolutions all are. And in the case of Rackley, because the vendoralso supplies comparative rating services, the vendor can help thecarrier be part of a multi-carrier solution for agents.

And so

Ive had enough involvement with rating over the years tounderstand how difficult it is to maintain rate plansnot just inthe narrow sense of changing a particular rate or making changes tothe structure of the policy, but in the broader sense of capturingknowledge in a way that it can be reused for purposes notcontemplated at the time the analysis was done. The larger issue ofmaintenance isnt within a technology generation but between them.Thats the insight these three vendors, and others like them, havehad about the nature of the rating problem, and thats whatsespecially interesting about their solutions.

Elegant solutions solve multiple problems simultaneously. Theneed for Web-based rating should be viewed, I think, not simply asa way to put rating on the Web (as attractive as that prospect is),but as a way to solve future rating and insurance deploymentproblems that wont even surface until 10 years from now. If the Y2Kdebacle taught us anything at all, its that the future comes soonerthan we think.

clickhere

AscendantOne: www.ascendantone.com

Duck Creek Technology: www.duckcreektech.com

Rackley Systems: www.rackley.com

John Ashenhursts company, Sound Internet Strategy, providesconsulting, Web site evaluation, and seminar services to carriersand their trading partners. He can be reached at johnashenhurst@soundingline.com or (978) 318-1944.