The problem with Insurer Hosted Pricing

What is IHP?

Back in the day, insurers used to send out physical rate tables for brokers to use to calculate premiums. Brokers reported sales via a monthly bordereaux. This was a bit before my time, but I’m told they were good old days. Then the insurers started to send Excel rating guides to brokers (or more specifically brokers’ software houses) that were built onto the software house rating engine and reported to the insurer in daily EDI messages.

The current vogue is for Insurer Hosted Pricing (IHP) where brokers’ software houses apply directly to the insurer with quote information and are given back a price, and in some cases, even documents.

What was it trying to achieve?

The move from manual rate tables to Excel sped up the process of providing a quote. But rate updates still took weeks or months to implement. IHP was supposed to speed up rate updates, avoid software house fees, and make the insurer rates more widely available.

Did it work?

Sort of. Rate updates are now a bit quicker than they used to be because the insurer has direct control. But those rate updates still need testing, and so it’s not quite as quick as hoped. Also there is now the cost overhead of managing a public-facing API (much more complicated than just sending out a new spreadsheet of rates each month).

The area where it has really failed is in widening the availability of rates to the wider market, outside of the big 5 software houses. The idea of IHP was that with well documented, well validated, public-facing, open APIs, then innovative Insurtechs would be able to get access to rates without having to use one of the legacy big 5 software houses. That hasn’t happened. In fact, it takes even longer to integrate to IHP than it used to do to just build the pricing in a software house.

The head of e-trading at a Top-10 UK insurer admitted to me: “we’re just not sure why it takes so long, the whole point was that it was meant to be quicker! Despite IHP, we’ve not integrated to a new software provider in over 15 years. I’m not sure we’ve got anyone here who’d know where to start with it!”

What’s the solution?

There might not be one, but if there was, it would probably be in revisiting the APIs (that is the public-facing connection points for IHP) and re-modelling them to make them easier to access, easier to support, well documented, well validated and genuinely an opportunity for innovation. Currently IHP is cumbersome and just another layer of cost and delay in an industry that doesn’t need more of that!