Carrier exec calls for BMS vendors to move away from developing third-party rating tools

Broker management system (BMS) tech vendors need to move away from spending time, effort and money on developing third-party rating tools used for comparison quoting, an insurance company executive said at a recent webinar on broker-carrier connectivity.

Instead, they should consider working on an industry-wide quoting solution that, through APIs (application programming interfaces), connects brokerages directly to the ratings engines developed by the carriers.

“BMS vendors need to move away from third-party rating tools and towards integration with company rating systems, and the sooner the better,” Graham Haigh, vice president of broker distribution at Wawanesa Insurance, said Thursday as a panelist on the Insurance-Canada.ca webinar, Data Exchange Update: Automating Broker-Insurer Transactions to Improve CX.

“If rating applications were to take the resources they had currently working on duplicating insurer rating structures, and move them over into API integration, I bet we’d make good headway.”

Haigh made his comments as an aside in his support of the industry D/X initiative. Essentially, the D/X Initiative is a project to develop seamless, real-time data exchange between a brokerage and carrier systems for common broker transactions such as policy and billing inquiry, claims inquiry, first notice of loss and loss runs.

Quoting could also be covered by the D/X Initiative, as noted by the panel moderator Doug Grant, partner at Insurance-Canada.ca. Grant put this as a question to Haigh during the Q&A portion of the webinar.

“I think the D/X model would be an excellent way for us to deliver on that,” Haigh responded. “It really is a quoting API that’s required to take over from the duplication of the rates at the third-party rating software platforms.”

Auto quote comparison websites offered by P&C industry players are intended to provide Canadian drivers with multiple auto insurance rates. Drivers receive quotes from multiple insurance companies based on the information that they submit online during the shopping experience. The consumer then decides which quote to pursue.

One thing that brokers have noticed, however, is that although third-party ratings tools may provide a quote to the consumer, the actual price paid for the auto insurance may be different by the time the broker binds the insurance. That’s in part because carriers are updating and changing their rating systems at the back end all the time.

“So, if we have done all of the work at our end to create the rating models that we use to quote for our brokers and customers, there’s no point in having another party duplicate that effort, especially as complicated as it is today,” Haigh said of third-party rating tools. “I hate to think that about how large some of the software shops need to be to do all this work, because Wawanesa is doing monthly rate changes on a variety of different products. And every other company that’s working with brokers would be doing the same thing.

“If you think about how much effort is going into re-manufacturing the rates that companies have created in their own platforms, it doesn’t make a lot of sense to do that, and it’s very expensive. And somebody pays for it in the end. So, let’s get away from doing that.”

Webinar panellist Kim Opheim is the Insurance Broker Association of Canada (IBAC)’s broker technology and innovation consultant and INNOTECH advisory committee. He said an API-based solution for quoting is ultimately going to be the best way for brokers to access a company’s back-end rating system.

“The complexity of [companies’] rating algorithms is getting to the point where it is virtually impossible for a technology company to replicate those algorithms [in a ratings tool],” Opheim said. “Sometimes that’s the “secret sauce” (of a company’s underwriting), so there may be issues sharing that.

“If we want to go get to a place where brokers can provide guaranteed quotes, access to the carrier engine is the only way that can be accomplished through an API. As technology evolves, as the standards that CSIO is working on for APIs mature, this will be a natural evolution. It’s something that’s unstoppable, and it’s just going to happen because it makes so much business sense.”