Property & casualty insurance carriers depend on agile andmodern IT systems to respond to fast-changing regulations,competitive threats, new opportunities and customer demands. Policy administration is at the heart of these operations, butlogistical challenges and costly risks associated with replacing orconsolidating these core systems have prevented masstransformation. To overcome these challenges, many carriersare looking to accelerate the product development lifecycle through productconfiguration.

Product configuration—used as a means of centralizing andstreamlining product development processes—can be an initial stepto policy administration system replacement. The productconfiguration vision eliminates adding yet another system to aninsurer's IT infrastructure, leveraging technology innate toexisting systems to effectively share product information acrossall systems including rating, rules, forms, state filing, businessintelligence (BI) environments, and more.

Product configuration enables insurers to share one set ofproduct details, stored in a common database, across enterpriseapplications. This eliminates data duplication, reduceserrors and opens up new revenue streams at a much faster rate andlower cost. Carriers can take the first steps today toprepare for product configuration tomorrow.

Where Are We Now?

An era of continuous mergers and acquisitions has resulted insprawling, heterogeneous—and in many cases, redundant—ITenvironments. Consolidation is the mantra, but it is easier saidthandone; the larger the carrier, the bigger the challenge.

Out of necessity, most companies prioritize integrationthroughout the policy lifecycle for run-time applications (i.e. theintegration between an agent portal and a rating engine/policyadministration system for new business quoting and newissue). The goal is to consolidate the number of policyadministration systems, rating engines and other insuranceapplications to enable straight-through processing. This is acritical first step; however, streamlining the product developmentprocess (for design-time integration) reveals further opportunitiesto share and consolidate information across the ITinfrastructure.

To introduce a new product or product change, carriers typicallygo through a process which includes analysis, modeling anddevelopment, and then move into the later phases of testing, impactanalysis, compliance, and finally, deployment. For example,if a company is developing a new personal auto product, the insurermust:

• Evaluate criteria such as actuarial data, claims records,industry advances, changes to state rules and regulations, andcompetitive data (analysis phase).
• Establish the impact of product components based on thefindings from the analysis phase such as rates, tiering or productplacement rules, discounts/surcharges and underwriting rules(modeling phase).
• Ensure that product updates and information are cascadedthrough many systems including customer relationship management(CRM), agent portals, rating and rule systems, claims, billing, andaccounting (development phase).
• Test the product to make sure functions work as expected. It is important to check not only for accuracy in implementation,but also for understanding the impact of changes made on the bookof business (testing and impact analysis phases).
• Work with regulatory bodies to file the product, which thenapprove and give the green light to distribute throughout thecarrier environment for new business quoting and renewals(compliance and deployment phases).

The more practice a company gets with moving through thesesteps, the better it will be able to quickly and efficiently meetthe demands of the actuarial department, industry and customerbase. But the multitude of systems in most carrier ITenvironments means that even the smallest change in a deductible ordiscount triggers a cascade of updates in dozens of separateapplications. This increases the time needed to introduce newproducts or update existing ones, and reduces the frequency withwhich these changes can be made.

Even with a consolidated approach to rating, document managementand policy administration, there are still many systems thatrequire updates when a product is introduced or changed. Theagent portal, policy administration, claims and billing systems allneed attention. Many carriers experience months-long cyclesto communicate and implement the new product information. And, as insurers enter and re-enter product data, mistakes areinevitable, adding more time to the cycle.

A Common Product Palette

Product configuration is an often-used term that can meandifferent things to different people in the industry. However, there are three common elements that are necessary forproduct configuration to work effectively in the insurance carrierenvironment, including:

1. Consolidated Product Workbench: A single interface toconfigure all product information and a consolidated palette toolfor rates, rules and forms. This is a central portal foraccess to and creation of all the different elements supporting theproduct development process. The workbench is also theinterface to manage the common product database, as well as theportal to access rating, rules, documents and more.
2. Data Management: A centralized hub of productinformation, or common product database, provides product data toall systems, reducing data duplication. For example, the listof available deductibles for a comprehensive coverage only existsonce, but is referenced and used in rating, rules, forms, statefiling, BI, quality assurance/testing, impact analysis and anywhereelse the information is required.
3. Product Lifecycle Management: Carriers need consistencyin the way they handle products, from concept throughapproval. This enables carriers to view and manage the entireproduct lifecycle in a collaborative manner. It also providesa consolidated portal for the orchestration of product changesthrough data capture, rates, rules and documents. Insurersbenefit from a central view of all lines of business, states,product versions and their status for management andreporting. When the actuarial department makes new ratesavailable, the underwriting department gets notified. Similarly, a product manager would know when the new changes havebeen approved by the state and are ready to deploy.

Together, these three elements form a product configurationvision, in which each element is both interdependent(plug-and-play) and integrated for the sharing of productinformation.

Within the common product palette, users sign on just once, andthe system limits access to individual modules based on sharedsecurity. The vision for a common product palette supportsall phases of the development of a product.

Preparing for Product Configuration

Within a few years, product configuration will become the normin the insurance industry. Insurers can take steps today toprepare for this reality, such as:

• Continue to consolidate IT systems through best-of-breedapplications based on service-oriented architecture (SOA). The goal is one system for each insurance activity: rating,policy administration, billing, etc.
• Get smart about your integration. In addition to run-timeintegration, improving design-time integrations among systems willbetter streamline system changes and promote accuracy.
• Define which information lives in which systems. Withdata such as product information and rules living in multiplesystems, it is imperative to design a strategy for where the goldcopy of this information resides based on scope of use. Byunderstanding where the data lives today and how it is used,centralization and consolidation becomes simpler.

Moving Into the Future

To continue to compete in an ever-changing market, it isimportant for insurers to have applications that support the policylifecycle including a rating and quoting engine, documentautomation system, state regulatory compliance software and a BIsystem.

Product configuration can mean the difference between afirst-mover advantage and a come-from-behind effort. Carriersthat take advantage of product configuration as it evolves will beable to increase top-line revenues while controlling costs. They will develop new products faster, using fewer resources in theprocess. As a result, the entire product lifecycle couldaccelerate from an average of six to 18 months today to just one tothree months in the near future.

By enabling shared design and run-time artifacts, common userinterface components and databases, insurers can bring the poweravailable in disparate insurance solutions together to make productconfiguration a reality.

Srini Venkatasanthanam is vice president of products atOracle Insurance.