My next thought was, what kind of advice would I give the person who ranks #4 on Fortune's list of 2013's Top 20 Billionaires in the world -- aside from the obvious, like making sure you choose a software provider that knows the complex specialty market inside and out and that has a proven track record of successful implementations. What else should he -- or any insurance company seeking to drive growth in new markets -- look out for when making a technology decision? Here is my Top 5 list for Warren. What's on your list?
1. Go Global
Sure, the domestic U.S. commercial specialty insurance market is rife with opportunities. So why bother going beyond our borders? Because in the specialty insurance market many corporate clients are multi-nationals and the risks they bring will be from several different countries. You don't want to wake up one day and find yourself boxed out of a market opportunity because your system isn't fluent in handling multiple geographies, currencies and languages. As a brand new player with a greenfield site you already have an undeniable edge over your competition -- no burden of legacy systems where your only option is to retrofit after-the-fact. A system with built-in global capabilities gives you the flexibility of being able to do business whenever and wherever the opportunities arise.
2. Configuration Flexibility
In the Excess & Surplus insurance market there is one thing you can count on. No two customer policies are ever going to be the same. You might have a set of limits that work one way one time and differently the next. Broker commissions might apply to different sections of the policy or one set of broker commissions might apply to the whole policy. Almost every permutation is possible.
Systems that started life handling simple personal lines and products cannot easily be turned into ones that can handle complex commercial lines and products. Make sure whatever software solution you choose is easily configurable and can accommodate a variety of data types. A system that can easily be configured by your business users, without the need for reprogramming by your IT department, is how you maintain your speed to market.
3. Program vs. Policy
Most administration systems treat policies as discrete entities. But when you're dealing with complex transactions with multiple types of risks at multiple levels, you need a system that can link together every policy and product and provide statistics and analytics at the program level, not just at the policy level.
A typical corporate policy might cover corporate liability, products liability, Directors and Officers, fleets and a whole variety of property -- each with its own policy and limits. Moreover, some of those risks might have multiple layers where coverage kicks in only when there is a loss in excess of a certain amount and each layer can sit on top of the next, up to a very high catastrophe level. If your customer's risks have that level of complexity, your database needs to do more than recognize that all these policies belong to the same organization. It needs to link them all together and generate statistics and analytics that allow you to make smart decisions with real information in real time.
4. Integrate Co-Insurance and Reinsurance
U.S. domestic insurers tend to handle their co-insurance and ceded reinsurance in separate software systems. So the system feeds premium and claims data from the main policy and claims administration applications into the ceding system, which then handles ceded reinsurance processing. This may work fine in the admitted or personal lines market. But if you are doing complex commercial specialty lines in a global market, you need a system that integrates co-insurance and reinsurance on a single database. This enables you to view gross and net positions, where the business originated, what was co-insured, what was reinsured, and the relationship between all the constituent parts. Underwriters in this market are necessarily very hands on when it comes to analyzing where exposures exist and how to control them through judicious reinsurance arrangements. With an integrated system they can track every relationship down to the program level or policy level to fully understand and address the root cause of adverse performance.
5. Pack Your E-Toolkit
Today, you can't expect to grow and compete effectively without enabling your customers, agents, brokers and employees with all the latest mobile and e-technologies. Existing insurers with all the baggage of legacy systems, struggle to implement some of these latest technologies, many of which were still in their infancy when they implemented their core processing systems five, 10 or even 15 years ago. For most of them, their mobile strategy is an add-on, requiring either manual or non-real time interfaces in order to access the underlying data in the legacy application. Or they run their mobile applications separately, risking being out of step with or not taking into account data or intelligence that is embedded in their legacy systems.
But you have the luxury of starting with a blank sheet of paper. Mobile, e-accounting, e-acceptance, ACORD messaging, and all your electronic channels can be in one place. And when all that data is feeding up into analytics and reporting, you've just created an IT environment that most insurers can only dream of!
Mike Kulp is senior vice president global sales and president, Xuber USA, of Xuber Insurance Software.