The Great Data Shake-Up

Seismic forces are transforming the business landscape. Some landmarks are still visible, but their shapes have been altered. Paths forward that were once smooth and uniform have now been jolted into uneven, unreliable terrain without clear lines of sight ahead.

Evolving technology is triggering these changes, impacting the work being done and how it is accomplished. Innovation lab launches are commonplace, and every role, purpose and process is subject to re-evaluation. The common, insistent theme is the need for thinking and working differently.

In the insurance world, the technology tremors are apparent. Stakeholders are assessing countless innovative ways to communicate and to manage, use and share information, at the same time that insurance buyers are revising their expectations.

Prerequisite to change, however, are major upheavals within many insurers’ underlying systems. Legacy software characterized by outdated architecture cannot provide the flexibility or the lean analytics that are currently required.

As a result, many insurers are hastening to replace megalithic systems with nimble, modular installations, using non-traditional project management philosophies.

One priority for the new systems is improved integration capabilities. Since computers were first deployed in the insurance industry, their users have fantasized about transferring the information from one to another, without laboriously rekeying each and every byte of data.

MAKING A BUSINESS CASE

The business case for improving data exchange is obvious. Currently, brokers face limited, bleak choices; either requests and applications must be sent to insurers via memo or email for manual transcription into policy systems, or broker staff must shoulder responsibility to first create brokerage records and then re-enter the identical data into carrier systems through an assortment of bridges and portals.

The latter option may appear faster, but is greedily time-consuming for staff in the brokerage, where customer service should take precedence. With the duplicate entry comes a heightened danger of keying errors, not to mention the exacerbated security risks for carriers and brokers alike, with security designs providing Internet access based on individual credentials, rather than on the brokerage’s centralized co-ordinates.

Numerous attempts to address the redundancy have been made over the years, with limited success. Today, there is some integrated information transfer for new policies, but minimal automation exists for policy changes.

The costs of this inefficiency are substantial. While a given policy is “new business” only once during its life cycle, there may be many endorsements or changes. A portfolio of 1,000 personal lines policies may require some 500 endorsements during the course of a year, but with additional and return premiums offsetting one another, will generate minimal additional revenue.

Data entry, even when partially imported electronically, can often take more than half an hour per policy. At a hypothetical average salary of $40,000, unnecessary clerical work costs the industry an extra $5,500 for every 1,000 policies, every year.

It is a safe bet that many in the industry agree improved integration would serve not only brokers and insurers, but also consumers.

As Jeff Purdy, senior vice president of international operations at Applied Systems Inc. states, “Brokers and insurers need greater connectivity and capabilities to seamlessly exchange more information throughout the insurance life cycle for quoting, underwriting, billing, claims and other data exchange services. Technical innovation, product enhancements and improved insurer-broker integration benefit the entire property and casualty insurance industry, helping them run their businesses more efficiently and fulfill the promises they make to their customers every day.”

As technology and business imperatives have evolved, however, new possibilities have arisen to challenge assumptions about connectivity roadblocks. The adoption of XML (extensible mark-up language) as a common, ultra-flexible language, coupled with the steady improvement of available speed and capacity through the Internet, has helped to refine thinking. The Insurance Brokers Association of Canada (IBAC) has articulated a number of essential principles for electronic data exchange, which have earned broad acceptance as a frame of reference for integration designs.

Then, late in 2015, several insurers implementing one software platform formed a user group and, subsequently, a sub-committee to focus specifically on re-inventing communication to brokers’ systems. That committee’s discussions have spawned a project to design and create a software module to receive standard transaction messages transmitted from brokers’ systems, channel the data to carriers’ policy installations from that vendor, and then relay standard responses back to document brokers’ records.

Once completed, users of different broker management systems (BMSs) will be able to employ a consistent process to transmit new business, inquiry and policy change requests directly to multiple carriers, and immediately deliver the results to clients.

Committed carriers Aviva Canada, Wawanesa Insurance, Economical Insurance and Red River Mutual are collaborating on design and testing, working closely with the Centre for Study of Insurance Operations (CSIO) and broker system vendors Keal Technology, Custom Software Solutions and Applied Systems.

