In today’s rapidly evolving insurance landscape, staying competitive requires the ability to update rates, rules, and analytics swiftly and accurately. However, many U.S. insurers still rely on rating engines embedded within policy administration systems (PAS)—tools that often slow time-to-market, introduce production errors, and limit the sophistication of rating strategies due to system constraints and IT bottlenecks.
Externalized rating refers to the practice of moving the rating function out of the core PAS and into a dedicated, standalone platform. This approach empowers business users to manage the full end-to-end rating process without heavy reliance on IT.
Melissa Bagley, a P&C Actuarial Director at WTW, explains:
“While externalized rating has been widely adopted across global insurance markets for over a decade, U.S. insurers have only recently begun to embrace this more agile and business-led model. And it’s exactly the shift they need to make.”
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By shifting rating and rules management outside of core IT systems, insurers reduce their reliance on IT release cycles. Rate updates can now be driven by performance indicators and market opportunities—not constrained by technology timelines. IT capacity, which is often limited, is freed up to add value in other areas.
Real-world impact:
Clients have saved millions annually in operational costs by reducing the need for IT involvement in rate deployments.
“We’ve helped clients reduce their rate deployment cycles by 90% through the implementation of Radar, WTW’s market-leading external rating solution. This is a genuine paradigm shift away from IT dependency,” says Melissa.
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Traditionally, insurer rating has been limited to base-rate-only changes or table-based model forms. Even when opportunities to improve rates in more granular market segments were identified, the excessive time and cost to implement them often meant sacrificing growth or profitability for simplicity.
Externalized rating changes that empower insurers to adopt more granular segmental changes and advanced model forms, including machine learning models. Purpose-built tools for analytics and externalized rating eliminate the barriers posed by legacy and even modern PAS architectures.
Results in action:
“We’ve seen clients using externalized rating improve their loss ratios by 3% and increase retention rates by 2% by executing more refined rating strategies,” Melissa notes. “Pricing and rating are central to any insurer’s business strategy, so having the ability to identify and exploit granular market segment opportunities is key to delivering on that strategy.”
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Externalized rating provides a single source of truth, managed directly by the team responsible for the rating algorithm. The same platform is used for predictive modelling, scenario testing, impact analysis, rate filing support, and production deployment—eliminating the need for re-coding or handoffs.
Operational benefit:
“Our clients have significantly reduced production errors and QA costs, cutting down on expensive re-rates and testing cycles,” Melissa says. “And by removing the need for IT to recode rates, clients can be confident they’re implementing the rates they intended—something regulators appreciate.”
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While U.S. insurers continue to navigate a complex regulatory environment, externalized rating accelerates every part of the approval process—from analytics and decision-making to filing and deployment. It also enables rapid updates to rules or analytics that don’t require regulatory approval.
For example, the same externalized platform can be used to deploy risk scoring to underwriters or claims analytics to adjusters. These updates can be made in minutes, allowing users to access real-time information.
Time saved:
Clients have shortened their time-to-market by 3 to 5 months on average, unlocking significant revenue by getting rate changes into production sooner.
“Imagine housing a risk scoring algorithm that powers straight-through processing and being able to change your appetite or underwriter referral rules within minutes,” Melissa says. “This provides true agility—getting underwriter eyes on the right risks and adapting to ever-changing market conditions.”
For insurers looking to remain competitive and agile, adopting an externalized rating platform is no longer optional—it’s essential. A true end-to-end solution enables seamless integration across pricing, decision-making, filing, and deployment, providing the agility needed to respond to market trends with speed and precision.
To unlock agility and meaningful business value, externalized rating is the next step forward.
Used by over 500 of the world’s insurers, WTW’s Radar is the market-leading SaaS-enabled, end-to-end analytics and deployment solution that allows insurers to externalize rating and underwriting rules. Built by insurance experts, for insurance experts, Radar offers unmatched analytical speed, enhanced transparency and governance, and leading-edge innovation in pricing and rating.
