Once upon a time when I was an underwriter, my manager was fondof telling me we didn't sell a product, we sold a promise. And at ahigh level, he was entirely correct.

But at a more granular level, that promise differs from productto product based on the detail of the contract, whether it's alife, health, or P&C policy. Furthermore, a set of promisesthat's right for one customer may not be right for another.

Like any product manufacturer, insurers seek to find ways tomake their offerings stand out in the marketplace. It's not justthe oft-cited speed-to-market goal–it's about delivering the rightproduct at the right time to the right customer.

“Truly being able to respond to market conditions is the missinglink” in product development, says Kimberly Harris-Ferrante, vicepresident and distinguished analyst at Gartner Research.

Helping insurers connect that link is the objective of productconfigurators. These systems, designed to support the productdevelopment life cycle, are not new technology. “Productconfigurators started in the 1980s,” Harris-Ferrante says. Even so,she remarks the market is not mature and the technology is a “workin progress,” adding that although the deployment of systems amongall sectors of insurance has increased in recent years, only aminority of carriers use dedicated product configuration platformsoutside their policy admin environment.

Part of the reason for this state of adoption relates to myformer manager's comments about the definition of a product in aservice sector such as insurance. Product design is an easierconcept to define in manufacturing, where the development world hasprogressed from pen and paper and clay models into tools that letyou create, modify, and test product concepts without ever havingto leave your computer workstation.

“Product configuration is tougher in the service context such asinsurance vs. manufacturing, because it can contain not justproduct specifications but business rules, legal forms, pricingalgorithms, and other information,” says Roy Wildeman, senioranalyst at Forrester Research. “Configurators do a good job bycapturing both those pricing algorithms as well as eligibility.They then can provide detail of the product architecture andorganize and establish integration structure required to makeproduct changes.”

ORDER FROM CHAOS

The purpose of configurators is to centralize productinformation as well as organize the product development process,which often can be scattered among different systems and areas ofresponsibility, and that leads to redundant development effort anddelays in deployment.

“Configurators are the workbench,” Harris-Ferrante says.“Particularly if there are a number of policy admin systems,carriers benefit from centralizing development. They can see whatproducts are consistent among the systems and replicate currentproducts for other systems and delivery channels. It's abouteconomies of scale and centralized control.”

“One of the real key potential benefits of configurators isallowing business users to manage directly product data rather thanmaintaining desktop spreadsheets,” Wildeman adds.

Combining centralized control with distributed, user-levelproduct development responsibility is a goal of Liberty MutualAgency Markets. Liberty is in the midst of rolling out a productdevelopment suite based on Accenture's Insurance ConfigurationComponent (ICC) solution. Safeco, which was acquired by Liberty in2008, had been working with Accenture on deploying the ICC systemat the time of the acquisition.

“We wanted to empower the business to view the logic governingthe rating and pricing of our products, to make enhancements tothat logic, and to test and try different changes. The way to dothat in a more efficient process was to eliminate some of thehandoffs that existed between business and IT,” says KurtSchulenburg, director of commercial lines IT program delivery inLiberty Mutual Agency Markets' regional companies group.

Reduced product development costs, gained through productcomponent reusability, is another key benefit sought by insurers.“IT organizations are all facing budgetary pressures–to do morewith less. Replicating code changes in different systems andkeeping them in sync are all non-value-added activities. There isan opportunity to do product design and changes in a stand-aloneapplication that can take out a lot of those routine and mundaneactivities,” Wildeman says.

Configurators also enable companies to test the impact of newproducts and changes to existing products without affectingproduction systems. “Simulating what changes would do in atest-and-learn environment improves the accuracy of changes thatare made,” Schulenburg says.

A dedicated testing environment is one of the biggest benefitsof product configurators, Harris-Ferrante claims. “You ensure whenyou do give a product to IT, the impact of that product is tested.Also, the testing process of most systems produces an XML datastream output that gives IT a much clearer picture of the changesthat are being made. You also can leverage the testing environmentfor product analytics by running data from the warehouse againstnew products or changes to see what you do or don't want to sell,”she says.

CONSOLIDATION AND
CONFIGURATION

Liberty's product configurator rollout coincides with a legacymigration project, dubbed “ECLPS+” (Enhanced Commercial LinesPolicy System), at the company involving the consolidation of fourdifferent platforms, including one obtained when the companyacquired Safeco.

