Get Connected

Brokers continue to regard face-to-face contact with customers as critical, especially in the wake of competition from direct writers. But it remains to be seen how technology can and will be employed to preserve those critical connections and foster additional growth.

Experts are urging distributors of insurance products to redouble efforts to build customer relationships, in part by more fully employing Internet and social media tools. Others suggest that many brokers and agents are bogged down by a tangle of incompatible computer software that fills far too much of their time with mundane, repetitive data entry tasks, time better spent on efforts to build and maintain those all-important relationships.

Consider findings in a recent report from Boston-based Strategy Meets Action (SMA), based in part on a survey of 479 property and casualty carriers, agents and brokers in North America, including a small number of Canadian firms. Asked to name the top three capabilities that carriers should provide to brokers and agents, 81% of surveyed personal lines agents and brokers identified “data to be keyed once” – not twice, as is the case when once using the broker’s own software and then again using the carrier’s computer system.

RE-ENTRY WOES

“The unfortunate reality is the goal of data being keyed only once still remains just that – a goal,” notes the report, written by SMA co-founders Mary Ann Garwood and Deb Smallwood, a former software developer with Liberty Mutual Insurance. “Insurers would do well to start their efforts from the viewpoint of the agent.”

Entering the same data twice is an issue on this side of the border as well. “It is just criminal what we’re doing in the insurance industry,” argues Karen Rutherford, an associate with C.W. Consulting, formerly Cookson Walker, in Toronto. “We did a quick-and-dirty calculation about how much labour is executed at the broker’s office off the broker’s payroll that used to be done at the insurance company’s office. It’s significant, and brokers aren’t compensated in any way, shape or form for that,” reports Rutherford, a broker for 23 years before joining C.W. Consulting.

“If you were to have an insurance company person sitting in the room, they’d say, ‘But brokers love it, because the work is accurate,'” she continues. “I think that is just complete hokum, because if I type in a serial number to you, and I think I typed ‘12345,’ I can’t see my own mistake.”

What brokers want is a single system that accumulates all data required “to be able to underwrite the risk, and to be able to send transactions, from their agency management system to the insurer without having to go to the insurer’s portal and input that information again,” says Ted Harman, treasurer of Quebec’s provincial broker association, Regroupement des cabinets de courtage d’assurance du Quebec (RCCAQ).

“There isn’t a single insurer in Canada who would accept to work the way that brokers are required to work,” contends Harman, president of Accent Insurance Solutions in Montreal. “There is no way they would support having 10 or 11 or 12 different systems in order to transact policies, and that is exactly the situation brokers are put in across the country.”

Harman’s colleague at RCCAQ, its outgoing chair Catherine Mainguy, suggests an industry portal will help brokers compete with direct writers.

Harman, who sits on the technology committee of the Insurance Brokers Association of Canada (IBAC) and is RCCAQ’s representative at the Centre for the Study of Insurance Operations (CSIO), says that the industry is making good progress towards its goal of allowing brokers to work in one single system and to manage transactions without having go to individual carriers’ portals.

However, for that progress to continue, solid standards are a must. Debbie Thompson, president of the Insurance Brokers Association of Ontario (IBAO), and vice-president of business development for Beyond Insurance Brokers Inc. in Whitby, Ontario, cites the standard being developed by IBAC.

“It’s a standard that has to be developed that all insurance companies will accept,” Thompson says. “I can’t just go out and develop (a portal) and hope for the best,” she emphasizes.

EXPENSIVE PAPER

Dealing with a whole lot of flimsy paper day in, day out can produce some hard costs. After completing a study, Marsh Canada Ltd. discovered the company spent at least $225,000 annually to retrieve paper-based files, Laura Hill, vice president of finance, planning and analysis for Marsh Canada, said during a panel discussion at the Insurance Canada Technology Conference in Toronto this past March.

The study determined that each customer service representative retrieved an average of 20 files daily, with each retrieval taking about three minutes to complete, Hill reported. Multiply $22 per hour by 260 hours annually, and that translates into a cost of $5,700 for each of customer service rep.

The results were enough to convince Marsh Canada to start scanning incoming documents. The company can also retrieve electronic documents from one carrier’s file transfer protocol (FTP) site, Hill said, suggesting this reduces the time to get the documents and attach them to customer files.

TESTING THE WATERS

Industry-wide, things are far from done, but things are nonetheless chugging along. In March 2012, CSIO announced the availability to its members of its Extensible Markup Language (XML) eDocs standard, which is designed to let brokers transmit policy documents directly to broker management systems (BMSs). Less than a year later, in February 2013, software maker Applied Systems Inc. announced it had certified eight carriers for the CSIO XML eDocs standard.

At G&B Allen Insurance Brokers Ltd. in Warkworth, Ontario, staff members capture declaration pages from eight carriers’ portals, Karen Gale, the company’s information technology manager, noted during the aforementioned technology conference. “I can’t say enough about it because we have been through the scan and attach, which takes approximately seven minutes of somebody’s time,” Gale told session attendees. Add to that the time it takes to capture a dec page and attach it to a client file, about five minutes more, even when done by someone who is well-trained, she added.

