ONLINE TECHNOLOGY: “Doing the Evolution”

“…We have come to accept change as a constant. The hard reality is that if you don’t lead change or have an effective strategy to react to change, the market will deliver its verdict in relatively short order,” observes Howard Moran, chairman of the Centre for Study of Insurance Operations (CSIO).

Moran presented this philosophical truth to independent brokers from across the country through the first in a series of educational and “support drumming” sessions titled “Perspectives on the Portal” hosted by the Independent Brokers Association of Canada (IBAC) in conjunction with the CSIO. In the words of IBAC’s executive director, Brendan Wycks, the objectives of the sessions are to “generate enthusiasm, passion, and a missionary force that can promote and sell the portal to brokers across the country”. Indeed, selling portal participation to brokers and companies alike in the lead up to the portal’s launch, and in the immediate future thereafter, is critical in gaining “critical mass” and therefore future financial viability of the intranet project, admits the CSIO’s president Klaas Westera.

The word “Synchron” has today almost become a “dirty word” within the industry, and many commentators consulted by CU in compiling this article seemed wary to use the name in the same sentence as referring to the CSIO’s new Internet portal. Perhaps this might relate to tempting bad fate and “vexing” the future of the project. As many in the industry who lived through the Synchron days will know, this previous attempt to achieve real-time company-to-broker online communications failed miserably due to lack of agreement between brokers and insurers, and even among the ranks of the latter. Using online technology through the Internet became a “competitive” banner for insurers while brokers feared that World-Wide-Web (WWW) applications would be used by companies to gain direct control over the “client relationship”.

Although the CSIO and IT system management developer IBM are associated with Synchron as well as the latest web-based online offering, there is indeed an excited air among insurers and the broker community that the Internet portal — which will go into a broker testing phase around the middle of the second quarter of this year — has the potential to succeed where its predecessor failed. The “first phase” of the portal will offer brokers comparative price quoting through single-entry point, with the “second-phase” development set for later this year expected to deliver “guaranteed online pricing”. So far, two insurers have been used to “pilot test” the portal in terms of company system integration, and a great many more companies are expected to go online by the first-phase launch date. However, many of the companies CU spoke to admit that, while their support to the CSIO project remains strong, they currently do not have the ability to provide the necessary link-up to exchange data from their legacy-based technology infrastructure to brokers via the portal.

CSIO’s “plans in motion”

Commenting on the achievements made thus far with regard to the CSIO’s portal, Moran notes that the application of online technology within the financial services sectors has been dominated by the banks. “While banks were able to accomplish this [online technology communication] many years ago, it was only possible because they were and remain few in number.” In this regard, he views the cooperative gains made by insurers and brokers alike in determining, and ultimately defining the construction of the CSIO’s portal as a major achievement in overcoming competitive differences. “When up and running, we will have more than just a portal that does comparative quoting and a single-point of entry to the Internet and your company websites. The completion of phase-one will not be the end but rather the beginning of a new phase of broker-to-company communications through the implementation of Internet-based technologies. Truly a new way of doing business together.”

While the objectives of the portal remain true, Westera concurs that application and further development of the Internet gateway will largely depend on when insurers are ready. “It’s a question of when companies are ready.” He adds, however, that a “critical mass of company support” is expected by the summer of this year, shortly after the official launch of the first-phase of the portal. At this point, he expects about 10 insurers will be using the portal, representing approximately $8 billion in primarily personal lines premiums. “We have 17 companies working to be ready to use the portal, which is equal to about $10 billion in premiums. Broker support is also expected to be strong.”

Furthermore, Westera says member insurer feedback suggests that application of the portal will complement their existing online strategies. In this respect, he adds that strong interest has been shown by companies to apply the portal’s technology to other service areas of the business, namely claims management. “I expect that the claims end of the business will eventually end up being conducted to some extent through the portal. Ideally, the portal will end up transacting virtually everything.” Westera says that development of the second-phase of the portal will be looked at in the late summer of this year with guaranteed policy sign-up likely to be the top priority.

Company progress

Rather than detracting attention from companies’ existing web initiatives, the CSIO portal should be seen by insurers as a means of maximizing their online strategies, says Noel Walpole, president of The Economical Insurance Group. Economical elected to be among a small group of companies involved with pilot testing the CSIO portal.

Walpole notes that, “we’re not looking at this [development of the portal] as a revenue generator”. Rather, he adds, the competitive benefits lie in strengthening broker relations by being proactively involved with an initiative that will greatly aid the broker community as well as easing the business process.

As such, he points out that Economical’s involvement with the portal is not “just lip service”, and that the company is close to realizing the necessary integration requirements of the first-phase of the portal’s development. “We’d like to see other companies involved in the testing,” he adds. Walpole says the biggest challenge facing insurers in the exchange or sharing of data between their internal computer systems and brokers via the portal is ensuring information security. “We have to find a way to flow brokers into our system. This sounds simple, but there’s been a lot of work involved in getting there. That’s the challenge right now, to make sure the information is secure. But, we’re close.”

