Property & casualty insurance carriers depend on agile and modern IT systems to respond to fast-changing regulations, competitive threats, new opportunities and customer demands. Policy administration is at the heart of these operations, but logistical challenges and costly risks associated with replacing or consolidating these core systems have prevented mass transformation. To overcome these challenges, many carriers are looking to accelerate the product development lifecycle through product configuration.

Product configuration—used as a means of centralizing and streamlining product development processes—can be an initial step to policy administration system replacement. The product configuration vision eliminates adding yet another system to an insurer's IT infrastructure, leveraging technology innate to existing systems to effectively share product information across all systems including rating, rules, forms, state filing, business intelligence (BI) environments, and more.

Product configuration enables insurers to share one set of product details, stored in a common database, across enterprise applications. This eliminates data duplication, reduces errors and opens up new revenue streams at a much faster rate and lower cost. Carriers can take the first steps today to prepare for product configuration tomorrow.

Where Are We Now?

An era of continuous mergers and acquisitions has resulted in sprawling, heterogeneous—and in many cases, redundant—IT environments. Consolidation is the mantra, but it is easier said thandone; the larger the carrier, the bigger the challenge.

Out of necessity, most companies prioritize integration throughout the policy lifecycle for run-time applications (i.e. the integration between an agent portal and a rating engine/policy administration system for new business quoting and new issue). The goal is to consolidate the number of policy administration systems, rating engines and other insurance applications to enable straight-through processing. This is a critical first step; however, streamlining the product development process (for design-time integration) reveals further opportunities to share and consolidate information across the IT infrastructure.

To introduce a new product or product change, carriers typically go through a process which includes analysis, modeling and development, and then move into the later phases of testing, impact analysis, compliance, and finally, deployment. For example, if a company is developing a new personal auto product, the insurer must:

Evaluate criteria such as actuarial data, claims records, industry advances, changes to state rules and regulations, and competitive data (analysis phase).
Establish the impact of product components based on the findings from the analysis phase such as rates, tiering or product placement rules, discounts/surcharges and underwriting rules (modeling phase).
Ensure that product updates and information are cascaded through many systems including customer relationship management (CRM), agent portals, rating and rule systems, claims, billing, and accounting (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 book of business (testing and impact analysis phases).
Work with regulatory bodies to file the product, which then approve and give the green light to distribute throughout the carrier environment for new business quoting and renewals (compliance and deployment phases).

The more practice a company gets with moving through these steps, the better it will be able to quickly and efficiently meet the demands of the actuarial department, industry and customer base. But the multitude of systems in most carrier IT environments means that even the smallest change in a deductible or discount triggers a cascade of updates in dozens of separate applications. This increases the time needed to introduce new products or update existing ones, and reduces the frequency with which these changes can be made.

Even with a consolidated approach to rating, document management and policy administration, there are still many systems that require updates when a product is introduced or changed. The agent portal, policy administration, claims and billing systems all need attention. Many carriers experience months-long cycles to communicate and implement the new product information. And, as insurers enter and re-enter product data, mistakes are inevitable, adding more time to the cycle.

A Common Product Palette

Product configuration is an often-used term that can mean different things to different people in the industry. However, there are three common elements that are necessary for product configuration to work effectively in the insurance carrier environment, including:

Consolidated Product Workbench: A single interface to configure all product information and a consolidated palette tool for rates, rules and forms. This is a central portal for access to and creation of all the different elements supporting the product development process. The workbench is also the interface to manage the common product database, as well as the portal to access rating, rules, documents and more.
Data Management: A centralized hub of product information, or common product database, provides product data to all systems, reducing data duplication. For example, the list of available deductibles for a comprehensive coverage only exists once, but is referenced and used in rating, rules, forms, state filing, BI, quality assurance/testing, impact analysis and anywhere else the information is required.
Product Lifecycle Management: Carriers need consistency in the way they handle products, from concept through approval. This enables carriers to view and manage the entire product lifecycle in a collaborative manner. It also provides a consolidated portal for the orchestration of product changes through data capture, rates, rules and documents. Insurers benefit from a central view of all lines of business, states, product versions and their status for management and reporting. When the actuarial department makes new rates available, the underwriting department gets notified. Similarly, a product manager would know when the new changes have been approved by the state and are ready to deploy.

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

Within the common product palette, users sign on just once, and the system limits access to individual modules based on shared security. The vision for a common product palette supports all phases of the development of a product.

Preparing for Product Configuration

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

Continue to consolidate IT systems through best-of-breed applications 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-time integration, improving design-time integrations among systems will better streamline system changes and promote accuracy.
Define which information lives in which systems. With data such as product information and rules living in multiple systems, it is imperative to design a strategy for where the gold copy of this information resides based on scope of use. By understanding 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 is important for insurers to have applications that support the policy lifecycle including a rating and quoting engine, document automation system, state regulatory compliance software and a BI system.

Product configuration can mean the difference between a first-mover advantage and a come-from-behind effort. Carriers that take advantage of product configuration as it evolves will be able to increase top-line revenues while controlling costs. They will develop new products faster, using fewer resources in the process. As a result, the entire product lifecycle could accelerate from an average of six to 18 months today to just one to three months in the near future.

By enabling shared design and run-time artifacts, common user interface components and databases, insurers can bring the power available in disparate insurance solutions together to make product configuration a reality.

Srini Venkatasanthanam is vice president of products at Oracle Insurance.

Special Reports /

Product Configuration: Bringing Order and Efficiency to the Modern Insurance Enterprise

Related Stories

Recommended For You