Planning for Insurance Product Changes

To stay ahead in an increasingly competitive insurance industry requires constant change and adaptation — change in product offerings to address the demands of an increasingly sophisticated clientele and adaptation to technological innovations that increase the efficiency and accuracy of underwriting and rating. In turn, those product changes mean insurers must learn to adapt — typically generating many questions. In an effort to demystify the process, Stephen Clarke, assistant vice president, ISO Commercial Property, and Ron Beiderman, assistant vice president, ISO Commercial Casualty, answer some frequently asked questions from customers.

Stephen ClarkeStephen Clarke, CPCU, is the assistant vice president of ISO’s Commercial Property Division, responsible for all aspects of the production and development of forms and manuals for commercial fire and allied lines, commercial inland marine, equipment breakdown, capital assets, and market segments. Clarke has more than 28 years’ experience in the industry, encompassing regulatory affairs, compliance, operations, and product development. He also serves as an adjunct professor at St. John’s University School of Risk Management. Ron BeidermanRon Beiderman, CPCU, is the assistant vice president of ISO’s Commercial Casualty Division, responsible for all aspects of the research and development, implementation, and maintenance of policy forms and manual rules for ISO’s general liability, commercial liability umbrella/excess, medical professional liability, and farm insurance programs. Beiderman started his career at ISO in July 1996 and has held positions in the Commercial Property, General Liability, and Specialty Commercial Lines Divisions.

How many filings does ISO submit per year?

Stephen Clarke: ISO submits annually more than 3,000 product filings with regulatory authorities. From state-specific filings to countrywide revisions of advisory insurance programs, 2013 is shaping up as one of the busiest in years for new and revised product implementation. In fact, every major commercial line of business will be implementing a program revision between April and October. Why the crush? Was it poor planning? Quite the contrary, the coordination of these revisions was the direct result of input from our customers.

Is ISO aware of the consequences of the changes it makes to forms?

Ron Beiderman: ISO regularly evaluates the effect that changes to advisory policy forms and rating manuals will have on customers. Changes can be as simple as introducing a new edition date for a state amendatory endorsement to something as complex as changing the basic rating approach. Whether it’s a modification required by statute or a new coverage option, the implementation of new loss costs based on a review of experience, or a revision to a rating algorithm, part of the development process includes an evaluation of the effect of the change at various steps along the distribution chain.

How does ISO initiate ideas for change?

Clarke: Depending on the type of product, the development process within ISO may involve seeking input from user panels, extensive data modeling and testing, policy forms drafting, and legal analysis. The extent to which the change affects statistical reporting must also be considered. ISO prepares explanatory material in support of the revisions and drafts regulatory filings accordingly. Once all the material is in order, the filings are submitted to state insurance departments in accordance with regulatory requirements, and ISO notifies its customers by circular letter.

Is ISO’s work done once it submits its filing?

Beiderman: The filing itself does not signal the end of ISO’s production cycle. Once the state insurance departments approve the change, ISO must make sure the revised product is included in its various product deliverables — from policy form libraries on ISOnet® to printed manual pages, from specific property quotes through ProMetrix® to ISO Rating Service® and ISO Electronic Rating Content. All this must be accomplished well in advance of the product effective date.

What can insurers do to prepare?

Beiderman: From a customer perspective, there can be a considerable amount of work in advance of the effective date. Some of the items an insurer may want to consider include:

  • the nature of the ISO change
  • the impact on a particular book of business
  • potential modifications to the ISO change
  • required policy administration system revisions needed to support the change
  • education of production forces
  • policyholder notifications
  • required regulatory filings

How does ISO select an effective date?

Clarke: The answer is simple: It depends. Is the change of the one-off variety or a program revision?

What do you mean by “one-off”?

Beiderman: When responding to routine statutory change — say, a simple revision to cancellation language — the impact on insurer systems tends to be minimal. At worst, it may involve programming the mandatory attachment of a new amendatory endorsement into a policywriting system. More typically, it involves substituting a new edition date of an existing form. In either case, company lead-time needs are minimal, and ISO can file the revision with an accelerated effective date, if needed. That allows sufficient time for regulatory review as well as for company implementation.

Occasionally, ISO will introduce a new coverage option with a short production lead time. While ISO usually gives 12 months of advance notification, sometimes the nature of the product is such that an accelerated introduction will benefit ISO customers, giving them added flexibility.

