Keeping up to date with rating bureau content has always been an onerous task for P/C insurance carriers, particularly small to midsize carriers with limited operational resources. According to research by Novarica, 80 percent of carriers are not current with ISO filings, with most lagging anywhere from two to five years behind. This insight speaks volumes about the challenges of remaining compliant, even though the updates serve a strategic purpose and should be treated as a priority.

Being outdated by multiple versions of bureau updates can be detrimental to both insurers and policyholders. Insurers rely on up-to-date information from rating bureaus such as NCCI, ISO and AAIS to ensure that pricing is both competitive and risk appropriate. Aside from its importance to underwriters and actuaries, staying current can also streamline product updates and benefit the insurer’s bottom line. However, insurers face escalating internal and external challenges with properly navigating the increasingly complex regulatory landscape and efficiently handling the adoption of the circulars that would positively impact their business.

So Many Circulars, So Little Time

It’s easy for carriers to underestimate the full scope of compliance. For many years, changes were small and routine. Now, large nationwide and state-by-state changes with significant impact to rates, rules, forms and statistical coding, along with the corresponding changes to underlying core systems, have become the new normal.

Carriers rarely use bureau content “as is” and typically spend significant time analyzing, interpreting and reporting the updates to adapt them appropriately. The process often requires an entire division dedicated to the task. As an example, ISO releases 75 new circulars each week on average, making manual vetting and implementation challenging for many carriers. And this is just for a single bureau. If insurers are writing workers compensation business, which is subject to the NCCI, it is another set of transitional rules, forms, rates, as well as underwriting rules and potential system changes that must be addressed.

What’s a Carrier to Do?

One way insurers can optimize their in-house staff and resources dedicated to managing bureau content is ensuring that their core systems are architected to seamlessly support bureau content updates within business processes, ideally for all bureau-based lines of business (ISO, NCCI and AAIS). The systems should be equipped with tools that can both maintain and adequately separate the base content of the bureaus and carrier-specific deviations throughout the life cycles of rates, rating, rules and forms. This separation is crucial to avoid friction or confusion among team members when maintaining or upgrading over time.

By having core systems capable of routinely pulling new circulars, regulatory teams can be nimble in their adoption and make quicker, better-informed decisions on which updates are a good fit for their business.

Why It’s Worth It

Bureau data is an actuary’s secret weapon. Ratings bureaus are the industry’s largest data aggregators, with data volumes that can substantially inform actuarial decisions. For example, by having up-to-date data on the distance between commercial properties and a water source, actuaries can determine with far greater accuracy their potential exposure in the event of a fire. Yet, it isn’t uncommon to see insurers using property risk data that’s 10-12 years old, and as a result, setting rates based on incorrect information.

Emerging lines, such as cyber liability insurance, also benefit from staying current because of the dearth of available historical data. It’s a fast-changing space where claims have high severity potential, and with each carrier’s data contributing to ISO or AAIS over time, actuaries are better able to set rates and remain competitive. Keeping up with regulations will also be important for prospective future risks, such as those related to autonomous vehicles including cybersecurity, product liability for vehicle sensors, and vehicle infrastructure to control vehicle movements and traffic flow. The less established the market, the more reliant insurers are on the latest rating bureau information.

Access to the most relevant bureau information has always been essential for insurance carriers to keep up with the latest trends and data in their business lines. This is even more critical today as advanced technologies alter consumer behavior and create a demand for new insurance products with minimal historical risk data available. Insurers must invest resources to proactively stay current with the latest regulatory changes as they adapt their offerings to serve an ever-changing customer base. In addition, their core systems must have the proper tools and integrations in place to simplify the workflows for bureau content updates.