“We've had some of the same challenges of othercompanies–hard-coded rules, difficulties testing changes, anddifficulties integrating new technology, such as agent interfaces,predictive models, and unique rule-managing systems. We're movingto bring ourselves into the future in one fell swoop, taking thebest tracks of both projects to build a new and robust policy adminsystem and product development suite,” says Tom Troy, executivevice president and COO in Liberty Mutual Agency Markets' regionalcompanies group.

Speed to market is a key objective in both projects. “From aproduct development standpoint, throughput is essential,” Troysays. “We want to take an excellent product idea and, when it'stime to put it in the marketplace, to do so as quickly aspossible.”

ICC incorporates a product developers' workbench that providesaccess to centralized product definitions and includes XML metadataand workflow for configuring products, underwriting rules, ratingalgorithms, and other development tasks. Liberty now is in theprocess of integrating the configurator tool with its CGI Ratabaserating engine and its Blaze Rules Engine for underwriting andpricing rules.

The ICC project will have an impact on the conversion effort asboth projects move forward. “As we plan to take policy data off thefour admin systems and convert it into one, we want to know theimpact to agents and customers beforehand,” Schulenburg says.“We'll run those converted policies through the ICC application tomake sure premium is in the range of what it should be.”

Consolidation and centralization also will help simplify what isa complex technology landscape at Liberty and make product logicaccessible to users outside IT. For instance, to research theimpact of a rating change in the current environment, businessanalysts have to obtain the rating logic from IT, request changes,and repeat the process through various iterations.

“Now, the business side has access to the rating logic within amodeling environment we didn't have before,” Schulenburg explains.“IT is just involved in the final rollout. We've taken multiple ITinteractions in a typical change and reduced [them] to one.”

Liberty also expects the product configurator to enable a moreseamless development environment. “A lot of companies have done agood job of system integration at the runtime level–when a quote isdone or app is issued. However, we would like to integrate at theproduct development time,” Schulenburg says. “That will allow usersto navigate to the products and rating logic they want to changefrom within a single system while that system also keeps track ofversions and change activity.”

The system also enables users to test changes and to replicateaccepted components into other products and markets. For instance,users can take a rating, coverage, or underwriting change made orproposed in one state or market and run that change against a bookof business in another market to obtain a before-and-after impactanalysis.

“We can run our current book of business against both the oldand new logic to compare what is going to happen and determine howour agents and policyholders will be affected by a rate change orunderwriting rule change. We can run changes against quote data tosee how they impact the amount of business we are accepting orrejecting and how that affects our market position,” Troy says.

Although the ability to test proposed changes is an importantcapability of product configurations, testing is only part of theproduct development process. At some point, that fully testedproduct needs to meet the real world.

“There is always the point where you need to define yourtechnical integration,” Wildeman says. “A configurator is a pieceof technology–a repository or source of truth for product data–butthat does not necessarily drive the entire life cycle. To achievefaster time to market, you need to integrate that catalog withthose downstream systems. In many cases, that is easier said thandone depending on maturity or the quality of your legacyapplications.”

The ability to create a “manifest for deployment” is anessential feature of Liberty's product configurator solution,asserts Schulenburg. “ICC doesn't deploy code into production.However, a business user can determine the changes ready forrelease and deploy those to a staging environment for rollout intoproduction.”

A robust change management process enabled by the two projectsalso will help Liberty prepare for additional acquisitionopportunities, should they ever arise. “All we need in order toanalyze the impact of any potential book transfer is to get data inXML format,” Schulenburg says.

Liberty will know, as well, exactly the information it needsfrom an acquisition candidate in order to do complete impactanalyses. “We will have many more options and capabilities in ourconversion strategy,” Troy says.

Wildman does caution companies should not underestimate the workinvolved with deploying a true configuration workbench. “The toughwork of identifying your existing product data and getting thatmassaged into a central catalog can be very challenging. It cantake longer than expected and take a specific skill set toaccomplish. Companies should not underestimate–orunder-budget–mapping activities of product configurationinitiatives. There are migration tools out there, but at the end ofthe day, it takes a human process manager to make sense of thedata,” he says.

Building its policy systems to incorporate IBM's IAA InsuranceFramework has provided useful structure to Liberty's project, butthere still is a lot of heavy lifting involved. “The biggest issuewe had to start with is defining how we organized our logic,” notesSchulenburg. “Over the course of 30 years, we had built in a lot oflogic in a lot of different areas. Now, we want to reorganize thatinto our structured environment. There's a lot of effort involvedin defining message models, the hierarchy of products, the way weorganize data, and so on.”