Clarke: An example of that is the green upgrade coverage option introduced for commercial property in 2009. Companies were given six months from filing to ISO implementation. Why the short time frame? As an optional coverage, use of green upgrade coverage was not mandated on any particular date. Rather, companies could begin to use the innovative new coverage option as soon as they were ready. Whether actual IT system changes were implemented or manual workarounds developed, companies could introduce this optional coverage at their own pace and in accordance with their individual underwriting intentions. If a customer was not ready or able to implement the revision on ISO’s effective date, the optional nature of the form relieved the pressure. In fact, for those companies that grant ISO filing authorization, the optional nature of the particular coverage might make it unnecessary to file an adoption delay with regulatory authorities.

So then, what do program revisions involve?

Clarke: Program revisions are the opposite of one-offs. Revisions are typically made to the major coverages that form the basis of the policy and to various optional forms that make up the program. ISO may also revise policywriting and rating rules and introduce new and revised rating relativities and loss costs.

Program revisions have the potential to have the greatest effect on insurer operations. Whether they involve the need to capture additional information during the application/underwriting process, the programming of new or revised rating algorithms, or the need to revise data capture and display on declarations and schedules, program revisions usually require a dedicated investment of time and resources to implement them effectively and efficiently. In addition, insurers must consider educational initiatives to ensure all members of the team are on the same page — sales, underwriting, claims, loss control, and actuarial must all be aware of the changes that could affect their operations.

Beiderman: Typically, ISO will give a minimum of 12 months lead time between filing and implementation. On occasion, if the changes are likely to require considerable IT implementation, ISO extends that to 18 months. However, companies that follow product developments through ISO’s user panel agendas and minutes can get a good idea well in advance of where product development is heading.

Because of the potential for significant implementation efforts, ISO tries to minimize the number of program revisions it makes to a specific line of insurance. While one-offs can occur at any time, ISO submits a program revision to each of the commercial lines on average approximately every four years. Historically, commercial property would make a program change, and other property lines would make similar changes over the course of the next year or so to maintain consistency. Similarly, general liability would make a program revision, and other liability lines would make similar changes as appropriate over roughly the next year to maintain consistency.

Recently, we added a new dimension to our coordination planning, which is why, in part, we’re implementing so many program revisions between April and October of this year.

2013 Commercial Lines
Program Revisions

Capital Assets — April
Commercial Property — April
Equipment Breakdown — April
General Liability — April
Inland Marine — April
Umbrella/Excess — April
(for GL-related changes)
Businessowners — July
Market Segments — July
Crime and Fidelity — August
Financial Institutions — September
Commercial Auto — October
Umbrella/Excess — October
(for auto-related changes)

Can you explain this new dimension of coordination planning?

Beiderman: Previously, once changes were made to the general liability program, other liability programs might take a year to make similar changes. Eventually, the changes would also find their way into businessowners, professional liability, and, occasionally, automobile, as appropriate. The same thing would occur with commercial property, with changes eventually finding their way, as appropriate, into businessowners, inland marine, equipment breakdown, and other property lines.

This staggered approach worked well. But recently customers have pointed out an issue that runs to the heart of coordination. To oversimplify, the issues boils down to this — property is property, and liability is liability. Meaning, when one liability provision is changed, it’s more efficient to make all related changes at the same time. Rather than focus on a line of insurance or program, it’s more effective to focus on a type of insurance.

Clarke: What this means in practice is that everyone involved in the insurance transaction — claims, underwriting, et cetera — can learn a new provision, for example, water damage, and apply it to all types of property insurance at approximately the same time. Whether, commercial property or businessowners, inland marine or equipment breakdown, similar provisions apply across an entire portfolio. That makes implementation more efficient and reduces the likelihood of unintentional errors, because consistency can be maintained. Given that the Businessowners Program draws from both property and casualty, that led ISO to coordinate program revisions to its commercial lines in 2013.

Beyond all that, what do insurers need to know about handling product changes?

Clarke: Planning for change is crucial, and anticipating and considering potential drawbacks and discomforts can help mitigate unwanted outcomes. ISO strives to give sufficient lead time to allow for proper planning and offers significant explanatory discussion of changes to permit customers to evaluate independently the efficacy of proposed changes. One of our goals is to provide our customers with the information needed to make informed decisions that will support their efforts to maintain competitive products in a competitive marketplace.

Do you have any other questions? We encourage you to contact us. Send e-mail to Stephen Clarke at or Ron Beiderman at