The date was February 28, 2003 and I was presenting at one of the early Insurance Canada conferences put on by Doug Grant and Patrick Vice. One of the themes of the conference was "Frictionless Distribution" and I was there to evangelize on the value of XML standards.
To add some levity, I decided to have some fun by fudging a screen snapshot of a OneLook® online dictionary search for the term "Frictionless Distribution." It looked like this:
I was, of course, poking fun at my own industry for the lack of progress we had made over the years in addressing the Holy Grail of the insurance industry: Single Entry Multiple Company Interface or SEMCI.
If there was ever an “object of a prolonged endeavor” SEMCI was it and, at that time, commercial lines data exchange was just a pipe dream. Though the term has mostly gone out of style, SEMCI truly was, and arguably still is, the Holy Grail of the insurance industry, especially in commercial lines.
That's why I'm excited—no make that stoked—about the recent and rapid progress that CSIO is making in commercial lines with their Minimum Data Set initiative. Not only will it lead to faster quotes, reduced double-entry, download of commercial policies and automated eDocs workflows...
I believe it will allow us to finally achieve the Holy Grail of the insurance industry by enabling real-time quoting with multiple insurers for some small business risks.
Why am I so optimistic? I believe there are five reasons this initiative will be successful. Here's why:
- It was designed by insurers, not vendors.
- It enables straight-through processing of small-business quotes.
- It represents a consensus of 12 insurers, which CSIO achieved in record time.
- It will incorporate a standardized set of industry codes for industries that can be automatically quoted.
- Certification is simple: you just need one insurer and one vendor successfully exchanging data.
Designed by Insurers
Under the guidance of CSIO, the Minimum Data Set was designed to process and quote small business risks by a group of insurers, not vendors. Why is this important? Well given I’m a vendor, you might think I would be opposed to this. You’d be wrong. Let me explain.
When we pioneered commercial lines data exchange with our 12 insurer partners over the last decade, each of them mapped their data to the Policy Works data set through the original CSIO XML standards. So over time, as we worked with each insurer in turn, the Policy Works data set became the de facto data set for commercial lines data exchange. We weren’t trying to be evil and give ourselves an unfair advantage over other vendors; it was just the most pragmatic way to make progress.
The Policy Works data set is optimized for mid-market risks and, as such, is not particularly well suited to the task of real-time quoting for small business risks. While it can scale down to handle these risks, Policy Works leaves it up to the broker to decide which fields are important for a given risk. Brokers love this flexibility, but it can result in all sorts of variations that make real-time quoting difficult for insurers.
In 2012, as part of our Producer App initiative, we saw the need to address this. With a vision to enable real-time rating for small business risks, we knew we had to scale our data set back to handle smaller risks. We called it “Simplified Application for Specific Industries” or SASI and it was a small subset of our own data set. The Producer App was different than the full Policy Works system in that it constrained the broker to use only the fields in our reduced data set. But for various reasons we never did realize our vision of real-time rating.
Looking back now, it’s clear to me that, while the Producer App and the SASI data set were steps in the right direction, our approach was flawed. Clearly it is the insurers who need to specify this data set, for it is they that know their underwriting appetite and the intricacies of their rating engines. Unlike a vendor, CSIO has the mandate to get the insurers together. To their credit they did and the CSIO Minimum Data Set is the result.
To appreciate the value of straight-through processing, it is helpful to understand what it is not. Again, a historical perspective is useful.
To address the data rekeying problem brokers faced in 2007 with multiple quoting portals, we built bridging solutions from Policy Works to various insurer portals. This was not straight-through processing because it took the broker out of their system (Policy Works) into another system (insurer portal) where they completed the work by answering insurer-specific questions.
To address this problem and keep the brokers in Policy Works, we worked with insurers to build “Ask Back” technology that interfaced directly with their rating engines to present “gap” questions back to the broker right in Policy Works as part of the quoting process. While Ask Back solutions kept the broker in Policy Works, they required a different workflow and they could trigger multiple rounds of questions for the broker and still result in a referral to underwriter. So, they were not straight-through processing either.
Straight-through processing, in contrast, is exactly what is sounds like: data from the broker’s system is sent to the insurer and results in a real-time quote. No fuss, no muss…data in, quote out! This is one of the objectives of the CSIO Minimum Data Set initiative. While it won’t work for every risk, there will be groups of insurers who can quote on the same groups of small-business industry codes enabling SEMCI for those business types.
Perhaps the Holy Grail of the insurance industry will be found at last!
Consensus of Insurers
Getting a consensus of insurers is a monumental, but necessary task to enable real-time quoting for small business risks. Again, this is something no vendor can accomplish by themselves because they don’t have the mandate. CSIO does and they used it very effectively to get 12 insurers to contribute to and agree on what elements would be in the Minimum Data Set. And they did it in record time. This initiative started in July and CSIO had achieved consensus by November.
Quoting from CSIOs November press release: “The progress made on commercial lines standards in just a few months demonstrates the value of collaboration in our industry,” said CSIO President and CEO Catherine Smola. “This minimum data set promises substantial improvements to commercial lines workflow, and we look forward to continuing this important work in partnership with our members.”
Standardized Industry Codes
In our experience, one of the main barriers to real-time, straight-through quoting is that brokers often don’t include industry codes in their submissions. One reason we often hear from brokers is that they don’t enter industry codes because they know that the underwriter will change it anyway. The reason for that is that each insurer has their own set of industry codes.
Standardizing a set of industry codes for small business risks that can be automatically quoted in a straight-through workflow is an important step and CSIO recognizes this. The last time I met with Catherine Smola, she explained how they are working to find groups of insurers who can rate on sets of small business risks and then working to standardize the industry codes across insurers for these businesses. Once this is done, we as vendors will have to make it easy for brokers to specify these codes and encourage them to do so using the “carrot” of multiple real-time quotes for specific small business risks.
With all the recent excitement around APIs and the CSIO Minimum Data Set, it’s easy to forget that when it comes to exchanging commercial lines data, the devil is still in the details. The mapping of commercial underwriting and coverage data is still a time consuming, complex task where accuracy and completeness are critical. Errors in mapping can lead to mistakes that ultimately lead to Errors & Omissions exposure down the way. That’s why certification is so important.
What I like about the CSIO certification process is that it is simple: one insurer and one vendor exchanging C/L data. That’s it! And they can use any delivery mechanism they want: web services, the CSIO mailbox. Even ordinary email can work!
This style of certification works because it puts the onus on the insurer and vendor to verify that their mapping between systems is accurate and complete. At the end of the day, this is the best approach because each of them understands their systems underwriting and coverage data better than a third party ever would.
Real-time quoting with multiple companies has been the Holy Grail of the commercial lines sector for decades. While it is only one aspect of what CSIO intends to achieve with the minimum data set, I believe the CSIO Minimum Data Set commercial lines initiative will finally enable insurers and vendors to address this issue—at least for some risks—once and for all.