The revolution is now

Brokers, insurers and tech vendors unite! You have nothing to lose but your legacy systems!

This battle cry has been sounded by Canadian commercial insurance brokers for decades. In the meantime, commercial insurers are paying out 32 cents on every dollar they earn in premium to maintain the existing, manual processes for data exchange with their broker partners. Basically, it’s 2019 and people are still using email and re-keying data.

Enough is enough. Two years ago, the Toronto Insurance Council (TIC), representing the nation’s commercial insurance brokerages, published a white paper urging immediate change: “To be viable long-term, brokers must work quickly with all industry stakeholders to implement change.”

The revolution has been a long time coming. Previous efforts to achieve industry-wide commercial data exchange between brokers and insurers are legendary. Many bones litter the graveyard of projects that sought to achieve some form of the highly-coveted, single-entry, multiple-carrier interface (SEMCI) solution. Witness the $12-million insurers poured into the abandoned Synchron project in 1996, and an additional $12 million that went down with the CSIO Portal project in 2006.

But this time is different, brokers say.

“The retirement of legacy systems is creating a real opportunity to advance broker-insurer connectivity,” says Peter Braid, CEO of the Insurance Brokers Association of Canada (IBAC). “All stakeholders recognize that we must work together to continuously improve the customer experience. If not, a space may be created where customers seek other options.”

This historic moment of industry cooperation has led to the Data Exchange (D/X) Initiative. This project promises brokers the ability to send data from their broker management systems (BMS) directly into the carriers’ back-end systems and receive a response back from carriers in real time.

To support the initiative, representatives from every broker association across the country met in Toronto in late January to get buy-in from key players – including approximately 14 major insurance companies, as well as all seven of the country’s major tech vendors.

Change is imminent, perhaps as early as August 2019.

“We’re not talking anymore, we’re doing,” says Michael Loeters, past president of the TIC. “This event is the start of the revolution. It’s the biggest revolution in technology for the P&C industry in 50 years. Today’s the day we kick it off. We’re not talking any more. It’s no more ‘proof of concepts.’ We are doing it. And that’s the big difference.”

The Old Order

Why are brokers so bullish on the potential of the D/X Initiative?

Currently, the D/X Initiative is 90% finished its work on creating a fully-digital, real-time first notice of loss (FNOL) process. Digitizing the process would be a huge improvement over the way this is handled today. Loeters describes the current manual FNOL process in the following way: “We take the phone call from the client and we put the information in an email. We send the email to some email address and somebody on the insurance company side bangs [the information] into their system, puts in a claims number, and they send it back in an email to us. We take the information from the email, put it into our broker management system.”

This is a daily transaction, Loeters says, and it leaves a lot of room for improvement. In fact, the TIC’s 2017 white paper identifies 48 manual procedures in the current FNOL data exchange process between broker and insurer. Sixteen of them could be automated through real-time integration.

“Look at how many people and how many manual processes are involved in something that’s so simple,” Loeters says. “From a customer experience perspective, it’s terrible. A customer has had a claim and they want to know what the claim number is. They want some kind of confirmation that the company knows something about it, and who the contact is. The broker wants the same thing.

“Right now, the whole process takes 24 hours at best. We’ve demonstrated [in a D/X pilot test] that it can be done in three seconds.” Time costs money, as everyone knows.

The 2017 TIC white paper put the current situation in stark and simple terms: “The cost of doing commercial insurance through the distribution channel in Canada is too high. For insurers the average expense ratio is about 32 per cent, split between broker commissions and the costs of running an insurance company operation. Fintech and insurtech companies view this expense ratio as a tremendous opportunity for disruption by bringing efficiencies to the transaction, thereby creating cost savings and improved services to the consumer. They also view the lack of technology integration between various industry stakeholders as an opportunity to increase availability and ease of doing business to the consumer. To be viable long-term, brokers must work quickly with all industry stakeholders to implement change.”

Closing the door on portals?

When the CSIO Portal project went belly-up in December 2005, the Centre for the Study of Insurance Operations (CSIO) announced it would re-focus its efforts on developing data standards. Described in simple terms, commercial data standards would allow broker and carrier systems to “understand” the customer data being transferred electronically from a BMS directly into a carrier’s back-end system. These standards underpin a wide variety of emerging solutions for data exchange between brokers and carriers (including the D/X Initiative). In the meantime, while CSIO worked on creating data standards, carriers designed their own proprietary online web portals as a way to connect with the broker force.

