Guest posting for Drew Birtwistle
ISO circulars are a vital tool for insurers aiming to ensure compliance and to improve their own profitability – but the sheer volume of information has to be managed.
Swamped by circulars from ISO, many insurers are lagging behind with systems unable to extract value or distinguish between vital and technical changes.
The pile is something I have seen more than once in meetings with insurers. At some point in the conversation, they pull out a sheaf of annotated papers. This is often the system for managing changes to standard insurance terms, and it is not working. I have seen a paper pile a foot high, documenting a complex multi-state change, which will need to be approved by management and implemented by IT.
Insurance compliance departments in North America face some unique challenges. A multi-state company may at any moment be dealing with hundreds of changes, many of which will have an impact on profitability.
ISO – Insurance Services Office – provides an important service, sending out circulars and manuals that help insurers to stay on top of loss cost trends, new product forms, and regulatory changes. In a best-case scenario, those circulars drive effective change. However, without the right systems, these contribute to the paper pile instead of the bottom line – as hundreds of changes breed thousands of circulars.
Cycling through the circulars
This was the problem we set out to solve with Circular Authority. Rather than developing in isolation, we worked with insurers to develop our product, issuing monthly releases for them to test, gathering valuable feedback in the process. Out of that group of insurers came our first customers.
SAP Circular Authority acts as a central repository for guidance from ISO – once logged in, a compliance manager can quickly filter out the noise and focus on the information that is relevant to their business and geography. Suggested changes to standard wording, loss costs and algorithms are highlighted in a “track changes” view, and these changes can be accepted or rejected. Adoption decisions are recorded, additional requirements are captured and these changes can be sent for approval, and then for implementation. Throughout, there is a “single vision” – the risk and complexity of moving hardcopy between desks, or electronic documents through an unmanaged process, is removed.
Clearing the pile
The advantages of being able to select, process and implement based on the information in these circulars are multiple. First, it allows for better pricing. And having the right loss costs, rules and forms on hand in one, centralized tool helps those products to be delivered faster to market as well.
That is the customer-facing pull. The push is annual fines in the hundreds of thousands of dollars, currently accepted as simply the cost of doing business, and a list of unimplemented changes that may extend back years or even decades.
The first goal is to facilitate the cutting down of those foot-high piles of paper to nothing, by simplifying and automating the process of receiving advisory circulars, understanding them, analysing their impact and passing necessary changes seamlessly through the approval and implementation process.
There is more that can be done. There are more information sources, bureaus and analytical tools that can be incorporated. Eventually, neighbouring departments will want to bring their processes into the workflow to realize some of the same benefits around speed, quality and consistency. The vision of streamlining the product development process, from measured performance, industry data or proprietary ideas straight through to writable policies is a compelling one.
Right now, though, the benefits of cutting the pile down to size will be seen rapidly in more accurate pricing, more timely responses to changes in regulation, lower operating costs and, ultimately, better service to customers.
For more information on SAP’s solutions for the insurance industry, visit our home page, or the Insurance Solution Explorer for a view of the SAP solutions portfolio and how it applies to insurance. And, to stay updated on the latest developments for insurance, follow @SAPforInsurance on Twitter.