Still in development, it doesn't have an official name, yet the ground swell for the electronic insurance exchange appears to be growing.Depending upon whom you ask, the "exchange" is the best technology for the insurance industry since the Internet, a "me-too" service that will only add complexity to the supply chain, or a behemoth to be reckoned with by carriers and producers alike.
Regardless of how it's perceived, the exchange movement is not unlike the proverbial freight train. It's chugging along and gaining speed. This is largely the result of the insurance broker network, which has quietly pulled together venture capitalists, a couple of heaving-hitting technology providers and a host of other stakeholders to create what they are calling the ultimate network solution for producers and for carriers.
The exchange takes the real-time, comparative rating, single-entry, multiple-company interface idea a step further.
Along with providing producers of all sizes with the ability to perform "once and done" transactions with any number of carriers simultaneously, it holds a bigger promise: as a content aggregator it can make exchange participants' data available in a variety of forms to subscribers.
"In the 10 years that we've been looking at this, we've moved from evaluating the inefficient nature of the linkage between A, B and C, to being able to gather aggregate data and information necessary for the industry," says Frank Sentner, director of strategic technology for the Council of Insurance Agents and Brokers, Washington, D.C. "Other industries have this, which means the insurance industry is operating in the dark."
The council's clout is not to be ignored: The organization claims that council members annually write 80% of all commercial property/casualty premiums in the United States and administer billions of dollars in employee benefits accounts. And CIAB is not the only party interested in climbing aboard the train.
More than 7,500 agency, brokerage, MGA and wholesaler professionals who took part in the ACORD Users Group (AUGIE) 2006 Technology Survey made it clear last year that dealing with various company proprietary interfaces, followed by duplicate entry, represented the group's biggest challenges (see charts, pages 8 and 10).
The Independent Insurance Agents & Brokers of America (Big "I"), Arlington, Va., which represents more than 300,000 independent insurance agents & brokers, has also joined the faction.
"The electronic insurance exchange will help address one of the two biggest issues our members face," says Jeff Yates, executive director of the Agency Council for Technology at the Big "I." "Our members care about reducing the complexity of proprietary systems so they can improve access to real time rating, and they want more effective commercialized downloads."
Yates is quick to point out, however, that the exchange may not be the only train on the tracks, especially in terms of supporting smaller personal lines agents across a number of lines of business.
"A number of comparative raters are doing work in this area and so are the agency management systems' vendors," says Yates. "There are a number of people working hard on this already."
BIGGER PICTURE
Sentner's vision, however, which is tied to middle market agents and brokers that focus primarily on commercial lines, is bigger than just transactional solutions.
"We're talking about supporting more than just the business process," he says. "It's about providing access to information that doesn't exist today. There is no place where information is aggregated to reflect agent, brokers or carrier performance, for example. None of the solutions out there address that broader scope."
The information Sentner believes is critical to this effort is a collection of marketplace data, such as an anonymous look at geographical regions that will enable members to identify market niches, and non-anonymous data to help them identify their performance against the marketplace. Brokers will track which carriers they are submitting to, the business they've already written with them or how long it takes a carrier to respond to a request. Sentner claims that, although the exchange initiative is "broker driven," carriers stand to benefit, too.
"The participating carriers will likewise have info on their agents and brokers and be able to better track their performance," Sentner says. "But they'll also be able to see which business they didn't write-for whatever reason. This is not something carriers do a very good job of tracking today."
With momentum building and funding discussions under way, the exchange is already taking hold-at least in spirit. Sentner maintains that the target for rollout is late 2007.
Superior Access Insurance Services Inc., an Irvine, Calif., technology subsidiary of venture capital firm Pequot Ventures, owns the patent on the exchange. On tap to manage the exchange's data center, security and infrastructure is ChoicePoint. The Alpharetta, Ga., technology provider will also spin aggregate data into services that include analysis of market trends. Plans call for ChoicePoint to work with Superior Access.
"We have a letter of intent, but nothing is 100% and this is not a done deal," says Jeff Glazier, ChoicePoint's insurance division president. Glazier also cautions that getting "all people on the same page" may be a major hurdle. "Until we get this set up and all users agree, the initial focus will be transactional," he says.
From the carriers' perspective, the hurdle may be high. More than 65% of respondents to a January Insurance Networking News Web poll believe that the biggest reason a single-entry, multiple-carrier interface has yet to be deployed successfully across all lines of business is that it's not in the best interest of carriers from a competitive standpoint. Another 19% believe the technology is too complex, based on line of business and 8% say it's too expensive to implement. An additional 8% believe agents don't have the technology to support it.
Still, the efforts to get carriers and brokers on the same page are worth it, in Glazier's estimation. "It can change the way the marketplace functions," he says. "Plus, we are starting with software that already exists-so time and expense will be more manageable."
APPETITE INTELLIGENCE
The exchange software will use ACORD standards. Users will enter the exchange site and input data once, then answer questions about which carrier they want to do business with.
