Commercial property isn't the most obvious place to implement a black box rating engine. But with new products and rates on the horizon, CNA Insurance replaced its integrated legacy rating engine and revamped the culture, taking ownership from IT and putting them in the hands of actuarial business users. Lindsay Lovvorn Fassett, AVP and business lead at CNA, spoke with INN about the challenges and opportunities of the project and how it's affecting underwriters and consumers.
INN: CNA has a black box rating engine for commercial P&C. How and why did that come to happen?
LVF: About three years ago, CNA started a segmented market strategy. We decided to focus on technology, health care and manufacturing, in addition to the other lines of business. This drove the need for new rates and forms, and for us to be a little bit more customized in what we are offering, which in turn drives the need for new IT systems.
We bought Oracle's Insbridge Rating and Underwriting. We put all our rating algorithms, tables, logic and everything we need to calculate a quote into the rater and integrated it with our legacy policy admin system. Our ultimate goal is to use it for our enterprise rating capability, so we eventually will integrate it with all of our policy admin systems.
INN: How long did it take, and why start with commercial property?
LVF: The project took a year. We started with large commercial property because we had some new rates we wanted to bring to that market, so from a business perspective that was the one to start with. We had 15 people from underwriting and actuarial, and many more on the IT side. The legacy policy admin system, and therefore the legacy policy rating system, was owned by IT. I'm not in IT, I report up through actuarial, so we formed a new team on the business side. They're called 'the rate loaders,' and included Oracle consulting, underwriting and actuarial SMEs-the people who are actually going to be developing the new rates. Now all of those are maintained by the business.
INN: It's in production now; how has it changed business and IT involvement?
LVF: It's a big change culturally, and it required many process changes. There are few areas where the business has taken over something traditionally maintained by IT. That's not a pervasive concept at CNA or at most carriers yet. Now our group has a role; it's easy to configure, but if the change requires a new policy admin screen or a new integration point, IT gets involved. Our entire initiative is speed-to-market: getting products out faster and more effectively. As we are talking about these transformational projects, rating is just one component of our roadmap. We put a lot of emphasis on claims and policy admin. We frequently talk about rules management and how we effectively maintain those; what are the best practices? Any time the speed-to-market concept comes up, our underwriting VP is very clear: It's not just rates and forms; it's getting the entire product to the customer, including business intelligence at the end. It's probably going to touch 20 systems to do that.
INN: Explain your rating engine evaluation process.
LVF: We did an exhaustive study of stand-alone rating engines. We believe in that market and the business case, and we wanted to give it to the users. We did a request- for-information, request- for-proposal and proof-of-concept process and compared everyone out there. And, because the business and actuaries ran it, we were quite meticulous. Insbridge was easier to use, integrate and get data out of. It's easy to configure, but in the development of a rating engine, that's not the biggest piece. Testing, reporting and requirements gathering are all bigger pieces, and Oracle delivered.
INN: What would you do differently?
LVF: We were implementing a new product and new rates at the same time. That presented challenges. We could have recognized that and done an iterative approach to our product development, or waited until we finalized our new rates and then done a waterfall implementation. Once we knew our requirements, implementation and construction went seamlessly. Getting the requirements out of the actuaries' heads and documented so we could construct them certainly presented some challenges.
Many vendors talk about business-user empowerment, and I don't know a lot of carriers have taken that on. It's impressive that CNA believes in — and was willing to defend — the initiative and was able to do it.
INN: What did you do to prepare the users?
LVF: We created pricing and rating guides before we started changing rates; they knew what was coming. We provided train-the-trainer sessions. We brought underwriters to the Chicago office and then sent them to their branch offices to train others. We have an organizational change management group at CNA to help deliver these changes across the organization, so we're really focused on effectively communicating to our underwriters and eventually to the customers.
INN: How do users experience these differences?
LVF: We did a lot of work with our underwriters, preparing them for the rate changes and what was going to be different. And the feedback has been great; we're more aligned with where we want to be. We're better able to offer rates we think are appropriate for the market segments. Some of the largest policies that we have written at CNA have been done on this system. So we hit it hard.
INN: What advice would you give other insurers?
LVF: Don't look at this as a product implementation. I look at this as giving the market what we promised. This is just one component of being the best carrier we possibly can for our customers. That often gets lost in product, implementation and go-live conversations. It's a critical component of what we're trying to deliver to the market. Our CEO and heads of underwriting and actuarial made that clear, and I appreciate knowing why we're doing this. It's so we can give our underwriters what they need to sell business, and give the customers the segmented products they're looking for.
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