Technological Nirvana?

Is communication and service in the insurance industry really as good as we have been led to believe? Despite some progress over recent years, there remain some troubling industry trends, issues which will fundamentally impact how brokers transact with insurance companies.

The development that poses the greatest threat is the proliferation of standalone insurance company websites. Even with the development of the CSIO’s portal, the industry is seeing more and more insurance companies push brokers to their websites for policy enquiry, policy change and new business submission. It is no secret that these websites are generating significant savings for insurance companies, but so doing, are increasing costs for brokers through significant duplication of effort.

We have seen insurance company systems in brokers’ offices before, but they are now disguised as supposedly easy-to-use websites. Prior to the advent of electronic data interface (EDI) in the mid-1980s, companies were placing “dumb” terminals in brokers’ offices. Generally these systems were ignored and collected dust. The rise of EDI and broker management systems (BMS) capable of uploading and downloading significantly changed the situation. Brokers now could hope that the future of broker/insurance company connectivity would be driven through BMS.

The changed technological environment was mainly influenced by two factors: the introduction of “Windows” which created an easy to place, user-friendly interface on any mainframe computer system. The second development was the Internet, which enabled reliable, inexpensive and high-speed connectivity. This breakthrough led to the demise of traditional EDI. Insurance companies ceased investing in upload/download and policy change, and diverted resources to Internet connectivity and their own websites. It is easy to see the allure of the Internet for insurance companies – the ability to quickly and easily push many data entry functions down to the broker and in the process save millions in overhead.

But, have we not come full circle? Is there really any difference today between the sexy web-based portals and the dumb terminals that were installed more than 20 years ago? The answer is “no”.

FUTURE PAST

Despite significant advances in the technology of BMS, we appear to be reversing direction on how brokers and insurers do business. Companies, and CSIO itself, seem to be turning their backs on full, two-way direct connectivity with BMS. Brokers are now being told that the future lies with direct insurance company websites, through which the CSIO’s portal will eventually allow brokers to connect with under the “phase II” development.

The move to these independent web-based portals threatens many of the gains brokers have made.

Through the CSIO portal’s upload and rating integration, a broker can quote a new piece of auto or property business, print out an application (and all supporting documentation) then upload that application to the insurer without a person having to leave their desk or BMS. As soon as a broker is required to do even a portion of this work through a separate system, be it an insurers’ website or the CSIO Portal, then the costs begin to rise. No clearer example of this is with policy change. Brokers must still document their broker management system to note details of the conversation (or meeting) with a client before signing onto a company website to make the change. This is absolutely essential for errors and omissions (E&O) exposure. If a new liability slip is required at the time, the broker cannot wait for the download a day or two later to populate their system with the new underwriting information. This requires the new data to be entered a second time – this time into the BMS.

Add to this the costs of training of employees to use company portals (do we really believe insurers will cooperate on a standard look and feel for their websites?), and the administrative time of managing the numerous online accounts. Clearly, this is not the direction brokers want to move forward toward.

A future which sees benefits for both brokers and insurance companies lies in an industry solution that allows brokers to fully utilize the capabilities of their BMS and use those systems to communicate with insurance companies in sending and receiving data (not just the one-way back from insurance companies that will work with the use of web-based portals). This is true SEMCI – not one that involves any steps or work outside of the broker management system.

Does this mean the CSIO portal is a failure? Absolutely not. It can be deemed a success in that it has brought our industry together in an attempt to develop a solution. This is in itself remarkable for an industry known for its lack of cooperation around technology issues. The portal is also a win for brokers who have not invested in technology (and there are far too many of them). But, we cannot allow the lowest common denominator to dictate or drive where we are going.

DOWN SOUTH

Brokers and insurers stand to benefit the most from developing and implementing a process that allows for new business submission, policy enquiry and policy change to be done in real-time (so not waiting for EDI sessions to complete and/or finish a transaction) in using BMS. Is this just wishful thinking?

It is not, and one only has to look south of the border to see developments in the U.S. with regard to broker/company connectivity. All three major broker system vendors in the U.S. have the ability to perform real-time transactions with insurance companies (two of the major BMS developers achieved this through “Transformation Station” and the other through “TransactNow”).

Brokers can get real-time policy enquiry, quotes, submission of new business and claims reporting this way. And while U.S. insurers are investing in their own website portals, they are also working with the BMS vendors to develop solutions that bring about benefits and savings to both parties. Why is this not happening in Canada? It is unclear, but the CSIO has stated that it will look at all connectivity options as part of the “phase-II” development of the portal – if we get there.

However, brokers cannot wait much longer. The industry needs to be working on solutions now that bring companies and brokers together using the systems they already have in place. The technology exists to make this happen, let us adopt it and move forward.

COMMERCIAL QUEST

There is another issue that remains incredibly frustrating for brokers, and that is the complete lack of any standards for commercial forms and applications. Without such development, the industry will not achieve meaningful electronic data interface utilizing broker management systems.

In the U.S., ACORD (a not-for-profit organization overseeing standards for both forms and connectivity) has developed hundreds of forms for commercial use. Many insurers are now conducting upload/download of commercial business. It is appalling that no effort has been made in Canada to achieve this. Given that commercial lines is almost entirely paper-based there exists enormous savings by automating even a portion of the business that is transacted. Without guidance, insurers will develop their own solutions to fill the void, which will mean more duplicate entry and higher operating costs for brokers.

Our industry desperately needs a complete solution that equally benefits both brokers and companies. This means recognition of the importance that BMS plays in brokers’ offices and the need to develop a tool that uses them as the single source of communication with insurance companies. This approach is not necessarily incompatible with website portals being developed by insurers as these can be connected to BMS.

Such a solution is truly a win-win proposition. The industry should leverage the work done on the CSIO portal and take advantage of technologies that already exist (which will save millions of dollars) so we can truly achieve a “technological nirvana”.