ISO, NCCI, and independent state bureaus are universally-accepted sources for insurance rates, rules, and forms. Most admitted carriers use bureau content in some fashion. Many non-admitted carriers use the bureaus, too, at least as a starting point. They can shorten the filing process for admitted carriers. And they can give carriers of both stripes the confidence that their rates, algorithms, and forms are based on a set of data that reflects the market.
With such compelling benefits, why do many commercial insurers struggle with bureau content? In many cases it comes down to systems. Your choice of system vendor is as important as any other strategic business decision and should not dictate your bureau adoption and compliance philosophy. If your system is a constraint, you may be sacrificing business opportunities.
Insurance Bureaus: Bane or Boon?
Insurance bureaus provide an important service to the industry, offering rates and rules across thousands of business classes in all 50 states, along with court-tested forms language. Insurers can be confident in bureau content because it is derived from aggregated data provided by a broad cross section of insurers. Insurers submit claims data, the bureau updates rates, insurers apply the new rates, insurers submit new claims data, and so it continues. It’s a virtuous circle that has provided value to the industry for decades.
However, as much as the bureaus can be a boon for insurers seeking accurate rates, they can also be a challenge. The bureaus issue thousands of updates to rates, rules, and forms across all 50 states annually, and many software systems have difficulty absorbing that much change into their code.
It gets even more complex if a carrier chooses not to adopt bureau content “as is”. Most companies, for a variety of business reasons, choose to apply their own variations on top of bureau rates, rules, and forms. This is especially true for program insurers that address the needs of specific market niches. For these insurers, the challenge of managing compliance across all 50 states is compounded.
To Adopt or Not to Adopt
Many companies have business reasons to be non-current with bureau updates. Some find the rate change analysis too burdensome. Some have been approved by the states to use rates favorable to them. Still others believe they can price their policies better than the bureaus. Specialists, for example, who know their served market well, may feel it is a strategic advantage to remain non-current.
There is a downside, though, for those who choose to remain non-current. These companies need to submit state filings when anything changes. This is time consuming, expensive and burdens the company’s compliance or filings department, giving them less time to develop and launch new products. In our highly competitive environment, this means lost opportunities.
Because managing varying adoption philosophies across 50 states can become a bureaucratic mess, we find most admitted insurers aspire to be ‘current’ with the latest content. Compliance easiest that way. The insurer simply sends one letter to each state stating they will stay current with all future bureau updates.
The Involuntary Choice
Some insurers may not be current with the bureaus simply because their systems are unable keep up with the updates. Their software cannot absorb the thousands of changes to the source code required annually because of the rigorous testing and release management required.
These systems can be the bane of many insurance companies. Business aspirations may be stymied because the systems cannot respond quickly or economically enough. Being out of step with a bureau may also put a company at a competitive disadvantage, because they may not be charging current rates, using proper rules, or incorporating the latest forms language. State filing compliance may be jeopardized, too, placing the carrier in financial and regulatory peril.
Companies that have a mix and match adoption approach are the most difficult from a systems perspective. Managing bureau content updates on an automatic basis in some states, but remaining non-current in others, is difficult for most software to manage. And it becomes increasingly difficult if a company wants to change its adoption philosophy in any one state.
Which Systems Are Built for Admitted Insurance?
Not all systems are challenged by the rigors of admitted insurance. Those that come bundled with bureau content can shorten the implementation process. A key to consider with these systems is the ease and speed with which you can customize rates, rules and forms to fit the specific features of your insurance products.
Bureau content as a starting point only solves half the problem, though. What happens with each update? How quickly can the vendor incorporate these updates into the software? How far in advance of the effective date will your system be updated? And what happens to your customizations when bureau updates are implemented? A system that can change core functions, bureau content, and customizations independently, provides the fastest path to quoting and issuing new and renewing policies following each bureau update.
The flexibility afforded by systems that handle bureau content well can inspire new opportunities. What you thought impossible becomes achievable. What was a liability becomes a competitive weapon. And new initiatives are limited only by your skill and imagination.
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.