During the boom and bust cycles of the last decade, insurers have looked to policy management technology as a potential magic bullet that could strengthen growth. Unfortunately, magic bullets come few and far between.Yet, according to recent studies, property/casualty insurers reported their first net underwriting gain in more than 15 years during the first quarter of 2004.
This gain is partly due to insurance executives' realization that simply increasing premiums will not achieve long-term profitability.
A return to stricter underwriting standards and better service collaboration with distributors and policyholders are also necessary to fortify combined ratios.
But faced with aging and inflexible systems that often dictate costly, one-dimensional business processes, how can insurers leverage technology to sustain these encouraging results?
The magic bullet
Creating an Optimized Policy Management (OPM) environment can be a big part of the answer. By incorporating modern technology and innovative change management tools, OPM takes a holistic approach to the full spectrum of rating, underwriting and policy management.
The emerging concept of OPM combines processes and systems that reinforce decisive, economical sales and service workflows. It also fuses disparate data sources and functional components that traditionally reside in multiple stove-piped legacy settings.
Insurers today use diverse systems to manage new-business-to-renewal and in-force policy lifecycles.
Most modern policy systems are designed to achieve customer centricity while enhancing workflow and compliance efficiency.
Optimized Policy Management contains at least four other fundamentals:
- A unified, customizable rate-quote front-end to efficiently handle all premium calculations for any product.
- Automated rate management so updates can be quickly addressed and implemented.
- A highly flexible, rules-based underwriting process enabling new business or renewal risks to be accurately assessed straight through with minimal user intervention.
- Extensive tools for business users to control all policy management and integration requirements.
Progressive companies can also achieve OPM by absorbing some of the best principles of knowledge management, account-centric relationship management, and enabling technologies. Through these interconnected elements, OPM is a non-disruptive and cost-effective catalyst for achieving competitive advantage.
The following principles promote OPM and build value:
The value of consolidated insight. Knowledge management essentially involves the timely consolidation of intellectual resources, including personnel, data and products. It also enables insurers to make informed decisions when inevitable product, pricing or service changes occur.
The fusion of knowledge management with traditional contract administration promotes OPM. Where mission-critical rating, underwriting and policy service operations are strengthened, companies gain:
- Accurate, responsive quote-issuance-service workflows, and improved product delivery turnarounds.
- Point-in-time decision support for programs, accounts and distribution dynamics, as well as consistent data for market conduct filings.
- Predictive insight on the impact of rating, underwriting and service changes for individual lines or entire books of business.
Harnessing essential account information. OPM boosts the capacity to harness scattered account information, empowering productive sales and service feedback. To maximize retention, account-centricity can help insurers focus on directly serving distributors and customers, and less on hand-offs or corrective measures forced by divergent systems or data.
- Account-centric relationship management within an OPM environment entails:
- Access to "whole account" intelligence at the most favorable point of service.
- Establishment of shared account-management practices in any distribution environment.
- Promotion of Web-enabled best practices, and complete functionality to manage new business, renewal and claims workflows anytime, anywhere.
- Reductions in transactional redundancies, and streamlined service to agents and insureds.
Leveraging Web Services, XML and tools. Increasingly, Web services, XML architecture and tool-based technologies can be exploited for product management, systems integration and channel cooperation. These technologies bridge conventional platforms and databases and deliver function-rich sales and service applications.
Whether refurbishing or replacing existing systems, Optimized Policy Management should leverage these technologies to enhance the functionality of existing systems and to bolster the value of legacy automation.
Todd Meyer is a senior consultant at AscendantOne, a unit of Insurance Services Office Inc. (ISO).
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