The Human Element

Technology is undeniably transforming the world around us, and the environment in which we work, faster than ever. Just witness the ferocious adoption rate of the latest MP3 players and virtual reality games. To keep pace with high-tech advances, businesses must continuously make the right choices. This is especially true of public-facing organizations like insurance brokerages, as customer expectations increase steadily in tandem with the emergence of new technology standards.

Simply adding more computerized wizardry, however, can be counter-productive — especially if it serves merely to commoditize products and isolate the customer. The key is to use new tools to out-distance the competition without compromising existing services that customer’s value.

With the ongoing soft market compressing bottom lines, and the war for distribution heating up, brokers seeking to differentiate themselves must choose especially wisely among available technology options. When delivering advice and analysis to clients, the broker’s priority is always the customer relationship. Thus, the ultimate test for any new technology is whether it provides real benefit to the customer.

STATE OF THE ART

One tool now widely available to brokers is the insurer ‘portal,’ or Web screen, through which brokers key information directly into insurer systems to obtain quotations, create or change coverage. This is not a new concept; in fact, insurers’ sites today are more attractive and userfriendly than ever. Also, some portals now provide access to commercial package business as well as personal lines. The insurer sites do have a certain allure – a broker can control the work process and ensure a rapid turnaround, avoiding the frustration and expense of backlogs and endless unproductive follow-ups. Nevertheless, brokers must carefully weigh pros and cons before agreeing to employ these sites, because the longer-term implications may disadvantage both broker and client.

For traditional business, the broker’s ownership of client information is generally clearly defined within the broker-company contract. Once brokers enter data directly into insurer systems, however, that priority is not always as clear. Business relationships do ebb and flow, and contracts are sometimes cancelled. In

E&O QUESTIONS

Within a brokerage operation, the BMS is central. It’s a complete, integrated storehouse, encompassing many functions and incorporating information from any number of different insurers into a single, consistent format. In a claim or an errors and omissions situation, both client and broker will depend on the data preserved there. Complete documentation within the system of every communication and transaction is therefore a necessity dictated by prudent business practice. However, many insurer Web screens don’t interface with broker systems (or not for all types of transactions). In order to use insurer Web sites, information already

this event, what assurance does the broker have of ongoing access to data or notes stored within an insurer’s system? What protection does the client have that an insurer will not use the data stored in its systems for unrelated marketing purposes? To protect both the broker and the client, it is important to amend the broker- company contract to define clearly the rules around new processes before undertaking any of them.

In addition, typical broker-company contracts do not refer to liability arising from clerical work performed by brokers on the insurer’s behalf. In the absence of the insurer assuming specific responsibility, a brokerage will carry a greater proportion of the professional liability exposure, simply by virtue of doing a greater share of the work. If a broker CSR entering data via an insurer’s Web site erroneously omits some key coverage, the brokerage may very well be held responsible for a subsequent claim. The insurer can deny liability, forcing the broker to call on his errors and omissions coverage. Certainly, the brokerage cannot assume simple goodwill or ex-gratia payments will provide a safety net. Without written insurer acknowledgement of responsibility for work performed outside the Broker Management System (BMS), brokers must weigh the benefits of the Web technology against the added exposure to their own professional liability. recorded in the BMS must be reproduced manually — an expensive duplication of time and effort.

Each different insurer portal carries with it idiosyncrasies for brokerage staff to learn, creating inherent inefficiencies when multiple markets are used. Further, employing insurer Web technology requires an immediate brokerage decision on workflow: will CSRs enter their own transactions on the insurer site, or will specific personnel be designated for the task? Either option carries risks.

If brokerage staff members enter transactions on the insurance site on their own, that entails training multiple individuals and — if staff infrequently use the system — may lead to more errors. Alternatively, delegating to specific individuals requires relaying information to yet another person before it reaches the insurer page; again, this increases delays, expense and possible errors.

There are cumulative costs, direct and indirect, associated with using insurer Web sites.

