Carriers face unprecedented change in what was once a staid area – policy rating. With the introduction of multivariate rating models, increased use of third-party data and improved techniques to manage large amounts of data, carriers are now looking past core policy, claims and billing to ensure their rating technology meets future business demands.

In response to these needs, carriers have increasingly incorporated rating transformation into their larger policy administration transformation agenda. A majority of carriers undergoing a transformation now look to perform either full replacement of their rating components or make substantial changes to these legacy applications.

While replacement of a core policy administration system is challenging enough, these projects also are expected to help carriers understand the complex relationships between policy administration and rating and legacy and future-state architectures, as well as respond to the unique challenges a policy rating project entails.

In our experience, these projects have been most successful when sufficient up-front planning takes these three items into account:

First, Establish Realistic Scope and Project Milestones. Rating projects require clearly defined scope early in the project, as even simple changes to an algorithm can have pervasive effects across the entire code base. When establishing project scope, a cross-disciplinary team consisting of people from actuarial, product management, enterprise architecture, reporting and project management should work together to progressively define the program scope. Once they have defined a set of project requirements, the planning team then should map them to the overall benefits case of the project, prioritizing requirements with the highest benefit and lowest execution effort first. 

As the project “backlog” becomes defined, project managers can work with requirements, development and quality assurance teams to establish a realistic set of effort estimates to complete the work. This bottom-up sizing approach benefits projects because each specific task is independently sized and aggregated, producing a more accurate project estimate and milestone plan.

Next, Determine the Best Architectural Approach for Rating. As policy administration software vendors have incorporated rating functionality into their off the shelf products, carriers now have the option of utilizing these policy systems for rating. While each carrier’s current and legacy architecture will influence the project’s design, carriers have typically taken one of two possible approaches:

  • Rate using the policy administration system, or
  • Rate using an externalized rating engine.

When determining the best solution, it is important that project teams do not fall into the “this is how we always do it” trap because benefits of changing to a more appropriate rating design can result in significant long-term benefits for the organization. Regardless of strategy, projects can look to common criteria such as architectural fit, maintainability & upgradeability, performance and scalability, and product feature-set to help determine the best approach.
Finally, Understand and Plan for Policy Administration and Rating Dependencies. Accurately identifying and planning rating dependencies is a key differentiator for successful projects. When establishing the rating project, the planning team should assess not only technical dependencies, but regulatory and product dependencies, as well. Areas where we have traditionally seen challenges include:

  • Product Model Alignment: In order to accurately rate a policy, integration between the rating engine and the product model of the policy administration system need to align. Without adequate up-front planning, project teams have discovered late in development that the structure of the rating algorithm and PAS product models do not align, requiring costly re-work.
  • Quality Assurance Testing: Projects that introduce changes to the rating algorithm or tables make it impossible to test the new system against the legacy plans on a one-to-one basis. As a result, project teams need to plan an approach to adequately test the new system using an independent rating model. Projects that fail to account for this pseudo-development often delay their testing cycles as the team develops this rating model.
  • Regulatory Filings: When introducing new rating structures, project teams need to integrate regulatory approval timelines into the overall project timeline, and track tasks within the project management office to ensure overall alignment


With the introduction of “price all risk” rating plans and automated underwriting business rules, carriers now have the opportunity to lower policy acquisition costs through automation. This requires both policy administration and rating functions to work in harmony because automation has become a necessity as the industry seeks ways to lower underwriting expenses.

While undertaking a rating transformation represents a significant challenge, establishing a realistic project scope and timelines, selecting an appropriate rating design and managing project dependencies can improve project performance and lower overall risk. 

Next time, we will discuss how projects should implement rating-specific development techniques, as well as implement necessary steps to ensure rating changes can be rapidly brought to market once the main project concludes.

Imran Ilyas, partner with PwC's Insurance Advisory Services, co-authored this piece with Matthew Wolff and Balaji Jayakumar of PwC’s Advisory Services.

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