Complex Commercial: Does the System Fit? Michael Sauber, VP, Marketing | Jan 31, 2020

Complex Commercial Insurance Systems

In our last post, we described a segment of the market that shares many of the program market’s attributes. We call it Complex Commercial. It faces challenges on many fronts, from products to distribution, and chief among these is the system bottleneck, the topic of today’s post.

Beginning in the late 2000s, suite vendors began to dominate the commercial insurance landscape. Their strategy was to bundle policy administration, claims, and billing systems into a single offering. Buying all three systems from a single vendor promised easier integrations – theoretically, the systems would share a common database – and a single “throat to choke” in case of failure. Carriers expected these suites would be the new industry standard.

With legacy systems ripe for replacement and a desire to reduce operating costs, carriers were eager to sign up with the suite vendors. The projects were enterprise in scope, requiring whole teams to define requirements. Most suite vendors offered a build to order platform; the carrier licensed a set of code that the vendor customized to fit their needs. This required a large staff of developers, often outsourced. Program management offices were required to run them, and system integrators were a necessity because they had the staff and process to pull these projects together. The size of these projects was breathtaking, many hitting the “50/5 club” ($50 million over 5 years1).

The flaw in the suite model became apparent only after a couple of years into the project. And for many Complex Commercial and program writers, it was a show stopper. While all vendors trumpeted the excellence of their suites, the truth was far different. There was always a weak link in the chain, most often policy administration. And the core issue was most often the system’s ability to absorb bureau content.

Because these systems were built to order, their architectures couldn’t accommodate the hundreds of bureau changes issued each year. As a result, the common approach was to force the carrier to adopt a specific set of bureau content, build out the product, and once finished, begin another project to update to the latest set of rates, rules and forms2. This perpetually left the carrier five years behind with a permanent maintenance project.

As core system replacement projects dragged on, the Darwinian Economy expanded its hold on the insurance industry. Plentiful capital and technology eroded barriers to entry and fostered intense competition. Carriers found themselves with insurance products that were unable to take advantage of emerging opportunities, particularly in the Complex Commercial and program markets.

The problem these carriers faced was that these new opportunities required a system that could support a range of rate, rule, and form adoption strategies (see the sidebar in our prior post), from automatic adoption to a blend of automatic and delay adopt. These strategies would enable carriers to tune rates, rules, and forms, line by line or state by state, and create differentiated products that generated profit across their books.

Fast forward to today. As more insurers turn to programs and Complex Commercial as opportunities to stand out in a competitive market, the “single throat to choke”, while attractive in theory, just doesn’t fit. Instead, they’re rolling in systems with the flexibility to create highly customized products that keep up, in real time, with changes in the market. These systems deliver bureau updates well before the effective dates, so carriers have ample time to assess the impact on their books and filings, and then respond with haste. And when they accept the updates, their rate, rule, and form customizations are preserved, so there’s no major rework project.

While suites may still have a place in “Main Street” business, there’s a place right next to them for systems that support the growing opportunities in Complex Commercial.


1 Whether by coincidence or a mystery of nature, many of the projects had a run rate of $10 million per year.
2 We frequently saw schedules that stated 2014 rates, rules, and forms would be finished by 2019, at which time a new 5-year plan would update the system to 2019 rates by 2024

Mike Sauber joined Instec in 2016, with over 30 years of experience in technology marketing and sales. Mike has led global marketing teams and programs at IBM, Unisys, and Data General, among others, and prior to Instec was a member of the teams that launched two new enterprise software ventures. His deep technology industry experience includes software, servers, printers, and services, with an exclusive focus on the insurance industry since 2011. Mike holds an MBA from the University of Pennsylvania (The Wharton School), and a BES (Architecture) from the University of Waterloo.