Intact is one of the eight carriers that University Park, Illinois-based Applied Systems certified for XML eDocs in February. The others are The Dominion, Germania Mutual Insurance Company, Gore Mutual Insurance Company, Kent & Essex Mutual Insurance Company and Wawanesa Mutual Insurance Co., plus Peace Hills Insurance and SGI General Insurance Services Ltd., both out of Edmonton.

For its part, Economical Insurance in Waterloo, Ontario, was to run a month-long pilot implementation of the CSIO eDocs XML standard in April. “Brokers will implement the same workflow they have in place with other insurers offering eDocs,” reports Kathryn Curran, Economical’s director of broker solutions. “This is significant because it streamlines broker workflows and they do not have to learn different ways for different insurers,” Curran points out.

SUPPORTING EASY ACCESS

One organization developing workflows for insurance is the Organization of Real-time Brokers Implementing Technology (ORBiT). Its president, Wendy Watson, moderated the eDocs session at the technology conference.

“Customers want information now,” Watson said at the time. “When they call us because they just got their declaration page in the mail and we don’t have it yet, we cannot talk to them in an intelligent way. So we’ve got to have it at our fingertips right now.”

Brokers need to divert more efforts from mundane, repetitive tasks toward activities that generate revenue and retain clients, Watson said.

But as direct writers ramp up their businesses, brokers’ market share is dropping, Marcon vice president Catherine Kargas noted at the conference. Data from the Montreal-based market research firm indicates that brokers’ share of the personal property market in Canada dropped from 74.5% in 2000 to 64.7% in 2008, Kargas said. (IBAC reports there are approximately 40,000 brokers in Canada).

“To a large extent, the broker channel has let the directs take some of the business away,” Kargas said. “We have allowed, in personal lines, relationships to be taken over by once-a-year renewal.”

Marcon studies have shown the reasons customers are opting for direct writers using the Internet include the convenience of 24/7 access, and the perception that they will save money.

But other poll results indicate that insurance customers who want to do business through brokers do so because they want to consult with experts, Kargas pointed out. “They want to deal with a trusted advisor, who in their opinion is an expert in the field, and no matter how many Google searches they do, they may not get all the information that they require.”

But not all efforts to employ technology been positive. “There is less focus, than we have been doing in the past, to maintain a relationship with the customer and that has been done in an effort to increase efficiencies and decrease costs, but at the same time we are creating a situation where the product is commoditized in the process,” Kargas told conference attendees.

She suggested, however, Canadians still want to close their deals in person, citing State Farm Mutual Automobile Insurance Co.’s Chicago-based Next Door service, where clients can access both in-person coaching and classes on personal finance and insurance. “Next Door is proving people want to talk to a person, which is very different from the communication we’ve been receiving from communications that get passed on from the brokers,” Kargas said.

Canadian brokers, she advised, should encourage customers to come to their offices, rather than focus on competing with direct writers in web services.

BIG AND SMALL

It is relationships – developed face-to-face rather than through the Internet – that give small and mid-sized brokerages a way to compete with the largest brokers, suggests Jason Dunn, a general insurance broker at LaRoche-McDonald Agencies Ltd. in Saskatoon. “Just going out there and having a personal meeting and a walk-through of the operation often goes a long way,” Dunn says.

Despite not having the practice groups and resources of the largest brokers, another way small to mid-sized brokers can compete is by helping to steer clients in the right direction, says IBAO’s Debbie Thompson. “Most small to medium-sized brokers deal with small to medium-sized customers. They need some help with other products and services and if we become that trusted advisor, that we really should be or want to be as brokers, then these are things we can help them with,” she adds. 

MANAGING RISK

There are several risk management services available to brokerages that can provide models and risk management data, says Mike Berris, a Vancouver-based partner with KPMG Enterprise. “There are also a number of risk management services available to brokerages that specialize in an industry or area,” Berris notes in an e-mail. “Brokers tend to hire them on an account-by-account basis.”

But there are more brokerages specializing in one industry or risk, he reports. “These niche brokerages compete well with the larger brokerage practice groups,” Berris adds.

Technology may be helping to level the playing field. Berris notes that computer software vendors are developing technology that will allow niche brokerages to compete with major brokerages. “We have seen smaller brokerages deploy commercial technology to allow clients to access policy info, renew, get quotes, etc. online and at their own schedule,” he writes. “In the past, only larger brokerages would have this capability.”

Larger brokerages also tend to have “thresholds,” whereby they will not normally offer services to a client paying below a certain premium, says Harman. “Depending on the company, it could be $25,000; it could be $50,000,” he notes. “That leaves a segment of the market that smaller brokerages can compete in,” he adds.

