New Technology Will Bring Big Changes

You don’t have to be a mystic to predict that the next five years are going to be a time of change for Canada’s insurance industry, particularly the broker-based property & casualty sector.

This should not come as a surprise, but trying to get 30,000 or so brokers to sign on to a sophisticated solution is not an easy task. Up to now most brokers have ignored anything that resembles a technology solution, and most underwriters have not had the motivation to foist an effective solution on the broker community, and as a result have put off change as long as possible. But, trying to hold back the groundswell at this time will be a little bit like Neptune standing on the beach and commanding the tide to turn.

What makes change essential, and desirable, at this time is the need for progressive distribution and customer relationship management (CRM) models that will yield significant reductions in the cost of doing business, and the ability to provide the consumer with the highest levels of service at affordable costs, and generate profits for the underwriter. This is a tall order, but one that must be delivered, and it cannot be done by simply tinkering.

The current broker-based operation is expensive, and, while serving a useful purpose up until about ten years ago, it is now not cost efficient in providing the consumer with speedy, affordable products and first-class service. There are few obvious advantages to either the underwriter or the consumer with the current set up. On the other hand, redesigning the workflow applications, and taking advantage of leading-edge technology provides the potential for operating cost reductions in the 30% range, while providing a level of customer satisfaction which is currently out of reach.

Such changes would not be easy from a human standpoint – after all, no one is anxious to tear their own house down. However, a well thought out migration plan that takes care of the human and business transition over a three to four year period can provide the answer. But, whichever way you look at it, there are not too many alternatives.

Success will depend largely on the technology, and its ability to cater to the complex needs of disparate operations, while seamlessly integrating with both industry-associated, and outside databases. Specific attention will need to be paid to the networking between underwriters and independent brokers. Servicing the consumer means the need to “integrate” humans as part of the overall specifications. An optimum system design should be capable of providing consumers with full quotations in less than five minutes, and be capable of delivering a complete policy, along with payment arrangements.

A big step forward will be the use of universal insurance “smart card” technology as an important part of the system. The card would contain the ‘pointers’ that determine where the various information bytes of current customer/vehicle data in a standard application form are available. In this way, the consumer is only required to provide the most current changes to the biography to ensure accuracy. An additional feature would enable the card to be scanned by authorized persons, such as police personnel, to quickly and accurately determine the status of the existing insurance, such as under the new “Critical Coverage Reporting” system in place for Ontario auto insurance.

The proposed system could be driven by the specific underwriting company’s technology or, preferably, the major ‘standard’ processing could be performed in a shared technology environment, while the specific underwriters would provide customization and value-added features to permit branding, built into the “smart card”. The major advantages of such a system would be the uniform high level of service available to the consumer for basic insurance products, and a significant cost saving by the underwriters. While the broker’s function as we know it today would change considerably, and certainly the overall number of brokers would decrease, there would be the ongoing need for independent agents, or franchisees, modelled a little like travel agents. Agents would have the capability to communicate directly with potential customers, using both voice and data over the web, with the capability for both ad hoc communications, or sophisticated remote ‘one on one’ prospect presentations. The technology would enable real-time remote sales.

And lest insurers fear they are rebuilding from the ground up, the sophisticated large scale network componentry, which is an absolute necessity, is available today, while much of the required sub-systems hardware and basic software is either available now, or is in the latter stages of development.

The Wired World welcomes your feedback. Contact us, via E-mail at vikki@canadianunderwriter.ca