Iwix.net hopes that by providing an Internet forum linking carriers and MGAs to agents and brokers, it can reduce marketing and distribution costs for specialty insurance.When Max Carter decided to establish iwix.net, an online specialty insurance exchange, he knew he didn't want to reinvent the wheel. Believing that the traditional relationships between insurers and brokers work to everyone's advantage, Carter wanted to preserve that dynamic while introducing the benefits afforded by the Internet.

"We provide a service that, on the one hand, carriers and managing general agents use to make available their specialty products to our registered brokers, and on the other hand our registered brokers use to access multiple carriers and to receive multiple quotes," says Carter, who is chief executive officer of Chicago-based iwix.net LLC.

"The most important thing about the business is to keep it as simple as possible. Our users, both brokers and underwriters, are not looking to complicate their lives. They're looking to simplify. That remains at the forefront of all we do."

Specialty insurers can incur high marketing costs for the amount of policies they sell. "It's very expensive for them to distribute their specialty market products, some of which may be of interest to only one in every 100 brokers," Carter says.

In addition to saving costs for underwriters, Carter says the exchange enables mid-range brokers to access the same markets as the largest brokers.

Carter defines specialty insurance as "anything an agent is not likely to find through its one or two primary carrier relationships." He estimates annual premiums for special insurance totals about $36 billion.

Iwix.net seems to be unique in its focus on specialty insurance and "there is good opportunity in that fragmented part of the market," says Todd Eyler, a senior analyst with Forrester Research Inc., a Cambridge, Mass.-based research and consulting firm. Eyler notes that Lloyd's, specialty insurers in the United States and many MGAs have an appetite for this type of coverage.

A growing exchange

Thirty-five insurers and managing general agents have registered with the exchange, offering 150 products. The exchange, which is located at www.iwix.net, is courting 40 to 50 additional insurers, and Carter says the number of products available should double by the end of the year.

As of Oct. 1, 800 brokers had registered with iwix.net. Carter says he considers any broker outside the top 25 brokers as part of his target market, though he notes that larger brokers could benefit from the exchange as well.

Agents and brokers must register to use the exchange but never pay any fees. Insurers and MGAs register at no charge and then pay $25 each time they provide a policy quote and an additional $25 if they close the deal online.

Although iwix.net's business model is directed at reducing carriers' direct marketing costs for specialty insurance, some carriers that have signed on with the company say the arrangement also benefits their agents.

Targeting agents' needs

Royal & SunAlliance signed up with iwix.net despite the fact that it is not looking to drum up new business through the venture. Instead, the company was sold on the benefits iwix.net offers its agents.

"We will only see business from agents we're already appointed with," explains Christopher Gill, marketing manager of the Profin division at the Charlotte, N.C.-based carrier. "But our agents can input an application one time and send it to several carriers. That's a huge advantage for them."

Royal & SunAlliance is offering directors and officers liability, employment practices liability, fiduciary liability, crime, kidnap and ransom and extortion products via iwix.net.

As more carriers sign on with iwix.net, the benefits to agents will continue to increase. "With more of them on one platform it makes the agent's job a lot easier," says Carrie Allen, an independent contractor who works as a producer for DeMeulle Insurance Co., Huntington Beach, Calif., specializing on Internet sites and with mortgage brokers. Allen says the site's ease of use and the allure of paperless transactions is a real bonus.

"I'm so sick of all this paper," Allen says. As an agent member of iwix.net for several months, she has made several submissions through the system, but has not finalized a policy. "I'm all for making the process as easy and paperless as possible," she adds. "I can input the application or fax it into the portal set up for the file. It's almost instantaneous."

Bidding for business

Iwix.net employees guide agents and brokers through the submission process. Agents or brokers build up a submission by inputting client information directly, or scanning or faxing documents into their iwix.net file system. When the submission is complete, the system automatically presents a list of carriers interested in writing the business.

An agent can choose to submit a proposal to all carriers on the list, or to a select group. Once the agent hits the send button, insurers receive instantaneous notification that they have a new submission. Once an insurer receives a request for a quote they have three options: Reject the request, request more information or quote the risk.