For example, a Cdn$3-million portfolio with one insurer might represent 2,000 or more policies and, over the course of a year, well over 1,000 transactions. Informal surveys suggest a typical endorsement may take 15 to 20 minutes to input manually, consuming five or six hours each week. Multiply that number for each carrier for whom the brokerage undertakes to process transactions.

Further, because the data entry does require underwriting judgments, the responsibility can be assigned only to more experienced — and higher-paid — personnel.

Even harder to evaluate, however, is the cost of the time redirected from other, more productive work. Despite the convenience of producing some documents sooner, the value to the client is more than neutralized if the use of Web screens shrinks the remaining time otherwise available for customer service and interaction.

Fortunately, trends in insurance technology development are towards improved integration of insurer and broker systems. It is logical to win efficiencies by having brokers assuming some insurer tasks, but it follows that brokers and insurers should cooperate to simplify that process, using the most current technology. Insurers do realize that independent brokers must coordinate with multiple markets as efficiently as possible. Further, insurers recognize the most organized, proficient brokerages will deploy the most efficient tools. It makes sense, therefore, for insurers to maximize their own automation investments by using the same integration technology.

Despite its past history, the concept of SEMCI (single-entry, multi-company interface) is still relevant and pressing. The vision of ’round-trip,’ real-time transactions — starting and ending with the broker’s own system, and including a single ‘login’ required for access to many insurers — would still be the most efficient means of communication between multiple parties, without duplicated effort or loss of accuracy. A number of recent initiatives in the United States and Canada have targeted the elimination of double entry. Nevertheless, more development is needed; this will require ongoing stakeholder cooperation, information-sharing and adoption of CSIO standards before the broker’s ideal becomes the norm. Of particular importance is building an integrated process for policy amendments, as this transaction presently has the least amount of automated data transfer. On average, policy changes are revenue-neutral, but they are nevertheless a crucial customer service. In order to serve the client well, insurers and brokers need to manage this expense well, a shared goal that could be accomplished by means of improved integration.

BEYOND DATA EXCHANGE

Beyond data exchange with insurers, brokers have many other ways of leveraging technology to build value for clients. Certainly online quoting services hosted by direct writers and banks have gained much attention, and their response speed sets a new benchmark that must be equaled. It is not enough, though, simply to duplicate the competition’s devices. On the contrary, brokers need to differentiate themselves, highlighting the unique, custom features of their offerings. In attempting to match the convenience of Internet shopping, brokers do run the risk of overcommoditization, separating the client from the broker’s advice. Automation better serves customers when used to eliminate sources of frustration or redundant tasks that divert staff from customized one-on-one activities such as discussing needs and risk management, or providing a detailed analysis of coverage options.

Time-creating technology strategies, all focusing on raising the level of customer service, might include:

• telephony software to expedite client identification, locate associated records and spare customers annoying repetition;

• document imaging, in conjunction with dual monitors, enabling staff to easily access information instantly;

• multi-company quoting engines integrated with broker systems, eliminating re-keying;

• automated invoicing to avoid unnecessary data entry;

• claims download to the BMS, to hasten and facilitate client advocacy;

• automation of internal workflows such as document processing, saving unnecessary steps;

• maximizing use of features within the existing BMS, including marketing tools; and

• creation of secure client access to their own account information, including options for contacting broker staff at any point.

It is crucial, too, that all staff members are trained and fully comfortable with whatever tools are implemented.

Of course, brokers are not making operational choices in a vacuum. Given evolving technological capabilities, other factors — regulatory changes, new exposures and original products — are also generated and drive competition. One certainty is that the status quo is no longer an option. It is critical that brokers measure the pulse of new trends, cultivate their organization’s agility and incorporate change as part of their culture. Collectively, brokers can influence how technology develops and is implemented in our industry. To do so, brokers must be informed and get involved. The price of future success will be a diligent ongoing investment of time, talent and funding to ensure the best service and value for customers.