Specialty Line Insurance — Problems & Solutions

The specialty lines insurance market is a segment of the insurance business where the more unusual risks are written. Because specialty lines tend to deal with the uncommon risks, this market deals with a high degree of specialized rules and processes.

Insurance companies in this market have specialized expertise and experience in rating and underwriting insurance for a wide range of risks. These insurers work with brokers who are specialty lines experts. Most of the push for new product development comes from broker’s who need to cover insureds with unique coverage requirements.

The specialty lines insurance market focuses on two types of products: unusual and higher risk accounts. An example of the first type of product is professional liability for a trustee, and an example of the latter would be a manufacturer of dangerous chemicals. The professional liability line is included in the specialty lines market because the underwriting, rating and other insurance domain functions require a lot of experience. The dangerous chemicals manufacturer would be included because of the extreme liability exposures and the high claim severity.

The market size is difficult to estimate with precision, but it is in tens of billions of dollars in total premium volume.

Problems in the Specialty Line area

The Specialty Line arena has some unique problems associated with it. Some of these are:

• Most specialty lines serve a niche market.
• Complex rules that do not apply to a large customer base.
• A limited set of solution providers.
• Challenges in accessing external (industry) and internal (company) data.
• Lack of rating engines.
• Need for building highly customized information systems.
• Many core insurance constructs are different. For example, the Surety specialty line does not use “policy”. It uses “bonds”.
• Claims processing is very complex as a result of the above factors.

Current State Of The Specialty Line Solutions

There are some specialty lines that have a few custom providers; these companies have usually captured a large part of a niche market. The challenge for the carriers is typically the implementation cost since they are dealing with limited options. The other issue is the implementation timeline; this is because many of these specialty line solution providers are not that big.

Facing the above situation, some of the larger carriers servicing specialty lines decided to build their own solutions using their internal IT teams. This approach has worked fairly well for many people; however, we now have the situation of a carrier ending up in the software product development business for as long as these homegrown solutions exist.

Another Emerging Solution Option

There is now another solution option in the specialty line space: the use of low-code software development platforms to build the specialty line insurance ecosystem. This option is especially attractive to carriers that have a limited budget for the solution build.

• The main advantage is that low-code SaaS platforms offer capabilities needed to enable insurance providers to rapidly build specialty lines solutions at a very high speed.
• Implementation speed is achieved since the low-code platforms typically enable the user to focus primarily on their domain (specialty line insurance in this case). In other words, a good low-code platform will obviate the need for a large IT team to build a specialty lines solution.
• Specifically, a good low-code platform will offer a UI builder for rapid construction of the front end, and a visual flow engine and/or simple scripting for encoding backend business rules.
• Additionally, a well-designed low-code platform will reduce (or even remove) the need for a DevOps team.
• Another very new feature in some of the leading-edge low-code platforms is the use of AI-driven development tools; this will further shorten and hasten the development of specialty line solutions for carriers with limited budgets and few technical resources.
• To summarize, AI-driven low-code platforms can rapidly build and deploy fully-managed specialty line digital solutions within weeks! These solutions work on multiple platforms, i.e. laptops/tablets/cell phones with minimal effort on part of the development team, and they are very easy to change and extend.