If the insurer fails to respond within 48 hours, the company is automatically charged a $25 fee. This is designed to generate quick turnaround from the underwriters, Carter explains. If the insurer makes a quote, a notification is sent to the agent or broker, via e-mail with a link to the log-in page for iwix.net. Agents and brokers have a private "workspace" on the site, where they can view quotes to determine whether they want to accept or reject them.

As a specialty marketplace, iwix.net enables all of its agent users to place all types of business. If any of the markets are "nonadmitted," and the agent doesn't have a surplus-lines license, the retailer is automatically presented with a list of wholesalers that will act as an intermediary, Carter explains.

Iwix.net, which currently has 28 employees, developed most of its own software. Nevertheless, "we have used third-party software in the past and will continue to do so at times in the future," Carter says, noting that London-based Traffic Interactive was the main source of software during the early stages of software development. Carter would not reveal how much iwix.net spent to get up and running. "We've certainly invested more than $1 million in technology."

Experience counts

Although the company's strategy is to use the Internet to enable insurers and carriers to market specialty insurance, Carter doesn't want the industry to get the impression that iwix.net is merely an online insurance marketplace.

"We are a company that understands how the business of insurance works," he says, noting that 10 iwix.net employees dedicated to business development have insurance industry experience. Similarly, five of the seven board members have an insurance background. Carter spent 15 years as a specialty broker, most recently at New York-based Marsh Inc. until he left in 1999 to start up iwix.net.

Carter says he realized that it was taking too long to automate the process and realized the Internet presented a way to make the market much more accessible.

"More than one company has tried to simplify the process without being aware of how it works. People don't like to change the way they do business and we've been very aware of that," Carter says. "We enable brokers to create underwriting information using their expertise and then guide them through what the carriers are looking for. We wanted to create a process that mirrors the existing business process rather than change the way people did business."

That approach resonates with many of its users. Iwix.net has a "very compelling model," says Royal & SunAlliance's Gill. "It's clear our customers, agents as well as buyers, want to do business over the Internet. Iwix.net supports agents and enables them to do business more efficiently. This model is not one that cuts agents out of the business, which is absolutely a plus for us."

Iwix.net went live in April and is already working on the next phase of its development-to establish an interface between its back-office systems and users' systems. To that end, in June it received $5 million in venture capital funding from Quester, a London-based independent venture capital firm that backs business-to-business Internet companies.

"The venture capital will change what we do, but it was very much part of the original plan," says Carter, adding that the company is not actively soliciting any additional funding at this time.

Iwix.net is using the $5 million to invest heavily in technology. "Our goal is to get to the point of being able to provide genuine integration between our systems and the carriers' and brokers' systems," he says.

The power of XML

To accomplish this integration, the company is actively implementing XML in accordance with XML standards established by ACORD.

Iwix.net plans to have XML-enabled integration by the first quarter of 2001. Carter notes that most insurers would benefit from efficiencies offered by XML integration because iwix.net will be able to exchange data directly with their legacy systems.

Insurers could also rate automatically-either in their own or iwix.net's system-by using XML data received from the company, or by programming a racing engine that is integrated into the company's software.

Insurer participants say they welcome iwix.net's XML initiative. "We will be able to receive submissions from agents as raw data," says Royal & SunAlliance's Gill. "That is much more efficient and drives costs out of the transaction. It will improve accuracy as well."

With the advent of XML integration Gill says iwix.net's fee system will make more sense as well. "Our intent is to drive costs out of the process. We have no problem paying a nominal fee to do so," he says.

Since April, iwix.net has processed more than 300 submissions.

Insurer member Philadelphia Insurance Co. has received a steadily increasing number of submissions, says Brad Lacey, underwriting manager of the Bala Cynwyd, Pa.-based niche underwriter. Philadelphia Insurance is offering non-profit D&O and miscellaneous professional liability products.

Eventually the company intends to offer lawyers and accountants liability coverage as well. Lacey says in the last couple of months, the flow has increased from one or two submissions a month to four or five a month.

Sara Harty is a freelance writer based in Grayslake, Ill.

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