CONFIGURATORS AS
COMPONENTS

By the definition laid out thus far, configurators include acentral product repository and a library of product templates thatcan include products from any policy admin system as well asworkflow features that enable stakeholders in the productdevelopment process to collaborate.

Muddying the waters is, in addition to these stand-alonesystems, there are product configurators provided as components inpolicy admin systems, designed to model only products administeredon those platforms. Furthermore, most modern systems tout a“configurable” design that lets business users make manyrules-based changes without involving IT.

“What makes [stand-alone] product configurators more powerful isyou can do modeling and analysis of products administered on manydifferent systems. You also can pull information from the datawarehouse on any product in any system and run it through proposedproduct changes,” Harris-Ferrante says.

Those cross-platform analyses cannot be easily done fromadmin-level configurators. “Policy admin systems still are verylightweight for configuration by comparison,” she says.

However, even though they are not truly a cross-platformworkbench, configurators as components of admin platforms doprovide companies the ability to extract product information into arepository–albeit dedicated to that single system–that is separatefrom the process and application layers. This strategy may beadvantageous and cost-effective for a company that has all productsadministered on one platform or that does not have a vast productlibrary.

DTRIC Insurance Company is in the process of migrating itsmultisystem admin environment to DecisionMaker PolicyAdministration System from Decision Research Corp. (DRC). Itcompleted installation of workers' compensation and personalumbrella in 2008 and recently added general liability. In advanceof the migration of remaining lines of business, the company isutilizing a configurable rating engine to enhance the productdevelopment process, shorten time to market, and reduce reliance onIT.

“The rating engine is spreadsheet-based and structured very muchlike rate filings we already make and receive,” says Barney Wong,business analyst manager at DTRIC. “A lot of changes can be doneoutside programming now, which has helped us roll out changesfaster. Also, the business becomes a bigger part of developingchanges than before.”

The DRC engine enables DTRIC to replicate tested logic quicklyfrom one product to another and to take changes in rating criteriaand translate those changes into front-end modifications requiredfor additional data capture. That not only has helped the companyspeed product development but also expand market capabilities. Forinstance, DTRIC recently set up a direct online quoting system forconsumers on its Web site to complement its agency-facingcapabilities.

“Without the DRC platform, we would have had to connect theonline system to a rating engine that was embedded in the legacysystem, which was not up to the latest technology and was not XMLcompliant. That would have been a big task. Having a rating servicethat is centralized, independent, and easily configurable allowedus to make that connection and bring new capabilities to marketquickly,” Wong says.

BACK TO THE FUTURE

Despite the proliferation of the term configuration intoday's technology market vernacular, it's unclear whether productconfigurators as traditionally defined will see more widespreadadoption in the industry. Part of the reason is insurers strugglewith their own product goals.

“Companies right now are examining their business and askingthemselves critical questions,” Harris-Ferrante says. “Am I aproduct manufacturer or service provider? Do my customers want lotsof products that are unique and tailored either through me orthrough affinity groups? Am I like Nike, with a lot of flavors oftennis shoes? What defines 'innovation' in insurance?”

If a company truly is looking for ways to customize products toindividual customers at a much more granular level–to the point ofcreating a menu of coverages that can be assembled at the point ofsale into a complex product–having a centralized catalog ofdetailed, well-defined, and tested components is essential.However, companies that are hedging their bets on the “service”side of insurance–becoming specialists in a set of predefinedproducts that don't change frequently–may question whether theinvestment in stand-alone product configurators really iswarranted.

“[Product configuration] often has been labeled as a coolproduct–nice to have, but you're still going to survive without it.You can throw resources at the product and get it done,”Harris-Ferrante says.

Also, configurators are just one part of the product developmentprocess. “It's more important you have a well-defined process ofcollaboration even if working with antiquated technology than it isto work with a new system and have ineffective internalcollaboration,” Wildeman maintains. “No product configurator willaddress all your requirements. It won't define your productdevelopment business process, determine who owns various steps inthe process, or make sure you have enough resources in the ideationphase so that ideas are scrutinized.”

In fact, the “ideation phase” may well be the most importantpart of the entire process. “Being in sync with the market is whatenables a company to be more relevant and have greater marketshare,” Wildeman says.

In other words, technology supports but is no substitute forsound product development practices and business strategy. “Thereare companies that are making only incremental changes to products.There are other companies that see the industry at a turning point,and that changing regulations and a changing marketplace will havedramatic impact on consumer behaviors that require a fundamentalrethinking of their insurance products,” Harris-Ferrante says. “Thegoal is to prepare for whatever way the pendulum swings.”