Core processing is a term that means both everything and nothing at once until both "core" and "processing" are put into a business context. However, once defined, it's the heart of the IT organization's mission.
For a managing general agent (MGA), "processing" means a hybrid combination of multi-carrier rating, billing, quoting, underwriting, binding, issuing, endorsing, and accounting. Notice that I'm not talking about "systems" but rather the business areas because it's more important to understand the business than the systems.
What I find interesting is the "core" part. In my days working in the admitted carrier space, I focused on getting quotes out the door quickly, properly, with flexibly configured products, all while dealing with claims. My initial reaction upon joining the MGA space is that the core was the same, but with different value-adds along the chain of the policy lifecycle.
And that's exactly the case.
The common thread is the policy lifecycle. For an MGA, providing indications and formal quotes accurately and quickly represent "core processing." It's obviously critical to bind policies, but in general the fastest, most accurate quotes get bound, so one creates the other.
Since the MGA's role, especially in excess and surplus lines, is to provide access to specialized markets, underwriting expertise, and carrier products, underwriting and rating information are all core processing. That means integration, and that is why I talk about components so often since standardization eases integration.
Finally, the issue of claims is also a little different for MGAs than carriers. In some cases, MGAs administer the claims process but neither adjust the claims themselves, nor pay the claims (the carriers are). Nonetheless, providing oversight to the claims process results in better (i.e., lower) claims costs and serve as a control on loss ratios for carriers. Thus, claims processing is part of core processing for MGAs.
What it all boils down to is the policy lifecycle. While different parts of the industry focus on different parts of the process, we all participate in the grand circle of life(cycle), adding insight, market access, financial stability, or product options along the way. Your part in that circle dictates what you care about most. Some companies care about it all because they have an agency force, an insurance company, reporting companies, and wholesalers/MGAs all under the same roof. In those cases accounting, information technology, and sales/marketing can be considered part of the core.
So then, what about the "processing" part? There are many systems that satisfy the core business needs: agency management systems, accounting packages, and customer relationship management systems all come quickly to mind. The business and IT need to match the core to the processing while trying to reduce redundancy. What I'm suggesting is rather simple — define the core and the rest follows.
Core processing in the MGA space is definitely a mixed bag of systems that orchestrate the MGA's special value in the chain of the policy lifecycle. Whether it be gathering information for underwriting and administering claims, the MGA's core processing is always centered on the policy lifecycle and providing value within that lifecycle. Once the 'core' is understood, the rest is a matter of matching system(s) to function.
When I started at the company I now work for, I was given an assignment as part of my interview. I was asked to define how to go about creating an IT strategy for the company. That was the easiest question I've ever gotten on an interview. Check back next time to find out why.
Special thanks to Shannon Worsham and James LaLonde, for their contributions to this blog post.
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