While many brokers today use company portals, a majority of them would rather not. Only 22% of brokers surveyed in Canadian Underwriter’s 2018 National Broker Survey said a carrier’s digital quoting platform was the “easiest” way to submit a small business quote. Fully 65% of the 325 brokers who answered the question said email was the easiest way to do it. The main reason often cited is that company portals are proprietary solutions, not an industry solution. Each individual company solution requires a commercial broker to adapt his or her workflow accordingly. That requires time, which is time taken away from advising clients.

“Long gone are the days where each insurer builds a portal and then teaches brokers how to use each portal,” says Lynne Von Wistinghausen, managing director and head of operations and technology of Marsh Canada. “That approach isn’t sustainable on so many levels. It costs too much, takes too much time, and requires brokers to learn and use multiple different systems, which isn’t realistic in this day and age. We need one way to access this information in real time. Insurers and brokers alike are looking for ways to streamline processes and make it easier to do business. As the broker community continues to move this [D/X] initiative forward, those insurers that join in will reap the rewards of ease of doing business.”

What is the D/X Initiative?

Simply put, the D/X Initiative seeks to establish a repository or “library” of reusable services. Brokers would essentially check these reusable services out of the library and use them to program their BMS to do a specific broker transaction. For example, it would allow them to do real-time transactions with carriers that have installed the same code into their own back-end systems.

“We’re really talking about code, essentially,” explains Kim Opheim, IBAC’s consultant for broker technology. The code is bundled up as a reusable service and placed in the library. The first reusable service under development, now 90% completed, will tackle the first notice of loss transaction. All going well, FNOL would be the first reusable service to be stored in the library by the end of 2019 Q2.

“This is what they call Service Oriented Architecture, it’s been around since the 1990s,” Opheim explains. “We’re not talking about anything new. The architecture has typically used in a closed system. For example, Insurance Company X may build things for their own organization; when they build code, they write it in such a way that it can be re-used elsewhere within their organization. What’s different here is that we are talking about sharing that intellectual property in the broader community.” Broker tech vendors signed an historic agreement at the January meeting in Toronto. Essentially, they agreed to share intellectual property for the purpose of establishing the library for the D/X Initiative. At the meeting, brokers asked CSIO to host the library.

“The IBAC Data Exchange Partner Statement, signed by all BMS vendors, demonstrates their commitment to work together and to share intellectual property where applicable,” Braid says. “This is something that we have never seen before and creates an opportunity to make significant progress in this area.”

Long live the revolution!

After the reusable service for first notice of loss is posted to the library, what next?

Brokers plan to take stock of how FNOL is being used and then create a roadmap for the further development of reusable services. Individual carriers will pair with individual vendors to build future reusable services, so as to expedite the work and avoid duplication. After the first domino falls, look to see reusable services for seven to eight other common broker transactions to be posted into the library before the end of 2020.

“For the rest of 2019, we’re going to work on three to four new transactions,” says Opheim. “This is preliminary, but what makes sense to follow FNOL would be claims inquiry, loss runs, and then billing inquiry.”

Billing inquiry is when the customer calls up to inquire about a payment amount or due date. “That’s a very common request and it’s zero value for the broker, so the faster they can answer that question, the better,” says Opheim.

Claims inquiry allows a broker to establish such things as whether the carrier has set up as a claims reserve for the client’s loss, what’s been paid out on the claim already (e.g., what’s been paid to vendors such as a body shop or to a restoration company), and who is adjusting the file.

For loss runs, brokerages would be able to pull all of their losses for a specific period to do a back-office analysis. They can assess how much of the business is written in areas prone to weather losses, for example. Or the data will tell brokers whether they need to tighten up underwriting, or why excessive losses are happening. When the library becomes stocked, what happens next? For brokers, it’s all about maintaining the current political will and momentum.

“The problem boils down to what I call critical mass,” says Opheim. “It’s important that, when one of these reusable services is made available in the [library], the vendors and carriers get on it and build it, so a broker is not dealing with a plethora of different workflows. We need to reach critical mass where every carrier is using the same process. If we can get the main players on board, it will speed up the build-up of these things and ultimately the use by brokers.”