A new report from Novarica outlines the rating solutions market for P&C insurers and attempts to explain what insurers should be getting out of each component.
External rating engines enable greater efficiency, making it easier to maintain business logic and rules, and improve speed-to-market. The report asserts that “rate making is a key driver of insurance profitability,” and that choosing a rating mechanism is very circumstantial, based on an insurers product and business needs.
Yet there are questions all P&C insurers should be asking themselves when shopping for a rating system—whether or not the vendor is an official ISO business partner and whether they offer a subscription service for the maintenance of ISO products; whether a solution includes templates that can be leveraged for building new lines or products; whether the solution provides testing utility that supports debugging, modeling and displacement; whether the solution’s BI and analytics capabilities suit your businesses goals; and whether the system supports custom applications and forms including editing and upload.
Ease-of-integration is a general sign of a well-developed rating system, according to the report, and insurers should be cognizant of a solution’s ability to connect and be utilized by other systems (e.g., documentation for filing, marketing, integration).
Also, the report indicates that insurers should look for multiple or infinite rate-tiering options as “the more granular the rating algorithm capability, the more precisely a risk can be priced”; micro rating continues to grow more popular as well.
In terms of the vendor market, there has only been one player to recently enter, ValueMomentum, while two companies continue to share the bulk of the customers: CGI and Oracle. CGI’s average customer records under $1 billion in premiums and gravitates toward the personal insurance market. The largest vendor in the market to enter within the last 10 years is AQS, whose average customers are commercial insurers with under $1 billion in premiums.
To purchase a copy of the full report, click here.
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