Insurance operations often rely heavily on complex business logic. For example, actuaries analyze large amounts of internal and external data in order to estimate base rates and various factors for their insurance products. They develop rating and quoting algorithms to price their products, including complex and sophisticated underwriting rules.
Since these algorithms need to be programmed into various insurance systems, IT departments are often involved in the process. The most common approach is to code those algorithms into applications using one of the programming platforms that their internal IT departments are familiar with. Although this methodology is likely utilized by the majority of insurance carriers, it can prove to be a very costly and time-consuming process. Even beyond the upfront cost, these systems prove to be equally expensive to maintain and update once these initial algorithms are implemented. Even the simplest changes to these algorithms may take months to find their way into the deployed system. This poses a great challenge for overall time-to-market, significantly limiting the ability of the company to adjust to market changes.
Thinking Outside the Box: Spreadsheets-as-a-Backend
Let’s consider the algorithms developed by business users for various insurance operations, such as pricing, quoting, and underwriting. These processes are calculation-intensive operations, which is why they are often developed by actuaries, underwriters, and business analysts in Excel. Rather than re-inventing the wheel, I suggest relying on the initial source: the Excel-based calculation models that are generated by the business.
This is the definition of Spreadsheets-as-a-Backend, which identifies the concept of turning those complex Excel-based algorithms into tools that can be accessed and utilized – directly or externally – by existing systems, without requiring any significant development effort. The most common approach to employ this methodology is the exposure of Excel spreadsheets as web services. Insurance systems can consume these web services when their algorithms need to be executed. A basic example would be an insurance CRM or Policy Administration system that consumes a rating spreadsheet via web service to calculate the price of an insurance product.
I won’t go further into the details of Spreadsheets-as-a-Backend here. Follow the links below to find some articles that I have published on the subject: Spreadsheets-as-a-Backend - Part 1: A Business Case, Spreadsheets-as-a-Backend - Part 2: Use Cases, Spreadsheets-as-a-Backend - Part 3: Technology.
Instead, I would like to talk about a few projects where we helped insurance companies solve their business challenges using our SpreadsheetWeb software.
The first example is a major US-based health insurance carrier, who came to us with a very complex actuarial model in the form of a 20 MB Excel file, which was performing a critical calculation as part of their underwriting process. This entire process was manual since the underwriters had to pull data from an internal system, plug that information into the spreadsheet manually, and then return those calculated factors back into the same internal system. The potential for human error during this manual process posed a significant risk. Additionally, the underwriters had to update their copy of the spreadsheet quarterly since actuarial departments update their rates and formulas to keep in sync with the market and regulations.
The company needed a way to streamline this process – we helped them expose this calculation model as a web service on SpreadsheetWeb, which runs on their internal servers. Their underwriting system was updated to push the data to SpreadsheetWeb and consume the calculated factors. As a result, this entire process became fully automated and their underwriters no longer needed to move between the current system and the collection of decentralized Excel spreadsheets. In time, their spreadsheet model grew to approximately 40MB and expanded to include all of the states within which they operate.
The next example is a small, regional property and casualty carrier named North County Insurance (NCIC) that works with over 200 agents that sell their products. Over time, NCIC built a set of Excel tools that could be downloaded from their website in order to help their agents accurately quote rates. Every change made to these tools would require notifying their agents to instruct them to download the latest version.
They wanted a more centralized, efficient, and less error-prone approach. Rather than simply exposing the rating algorithms, NCIC decided to use SpreadsheetWeb to build web interfaces for their applications. Using SpreadsheetWeb’s UI builder, they were able to deploy their first spreadsheet, Business Owners Policy (BOP) within days. They deployed SpreadsheetWeb on their internal server and continued deploying other spreadsheets tools. Details of this implementation can be found in the case study.
The last example is one of the largest employee benefit plan administrators in the Mid-Atlantic named Group Benefit Services (GBS). They had a very complex spreadsheets to perform rating for insurance quotes. They wanted their brokers across the country to have access to this spreadsheet and generate quotes through their existing sales platforms.
They licensed SpreadsheetWeb cloud to expose this spreadsheet as an API. Their users access their web front end which makes JSON API calls to the SpreadsheetWeb calculation engine to perform rating operations. Their front end consumes the results and produces a custom PDF quote document. The flexibility of SpreadsheetWeb allowed them to expand their usage to the national scale. Currently, more than 130 brokers use the system. You can find the details of this case study.
These are only a few of the insurance organizations that we have helped utilize the Spreadsheets-as-a-Backend methodology. As a result, each of them was able to streamline their business development, achieving massive time and cost savings during the initial development, as well as in the ongoing maintenance phases.