(IBAC is also participating, with enthusiastic support for a plan that fully incorporates its data exchange principles, see sidebar below).

The group pooled resources through 2016 to complete the technical design; then, early this year, construction was launched of the first iteration of the software in a test environment, in a series of rapid sprints scheduled through to mid-2017.

Parallelling the group’s progress, CSIO recently unveiled a revised standards update process, ensuring that the standard on which effective connectivity relies to encompass all necessary data is regularly and rapidly refreshed.

SHIFT IN METHODOLOGY

One of the biggest shifts is the methodology framing the work itself. All stakeholders are sharing a cloud environment for development and testing, donated by one insurer.

Participants are not simply meeting and then working on their own separate projects; instead, staff from each stakeholder plot out their work together, share results and confer every day to discuss the work at hand.

Certainly, it is less costly for all participants to share programming and

development costs, but even greater benefits are to be realized from constantly deploying the collective experience of several organizations against questions and potential complications.

The aftershocks from this shift will be far-reaching. Without the cumbersome delays from repetitive data entry, batch processes and password authentication, transactions can be completed with far greater speed and accuracy. Of course, some exceptions will always still require human intervention, such as out-of-sequence corrections or requests that fall outside a broker’s binding authority.

The objective, however, is for the vast majority of transactions to pass through without referral to underwriters.

As Tracy Riley, vice president of business transformation at Wawanesa Insurance summarizes, “BMS-carrier integration will enable us, over time, to reduce manual processes and focus on exception-based underwriting, which will result in quicker turnaround time for our brokers and policyholders.”

The current initial development will include trial runs of traffic between the participating BMSs and carriers, in the test environment. Brokers from across Canada, who work with the various carriers involved and representing each of the participating BMS systems, have volunteered to assist with testing.

The new connectivity will then be introduced for production within the framework of each insurer’s own internal systems implementation schedule. Each insurer has a unique timetable, and may stage switching over to the new systems by region or by line of business.

DETAILED AND VIGILANT

In the interim, BMS vendors are working ahead to ensure that necessary functionality is available once carriers are ready. Brokers will then, of course, need to update their systems to the most current versions.

It will be crucial that brokerages stay current with BMS software releases, not only to access the new connectivity capabilities, but also the full set of data required by insurers in the most current CSIO version.

Brokers can further prepare to leverage connectivity by reviewing, in advance, the data processes and quality control routines within the brokerage. The new data exchange will only work well if accurate and complete information is first present within the broker’s system.

Discipline and consistency are mandatory. It will be crucial that insurance brokers reinforce best practices that previously might have been less critical, such as auditing staff use of BMS capabilities and verifying that policy record details, not only pdf images, are updated and maintained.

Even though the current work is exclusively centred on one particular vendor’s licencees, it has far broader implications.

Because standard CSIO messages are being used, and a consistent process has been defined for receiving and then answering the information packages from broker systems, the resulting process will be inter-operable. The same design can be applied to any carrier system able to map to CSIO standard data.

“As technology progresses and connectivity options improve, there will be more opportunity to optimize insurance transactions, with the end benefit being ease of doing business for the customer – a winning proposition for all involved,” predicts Tom Reid, executive director of digital brokers at Aviva Canada.

Perhaps the greatest beneficiary, however, is the consumer. Where brokers find new connectivity eliminating unnecessary work, they will be able to redeploy resources to more meaningful, responsive and client-focused activities. They will be able to provide immediate answers to consumers who now expect instant turnaround.

Further, the data resident in brokers’ systems will be more current, and more accurate, delivering better information to consumers more quickly, whether it is exposed through secure client accesses or shared by more traditional means.

The long-awaited connectivity shake-up is still in its early stages. Much work remains outstanding for current participants to first complete the pilot project and then for other industry players to adopt the new model.

Gradually, however, change is breaking up some of the old, monolithic barriers that have impeded effective communications for so long.

Brenda Rose, Vice President and Partner, FCA Insurance Brokers