Grace Webster, vice president of business solutions at Royal & SunAlliance Insurance Group, says the company will begin work on providing a quoting service through the portal in July of this year. At the same time, Royal will look at development of guaranteed pricing, which is expected to be the focus of the second-phase development of the portal. “It will be around the fall of this year before we have a presence on the portal.”

Royal will continue to maintain its existing web strategy, which Webster notes is “75% focussed on broker services”. In this respect, she expects the portal technology will complement the company’s existing online services. For instance, at this point brokers can only get non-guaranteed pricing via a third-party quoting source. With the portal up and running, Webster says Royal will develop its own online quoting engine. Looking down the line, she hopes that the portal will eventually enable brokers to fulfill business transactions. “Ideally, the next phase of the portal will provide brokers with ‘backdoor access’ to company web services.”

Kevin McNeil, president of Gore Mutual Insurance Co., notes that each insurer will have their own approaches to how they plan to utilize the portal. From Gore’s perspective, this joint industry technology venture is an opportunity to build and upgrade the companies internal IT capabilities, he adds. Specif ically, McNeil is interested in the portal’s price quoting facility. The fees paid by company members of the CSIO are set according to the amount of premium written, hence smaller companies are able to share in the CSIO’s initiatives at a lower cost.

McNeil points out that the portal can only but provide cost efficiency to the industry over the long term. “We see our investment to achieve portal capability as being more than worthwhile.” Gore will likely connect with the portal toward the end of the year, he adds, although a lot depends on when the CSIO completes its pilot testing program (Westera expects this to be around mid April). “I expect our involvement to take place by the end of the year. We want to be a close follower. You have to be on a path to incorporate new technology or face the danger of being at a competitive disadvantage.”

Bob Tisdale, president of Pembridge Insurance Co. (which now falls within the Allstate group stable), says that “any simplified industry IT solution makes sense”. The banks have mastered online technology for years, he adds, and have achieved significant cost efficiencies by doing so.

The portal is very much like an electronic warehouse, he notes, allowing participants to develop their own uses and applications. Specifically, Tisdale is attracted to the portal’s anticipated rating capabilities, and the fact that the system has been built around a common language. Not only will this reduce the amount of policy information errors from brokers, but cutting out third-party quoting services will create additional efficiencies. “Currently, we do not have an inhouse backroom rating system, this [the portal] will enable brokers to deal directly with us.”

Although Pembridge has not performed a cost efficiency analysis of what the portal could mean to the company’s bottom-line, Tisdale hopes that the technology will eventually allow companies to broaden their use into other areas of the business, namely claims processing. However, he notes, the extent of savings available to companies in using the portal will depend on how much business flows through the system.

Ted Carter, vice president of IT at Allstate Insurance Co. of Canada, points out that the group already has an inhouse quoting system which will not be tied into the portal. However, depending on the portal’s development, the company may look at building an online quoting function specifically to deal with broker business through the portal. “We’re monitoring the portal’s development. How we move will depend on how far the portal goes.”

Carter notes, however, that should the portal’s development surge ahead, Allstate/Pembridge would not be far behind on the technology trail. There are many inefficiencies in the way the industry currently operates, he adds, and development of a joint industry project like the portal makes a lot of sense. “We do see inefficiencies in the current system, so clearly the portal should in theory provide efficiency.”

Brokers bullish

“We believe that the portal is an extremely important development for the future of the broker channel in Canada,” says Wycks. Gaining “critical mass” in support of the portal in the early stages after its launch will be imperative, he adds, hence IBAC acting in conjunction with its sister provincial associations will hold a series of educational seminars across the country in coming months. So far, broker feedback from the provincial associations has been highly encouraging, Wycks notes, while responses from insurers with regard to their commitment to be capable of connecting to the portal by the launch date has also been very positive. “We know that synchronicity is crucial in order to attract a critical mass of brokers to use the portal.”

Wycks expects at least four insurers will be ready to provide comparative quoting via the portal by the time of the launch date. There should also be other companies using the portal through a third-party quoting service, he adds, while the number of companies coming onboard should rise significantly in the later part of the year. “Most brokers see the portal as a worthwhile cost, in fact, it should present savings on existing technology costs associated with third-party quoting services. So, the portal isn’t an ‘add-on’ cost.”

Danny Craig, president of the Insurance Brokers Association of Ontario (IBAO) concurs that achieving mass company participation on the portal is critical to achieve broker migration to the system. However, he is also bullish of the portal’s future potential to make the broker channel a more competitive and cost-efficient distribution mode.

The IBAO has just sent out a questionnaire to members inquiring to when they will be ready to link up to the portal. Brokers will be able to use the portal free of charge during September to the end of October as a trial run, Craig notes, thereafter a fee will be charged according to the amount of premium business conducted via the portal. “We’re not saying [to brokers] go online to save money, because equipment will have to be bought. The benefits [of the portal] lie in the long-term efficiencies as the portal’s capabilities are expanded. It’s about where we need to be five to ten years from now.”

The comparative quoting feature that will be available during the first-phase of the portal’s development will definitely be useful to brokers, Craig says, but the real benefit lies in what will likely be the next phase of enabling the issue of new business. “We’d ideally like to bring in policy change at the next development stage, this is at the top of our ‘wish list’. But we realize that this is probably not feasible at the moment.”