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Specialist insurer Hiscox has used rules management to overcome the complexity of operating across multiple channels

Home-owners beware: damage caused by vermin is often not covered by contents insurance. If that doesn’t sound like a big concern, ask the family whose home was gutted by a fire started when a squirrel chewed through an electrical cable, causing £1.5 million worth of damage.

Specialist insurance company Hiscox competes on its ability to offer policies to businesses and consumers that are more closely matched to a customer’s particular situation than any off-the-shelf policy.

For example, the standard home insurance policy will cost more if a burglar alarm is not fitted. In Hiscox’s policies, this provision is overridden if the policyholder owns a dog. And, incidentally, squirrel damage is included: it paid out to the aforementioned victims.

The company’s value proposition therefore lies in the sophistication of the rules it uses to assess each customer for risk and potential value. Historically, these decisions have been conducted by underwriters using its legacy application – the system makes recommendations based on customer data, which the underwriter can tailor to a specific customer’s needs.

But the insurance industry is becoming increasingly automated, and new channels abound. The Internet is now a major channel for insurers, and the advent of insurance aggregation websites and broker platforms requires them to provide information about their policies in a standardised and automated fashion.

Hiscox found itself managing six automated channels – a challenge of ever increasing complexity. “Every time we wanted to update a price, we would have to do it six times,” recalls Alan Millard, chief operating officer at Hiscox. “The process was getting slower and slower.”

It was this imperative that pushed Hiscox to adopt a business rules management system from ILOG named JRules. The system forms the logic repository of a new platform that automatically handles quote requests it receives through digital channels.

“We prefer to buy IT systems rather than build them ourselves, but there is no such thing as a distribution channel manager for insurance,” explains Millard. “However, we didn’t want to build it from scratch. That’s where JRules came in.”

Data such as customers’ postcode, whether they have a brick exterior or whether they live on a flood plain is fed to the company in various formats from the different channels. It is pulled together using a Web Methods business process integration suite from Software AG and submitted to the rules suite, which returns an appropriate quote.

The system allows Hiscox to present a consistent service across its many automated channels. “This consistency is important if we are to be fair to our customers,” says Millard. “There should be no ‘best way’ of doing business with us.”

But the key development for Hiscox is the ability for business users to edit the rules themselves. In the legacy application, named Magic, changing the business rules was a complex job for a developer. There is still some involvement from IT in changing the logic within the JRules system – not all business users see it as their responsibility – but it has certainly given the business more direct control over policies.

The Magic application is still in commission, however. This means the ILOG system is not the single, central repository for business rules – some are still hard-coded within the Magic legacy application.

This, Millard explains, is because the requirements for the broker-mediated business and the automated channels are slightly different. Going forward, there may be greater opportunity for integration as policies that are currently in operation are retired and replaced.

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