Based on user-defined carrier preferences, the user then answers questions that help qualify the risk.
"The Hartford may have 20 questions and Travelers may have six unique additional questions," says Glazier. "Then they can submit it to the carriers they've selected. If they want to submit to carriers they don't do business with, they are given the option of going through a wholesaler. This gives the user access to marketplaces otherwise unavailable to them."
Glazier points to intelligent screening as a time-saver, and rules-based editing ensures the data that's passed to the carrier is accurate. Finally, and perhaps most important, the exchange retrieves data from external sources, such as D&B, to further qualify the risk.
"It knows about appetite," he says.
Sharon Emek, Ph.D., managing director of CBS Coverage Group Inc., Plainview, N.Y., and chair of the Independent Insurance Agents & Brokers of New York, cites the exchanges' potential to provide intelligence on risk appetite as a key selling points.
"One of the biggest challenges is in keeping new business and renewals-to be able to quickly and effectively quote from many carriers," Emek says. "Carriers change their risk appetite so frequently, it's hard to know where the risk is best placed."
BRINGING ORDER TO CHAOS
Emek, who sees the exchange's potential as similar to E-bay's ability to capture information about all markets in one place, describes the exchange as a force for bringing order to chaos. "It's comes down to quality control and efficiency," she says. "Imagine discovering that the most suitable carrier is not in your current agreement so you are given the option of placing it with that carrier's broker. I'll be able to reassure my customer that I went to everyone viable in order to provide the best possible coverage."
As more agents and brokers become willingly engaged, there are still some missing pieces; carriers, for one. Sentner declares that efforts are well under way to garner carrier support, and he cites The Hartford as one of the leading carriers in terms of technology initiatives that will enable their participation.
"We have an 'if you build it' philosophy," he says, "and we've already held positive discussions with them."
Jim Rogers, director of agency interface and technology strategy for The Hartford's P&C lines, agrees the exchange has potential. He says he has yet to see a formal value proposition, but he's open to discussion.
"It's good that the initiative is coming from the agent/broker network, but we haven't seen anything yet about the financial model," he says. "We are not looking to drive up our transactional costs-it has to be a win for us and a win for agents."
As discussions continue, Rogers hopes to find out more about the exchange's overall promise.
"We already have an ongoing plan to improve ways in which the carrier works with agents and brokers to reduce friction in the submission process, and partner with other companies that help us do that," he says.
IMPORTANCE OF ACORD
Having made, in Roger's term, "some pretty significant investments in this area," The Hartford's No. 1 focus in 2006 was to streamline back office operations to reduce errors from rekeying. He also confirmed the company's policy of working exclusively with partners that use ACORD XML.
That's music to Yates' ears. "We've seen huge frustrations dealing with proprietary carrier Web sites," he says. "ACORD standards fit in to handle edits, and the more we can get the standards, and the common application of those standards, the better."
Yates believes that the growing number of carriers working with ACORD XML will lend even more support to the exchange. "Carriers understand the inefficiencies of agent workflow and how much valuable time it takes from growing the business," he says.
Rogers agrees. "We need to change the way we do business today, because right now it's very expensive," he says. "But change must come from both sides-carriers need to step up to the plate and improve how they get submissions in the door and agencies will face a change in how they do business, too."
Another missing piece to the puzzle may pertain to how agency management systems vendors will play in the exchange.
Sentner says that because the transactional piece of the initiative is a primary goal to getting all stakeholders on board, getting the agency management system vendors involved is a priority. "The exchange group is already in 'major discussions' with them," he says.
If successful, several sources say the electronic insurance exchange could redefine the distribution landscape-but will it level the playing field?
Sentner says maybe. "The history of electronic communication networks in other industries has had a leveling affect," he says. "We see it giving smaller agents and brokers the same footing as larger agents or brokers."
Other changes, says Sentner, may be subtle. "As an infomediary, the exchange will identify where we are falling down on the job, where the business sits, where we lost it and why," he says. "When you begin to expose those things, you are on track to change the behavior."
The Hartford's Rogers believes the exchange could hold everyone accountable. "It will raise the expectations of the agent/broker and create higher customer service expectations," he says.
By the same token, says Emek, carriers don't need to feel threatened. "If everyone agrees to use it, it has tremendous benefits for all stakeholders," she says. "It will make agents better business managers and enable them to compete better and drive more business to the carriers."
For ChoicePoint's Glazier, whether the electronic insurance exchange levels the playing field is moot.
"I've been in business for more than 30 years, so I'm always reluctant to talk about dramatic change in this business," he says. "It's another distribution channel. There is no company that will use this exchange exclusively...they'll use it in addition to other systems."
Glazier acknowledges, however, that it will mean access to more business rather than less. "It has the potential to make the agency more efficient and improve efficiencies," he says. "And it gives carriers access to business they might not otherwise get. Wins are on both sides, and we think the timing is right."
