Perfect Storm Of Events Boost Real-Time Rating Capabilities

I must admit, however, that we have heard such assertions before. Carriers have been told by self-appointed prognosticators that there is a new technology or movement coming that will revolutionize the insurance industry as we know it. On the coattail of this message rides the implication that if you are not an early implementer of this latest "techno-widget," then you will be forever left behindrelegated to the status of the buggy whip salesman.

Back to my storm: As I see it, there are three basic issues with comparative rating for property and casualty as it exists today:

First and most important, is the issue of accuracy. A manufactured quote by any rating vendor has very little value if that quote is not accurate. The more inaccurate the number, the less benefit gained by the user.

With the ever-increasing complexities of the individual carriers algorithms, the incorporation of information such as credit and the unwillingness of carriers to spend valuable resources to support the model, it is more difficult than ever for comparative rating vendors to accurately reproduce the carriers rates.

The second major challenge is the inclusion of credit information into the rating algorithm. With some carriers, premium can vary drastically depending on the insureds creditworthiness. If the vendor doesnt have the ability to retrieve this information as part of the process, then there is little hope of accuracy.

The last of the three major issues is the ever-increasing requirement by carriers for their agents to complete the process online within the carriers own site. Many carriers have invested large sums of time and resources in providing their agents with Web portals, which they often strongly encourage them to utilize.

Of course, there have been many who claimed in recent years to have solved these issues facing comparative rating, but all have met with varying degrees of failure. My own company has made its fair share of misguided efforts. The main reason for the collective failures has less to do with abilities and more to do with critical missing pieces of the puzzle. This has led mostly to flawed workflows and inefficiencies.

However, the "perfect storm" that I have alluded toa few recent strategic advancements in technology and a change in proposed workflowhas made a previously "undoable" task doable.

First, let us revisit the accuracy problem. Whether errors are caused by the increasing complexity of insurance processes, the inability to readily include pertinent consumer data (such as credit and motor vehicle reports) or simply vendor mistakes, there is a revolutionary new technology that answers all of these issues. This "silver bullet" is real-time comparative quoting through a Web-based application service provider, with connectivity to both the carriers and the various reporting bureaus.

This technology not only addresses the issues listed above, but it also deals with the carriers having and promoting the use of their own branded Web site. Actually, these carrier sites are a big part of what makes this new endeavor possible.

What has changed? First, is Web access. Most agencies now have some sort of high-speed access available. And with Web technologies such as Microsofts .NET framework, vendors and carriers have designed and built Web sites that are more user-friendly and look much more like a familiar Windows interface than an old "green screen" application.

These sites can also often be exposed to outside rating vendors to facilitate quoting within the vendors comparative systemthat means no more inaccurate quotes. The quote you receive from the comparative rater is actually generated by the carriers site. (This is assuming, however, that the rating vendor in question has a Web-based application with the ability to both send and receive outside information.)

As mentioned, the inclusion of consumer data in the process is the second major challenge. There have been several recent developments in this area as well. Once a system is Web-enabled, it is a fairly simple process to hook it to other outside sources of information. Most of the major reporting bureaus now have this capability. That means credit, MVR and even CLUE (the Comprehensive Loss Underwriting Exchange database) can now be included in the comparative rating process.

This leaves the issue of carriers requiring their agents to use their proprietary sites. To achieve a real-time quote in the first place, the vendor has to establish a connection to the carriers site. Once this connection has been made, it is very simple to return the user and all the previously entered data, directly to the carriers site. Of course, this would take place after the agent has selected the carrier of choice from the comparison.

What does this mean for the agents who do not presently have a high speed connection? They will simply have to get one, and they are now cheaper than ever. For carriers that do not presently have the infrastructure to support this effort, there is also good news. The ability to provide their remanufactured rates within the new Web programs will continue.

So what are the results of this "perfect storm" of circumstances? An agent will have the ability, from a browser, to generate a comparative quote representing all his/her carriers. The system will provide a "real-time" quote for any carrier that has the capabilities, while still supporting remanufactured quotes for those that do not. The system will also be able to include consumer information, as well as a bridge to different carrier sites.

Bruce Winterburn is vice president of company sales at AMS-Rackley Systems Inc., a rating software vendor based in Pulaski, Tenn.

Reproduced from National Underwriter Edition, November 23, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.