Championing Brokers

“Insurance grabbed me a long time ago. I fell in love with the people,” admits Klaas Westera, president of the Centre for the Study of Insurance Operations (CSIO). Coming from the technology industry, he began serving the insurance industry’s needs more than 25 years ago. Now, he stands front and center as the man on the verge of creating an industry interface solution to bring broker distribution into the new millennium.

Technology and insurance have long made strange bedfellows to some critics who see p&c insurers as lagging behind in the Internet revolution. Westera, however, is set to change this perception with the impending rollout of an industry-wide Internet portal to link brokers and insurers with online, real-time transactions. For him, technology and insurance are a perfect match. “What I do is I understand the processing of transactions in the insurance industry, with technology as a tool.”

Turning point

When Westera took over the reins of CSIO in June, 1999, the organization was at a crossroads. The previous winter, the organization’s board, comprised of insurer and broker representatives, took “a hard look” at whether to even continue its existence. “There were serious concerns in the industry that the industry was not receiving the benefits from CSIO that it should.”

The decision was made to continue, largely because “the industry needed a forum for brokers and insurers to come together”, but a new path was also chosen, and Westera brought on board to lead the way. Among the original tasks would be to extend the organization’s role as a provider of standards, including those for electronic data interchange (EDI). “The idea of the portal hadn’t even come up at that time,” Westera explains, although there was some sense that the broker channel was in need of the kind of services CSIO might offer in the face of competitive pressures. His job was to “turn CSIO around” so it would deliver the kind of benefits the broker-driven industry would need to compete with other distribution channels.

Since that time, he has seen “real support for CSIO, renewed faith”. While this is certainly a result of the portal’s development, it is also a response to the resilience of the broker channel. With many predicting its demise, the distribution force has done anything but turn tail. In fact, Canadian brokers are increasing their share of the market, Westera points out.

Early victories

Brokers were still facing a struggle in the face of the growth of direct sellers and their use of technology. While past attempts at an industry-wide SEMCI (single-entry, multi-company interface) solution had run aground, with the rise of the Internet as a cost-effective and easy to use technology came thoughts that it was time for another try. “The idea of the portal really came about because of the Internet.”

The CSIO board was also concerned that companies would develop proprietary sites, each vastly different, causing brokers to deal with several different types of screens and reducing their efficiency. “But that was just the beginning of the thought process,” Westera goes on to say. Once the portal idea was born, the board began to look at additional functionalities the Internet could offer.

In total, the plan for a first phase of an online broker/insurer interface took nearly a year, between September, 1999, and August, 2000. Only after that time did the CSIO feel prepared to make a request for proposals (RFP) and begin speaking openly about its plans. “We didn’t want to create a situation of unrealistic expectations” by speaking out prior to the RFP, he explains.

Guiding the portal’s creation were a set of basic needs, the first being “we wanted a common industry approach that was owned and controlled by the industry”, rather than by a third party. Creating a SEMCI solution, with real-time capability, but which could also support batch (overnight) processing and the various technological levels of member companies were also factors.

The first phase, which will offer guaranteed quotes in real time, is being constructed by IBM and DWL. The project was to have taken 12 months, but was stretched to 15 months and is currently slightly over-budget. However, Westera notes that given the standard technology project expectations, which predict half the functionality in twice the time for twice the cost, he is unconcerned by the short delay.

The main reason is that none of the planned features of the first phase has been missed. “It’s all there,” he says, including offering insurers the chance to differentiate products (for example, to note if an auto policy offers first claim forgiveness). Another key feature is the portal’s ability to act as a “data filter”, to stop errors or missing information before the transaction reaches the insurer and thus reducing rejection rates. Westera notes that as many as 25% of applications are sent back to brokers because of errors or missing information, wasting time and money. And lest anyone fear that CSIO is backing away from its role as a developer of standards, he notes that all of the standards, from paper to EDI to XML, are being used in the project.

The first phase is currently being piloted with Economical Insurance, and the CSIO is choosing a replacement pilot company for Zurich, which recently sold its personal lines business to ING. Broker testing will take place in the spring, with a late spring rollout planned. And while successive stages are planned and the work far from over, Westera can breath something of a sigh of relief. As he notes, “If there were any chances of the portal being derailed, we’ve passed those now.” This includes financial hurdles, with the recent announcement by the CSIO board that the project would be funded until it becomes self-supporting.

Drawing attention

The portal is also catching the eye of insurers in other countries, he confirms. “These sorts of things [the functionalities the portal offers] don’t exist in other jurisdictions.” Recently, a U.S. insurance publication looked at the CSIO portal example, asking the question, “Why don’t we have this here?” Independent agents south of the border have to deal with a variety of insurer sites and screens.

Now the task will be to draw the attention of brokers here in Canada, to bring them to the portal en masse. The Insurance Brokers Association of Canada (IBAC) and its provincial branches are joining in this effort. Road show seminars, training tools, and a web site offering brokers information on the portal are all part of a plan to rollout and market the portal.

Westera seems confident that the portal will be a hit. Throughout the process, he has been impressed by the “level of understanding and trust” insurers and brokers have shown in order to make the project a reality. And since the portal was announced, membership in CSIO has increased, particularly among technology companies. “The industry is a key market for them and they see the portal as an opportunity to supply additional services to the industry.”

While some vendors, specifically those who supply rating tools, may be afraid of lost business resulting from the portal, plans have been made to use ASPs to help insurers get their back offices in order so that they will be able to offer real-time quotes, offering a new business opportunity for those vendors. Though the benefits for brokers in increased efficiency may be clear, companies are also expecting to see the portal’s success translate into bottom-line results. There is widespread understanding that “the portal is essential to the future of the broker-driven industry, and that it will bring bottom-line efficiencies,” Westera says.

Passion for people

Even as early as 1976, Westera was a champion of the broker cause. As a programmer/analyst and then sales representative for vendors, he became closely involved with the industry and brokers in particular. With a Masters of Science in theoretical physics from Brock University, he might have been a “techie”, but it was the people in the insurance industry who drew him in.

He continued to address broker needs as Canadian general manager for Redshaw (later Delphi), where he worked with brokers and insurers on EDI. It was when he joined Redshaw, in 1986, that he also became involved with the CSIO and began working on its committees.

His desire to see technology used a vehicle for enhancing the competitive edge of the broker channel was also put to use when he moved to CGI in 1996 as a consultant. And with his move to CSIO in 1999, Westera was able to put his skills to full use for brokers. Perhaps a dream job for a man who admits, “I’m passionate about the broker distribution channel.”