Real-time policy change has gone from the drawing board to reality in 2012. It is safe to say that it will ultimately change the way in which brokers serve customers and carriers serve brokers. It is an essential technology innovation necessary for insurers and the brokers with whom they work. The challenge for all stakeholders is to ensure sustainable long-term success and to provide access to real-time policy change for all brokers.
Just what has been done and what needs to be done?
Let's focus on the changes insurers are making, within insurance carrier systems. These changes enable brokers to serve customers faster, more accurately and with less effort.
While each carrier is unique and each has unique systems, the business process, functions and necessary activities apply to all. The incorporation of Centre for the Study of Insurance Operations (CSIO) XML standards is an essential element in this process.
POLICY CHANGE IN 2012
Real-time policy change efforts in 2012 focused on two distinct areas:
Broker Management Systems (BMSs):
Changes were necessary within the BMS. This includes gathering and storage of data and documents; policy editing; extraction, creation and sending of the standard transaction request; and handling the subsequent receipt and reaction to the response information from the insurer to finalize the broker-approved changes that are made.
Insurance Carrier Systems:
There have been changes to the receipt and processing of the request, as well as to the resulting response - conversion and preparation of both incoming and outgoing information; comparison routines of the submitted data versus carrier records; mapping and integration to core systems; policy adjustments from the application of new underwriting rules; new rating of the changed data; retrieval of third-party data to add or verify information; integrated processing of the actual change to the policy when broker-approved; security protocols; and formulating appropriate standard responses for each of the connecting systems that need to be updated or changed.
INSURER ACTIVITY FOCUS
A comparison of the policy within the BMS to the insurer's policy of record in the policy administration system (PAS) must be implemented. This is fundamental - before one policy can be changed in two different systems by a single transaction, it must start as the same policy in both the BMS and the insurance carrier's PAS. Connected to this is the need to extract a "before" image from the BMS so that when changes are made, they can be exposed and highlighted along with explanatory notes if they are necessary. It is then clear what the broker intended to change, so underwriter notes and rules can be based on this.
Technology solutions approach this differently, but for 100% accuracy, consistent processing and reduced workload, this comparison should be automated and not handled by the broker through a visual review or manual intervention. Ideally, the automated solution will offer a Web service to the broker so that any identified differences and the requisite updates can be made immediately, in real time.
Someone needs to review the change in the policy data, apply the underwriting rules, establish the eligibility and complete the rating or log the errors.
One sentence, but a large amount of work is necessary to ensure a real-time change is made. Most insurers do not have an automated method of performing this process and, therefore, new solutions are necessary.
It is at this stage where any gaps, errors or omissions in the policy change are identified and corrective actions undertaken. Two processes are in practise. The first is simple. Gaps, errors or omissions are identified and the change is rejected. Either the broker must start over or contact the carrier by phone.
The second method also identifies any gaps, errors or omissions, and the carrier provides a Web service with a user interface for the broker to modify and update the policy change. In this option, the changes are then forwarded to the carrier and sent back to the BMS to update records at both systems.
This method is more functionally rich, more complete and resolves far more problems. Its weakness is that in order to be a real-time transaction, the broker management system needs to receive any edits and updates, making changes to the BMS data.
An alternative, which is less powerful but still workable for BMS solutions that cannot handle a real-time change, is to make any necessary edits with the carrier, sending a batch download containing the edits to the BMS when the policy change is issued by the carrier.
To ensure guaranteed quotes for policy changes, the carrier must use exactly the same underwriting rules and rating routines that will be used when the policy change is actually processed and put in force at the carrier.
Carriers need to put a set of automated eligibility and underwriting rules in place to guide which changes can be automated straight-through, and which ones require underwriter review and intervention. Collaboration with brokers is part of this process - what is straightforward within their authority and what requires consultation before it is processed.
In order to automate submitting the underwritten and rated policy change directly into the carrier's PAS, many carriers require a data preparation step that transforms the contents of the change into a form that can be processed by the policy system at the carrier.
In addition, the data preparation step must be reversed to transform the completed policy system change into a form that can be sent back to the BMS.
Policy changes must then be sent to the broker for approval and issued as part of the policy in force. This requires the creation of a work-in-progress file, as well as a final data comparison to ensure that a file that was worked on was not opened and modified during this brief period. Finally, it requires the return to the BMS to close the real-time circle.
GENERATING WIDESPREAD ADOPTION
Real-time policy change will deliver immediate benefits to brokers and insurers in 2013, and will act as a launch pad to the future, where the broker network will effectively compete with direct writers.
Industry estimates cite policy change as being 25% to 35% of a broker's daily workload, and in some cases this generates less than 1% of revenue. Real-time policy change will act to reduce these costs for both brokers and insurers.
Customer satisfaction will markedly improve as policy inquiries and changes can be processed in real time. The challenge for 2013 is to generate widespread adoption. With such enormous benefits, how can this be a concern? The answer lies in these two areas:
• There needs to be integration across BMS, bridge and carrier systems. Partnerships among suppliers, across the whole spectrum of the supply chain, are paramount to success. The insurance industry has many systems, many versions, and differing levels of core technology in different combinations already in place. In 2013, BMS vendors, service providers and carriers need to work together to broaden adoption.
• Prioritize the investments needed. Although brokers and carriers are fully supportive of real-time policy change, it does take time to budget, fund and develop solutions. Insurance carriers and broker organizations need to work together to address the threats to the broker distribution model posed by direct writers.
The good news is that insurers have told us they are budgeting for real-time policy change in 2013.
Real-time policy change has gone from the drawing board to reality in 2012. It is now live and operating in brokers' offices.
Brokers are saving time. Insurers are saving money. Consumers are experiencing brokers who can make real-time changes to their policies, and anticipating the next step of online self-service, while maintaining broker involvement.
In 2013, we need to prioritize this activity and ensure that when it is worth doing, it is worth doing right.