MAIN ATTRACTION

Another broader challenge for brokers is one that is also faced by carriers, says Harman. “Brokers are having a harder time attracting young people into the industry, so we need to have some method as an industry of generating more interest and drawing more young people into our business,” he suggests. If 100 high school students were surveyed, he expects that “you won’t find too many who say, ‘Oh, I want to work in the insurance business, because that’s a really cool career choice.'”

Once young people are persuaded that insurance is a solid career choice, they need to be trained. “You can’t learn to be a good broker by reading three textbooks and passing three tests and so I have a concern about being able to transfer a lot of knowledge, both on the underwriting side and on the broker’s side, to the next generation,” C.W. Consulting’s Karen Rutherford says. “The next generation in Canada isn’t learning to know insurance as a craft. Insurance underwriters have tried to make it easy for the brokers, so they have dumbed down the products,” she comments. There is no need for brokers to “think their way through what’s right for a customer.”

One area where younger workers at brokerages tend to excel, however, is using social media web services, some sources suggest. For example, RCCAQ’s Catherine Mainguy, who owns Quebec City-based Mainguy Assurances & Services Financiers, reports that she recently hired a new employee who uses Facebook to make connections. “He gets information out there, he has people following him, he’s got these contests going,” she says. “It’s really working out well.”

Mainguy is also a fan of using LinkedIn to connect with people in the business world, regarding it as a very professional way of using social media to obtain data on who is where in your community, as well as a vehicle to send information to clients. “I think individual brokers are using it, but I don’t think it’s widespread yet. I think they still have a lot to learn about how to use it.”

SOCIAL PRESENCE

Bryan Bedford, senior analyst for insurance technology at Peel Mutual Insurance Company in Brampton, Ontario, said during a presentation at the technology conference that he considers it vital for brokers to have a social media presence. Social media can bolster accessibility, he suggested. It may not be that a broker is “servicing people right away through that channel – but (prospective clients are) going to be finding you or looking for you through that channel.”

Another speaker recommended that brokers analyze geographic markets and then buy ads from Google. Doug Davis, president of Davis Consulting Inc., relayed he conducted an analysis of food stores in London, Ontario and found, through Internet services, data on individual stores’ size, annual revenue and number of employees. “If a grocery store owner wants to find you, he or she is going on the Internet,” he said.

Davis acknowledged a Google search using a generic term can produce millions of hits, but targeting is certainly possible. A broker can have advertising directed at people searching for information through Google, he suggested, alluding to AdWords, the Google service that allows companies to post Internet ads related to key words selected by the advertiser. The ads may appear on Google web pages displaying the results of searches that people did using those same key words.

“This isn’t pie in the sky,” Davis said of such services. “This isn’t three to five years from now; this is right now.”

That said, Davis finds from the brokers he speaks with that they are focusing more on renewing with or selling additional products to existing clients than on developing new business.

“It may be just, ‘We support the community,’ and those are all noble things, but it’s n ot going to get you the new business that you’re looking for,” Davis argued. “The days of calling Bob the insurance broker in the other county and saying, ‘I’m thinking of putting a Yellow Pages ad in your area if you put one in mine,’ (and Bob replying), ‘Okay, I won’t put one in yours if you don’t put one in mine and we won’t compete,’ those days are over.”

It must be acknowledged somebody from New Brunswick can now advertise (and is advertising) in Ontario “for the very products that you are trying to sell. So it’s not just the guy in the next county; it’s the person in the next province that’s attacking you.”

ADDING TECH TO THE MIX

Despite the challenges, the insurance sector still tends to lag behind other industries in “applying technology to win and serve customers,” suggests KPMG Enterprise’s Mike Berris.

“For example, personal lines customers that are used to doing transactions using online banking and investment brokerage services, do not have much luck finding the same level of functionality in p&c insurance, at least as of today,” Berris notes. “Insurers themselves will likely deploy more sophisticated technology solutions in future, and the question for brokers, particularly in personal lines, is whether this will create compelling cost and convenience advantages for direct writers, or whether brokers can strengthen their own e-commerce and other customer service to keep pace.”

Major carriers are currently focusing on replacing their “core” information technology systems, including policy administration and claims, reports Daniel Shum, partner in consulting for Deloitte. Noting that he has heard the desire to have a paperless office, Shum comments that “regulatory compliance or constraints will make it more difficult to have it. However, there are technologies out there, and software vendors that are beginning to pilot applications that allow for (electronic) signatures.”

In Saskatoon, LaRoche-MacDonald’s Jason Dunn says his firm is still “very much in a paper business and it is a challenge,” although he adds staff have started scanning declaration pages so they can be stored electronically.

“Our biggest use of technology would probably be on the personal lines front,” Dunn reports. “I find very much that success in commercial insurance is very largely based on the relationship that you’re able to build with your underwriter. You may be able to gain efficiencies through technology, but all this e-mail and portal use… I still don’t think that it’s as good as building a strong relationship with an underwriter where you have mutual trust.”