In December 2003, a handful of insurance execs interested in starting their own business venture came up with an idea: an Internet-based distribution network that could cut application processing time and expense for carriers, give agents a more efficient and profitable way to write policies and provide consumers with competitive, lower-cost health insurance.Almost one year later, their dream became a reality in the launching of America's HealthCare/Rx Plan (AHCP), a subsidiary of Chicago-based Insurance Capital Management. The Web site,, has resulted in more than 5,000 new major medical insurance applications worth more than $10 million in premium revenue since its full launch last June. In addition, more than 2,000 independent insurance agents are writing health policy business for the site's principal carrier partner, Continental General Insurance, a division of Ceres Group, Cleveland.

Two other carriers are selling policies through the network, States General Life Insurance, Austin, Texas, and Central Reserve Life Insurance, Cleveland. Both companies offer products that serve as a complement to Continental General's offerings.

"We decided that you could make money in the business by just focusing on consumers," says Michael Owens, president of Insurance Capital Management, which formed in 2003 and pooled investment and advisory input from former insurance execs including Peter Nauert, former chairman and CEO of Ceres Group.

Owens and his partners teamed with IdeaStar Inc., a Cleveland-based Web development firm, to create a Web portal that would provide agents with online applications and tools to add riders, change deductibles and calculate premiums on insurance coverage that best fits the needs of an individual consumer.

Agents also use the site to submit applications using electronic data interchange and e-signatures to submit fully completed and accurate applications to participating carriers. Agents can also use the site to track commission payments, stay current on new product features and updates and submit payments on behalf of consumers.

The benefit for carriers is this: Because the site requires fully completed applications and initial underwriting questions, carriers have experienced a 30% to 40% reduction in processing costs on applications they receive, Owens says. The site's e-signature functionality enables carriers to sign up agents and prevent them from writing business in states in which they do not hold a license.

"The applications come in and they are clean," Owens says. "There is no longer any missing or illegible information to slow down processing time."

On average, the system enables carriers to approve a policy application within an hour of its submission, compared with four to five days in a paper-based environment.

The success of the AHCP system earned its founders recognition in A.M. Best's E-Fusion competition last fall. The competition provides awards for innovative uses of technology to enhance efficiency and profitability in insurance markets.

Loyal agents

The business case for launching AHCP was straightforward. The Census Bureau estimates there are 45 million uninsured or under-insured Americans who are in need of health insurance. Owens and his partners believed they could find a more efficient way to provide price-competitive coverage to this underserved market.

However, insurers have been slow to embrace e-signatures and other technologies that would enable price-conscious consumers to shop for insurance and purchase their policies online without visits from agents and traditional pre-screening most carriers require.

Continental General already had an online application sales presence but it was more focused on the carrier's needs than on the needs of agents or consumers, Owens says. "We came to them because they'd taken a proactive role in the e-commerce space and were interested in the efficiencies and speed to market an online distribution network could deliver," he says.

States General Life Insurance and Central Reserve Life Insurance joined the network to help AHCP offer products in states where Continental General does not have a market presence, and to offer insurance products Continental General does not.

The AHCP site uses a multi-tiered approach to signing up and recruiting agents to sell over the online network. Agents must first submit their proof of licensing using e-signature to carriers in order to obtain approval to write new business.

Once they've become part of the AHCP network, they can also recruit other agents to take part and receive a piece of tiered commissions from policies those agents sell.

One agent, Doug Frankel of USA Benefits Group, Dayton, Ohio, recruited nearly 100 other agents to use the network within three months of the AHCP site's initial launch. "It's been an amazing and wonderful year," says Frankel, who's written three to four times more premiums than he has in previous years-on top of income he earns from the sales of agents he recruited. "The best part is we're all here because we want to be here," Frankel adds.

AHCP provides consumer leads to agents through a separate Web site, Insurance Capital Management is promoting that site through online advertising and search engine optimization to make it a one-stop source for consumers to build a policy and find an agent to write the business.

When a consumer visits the site and obtains a quote, the site generates a lead for one of AHCP's participating agents. The site uses a pecking order based on seniority and availability to distribute the lead to agents. Agents, like Frankel, can purchase leads for $5 to $10 on an individual or set amount of leads per month.

When agents receive a lead, they typically call the customer to answer any questions and complete the application online. If agents or customers prefer, they can print out the application and use an in-person visit to complete the sale. In that case, agents would then re-enter the customer information to submit it electronically to a carrier.

Some agents say those one-to-one visits with customers will eventually go away. Frankel, for example, has integrated AHCP's quote page into his own Web site, Once he receives a lead from the go2quote site, he invites the customer to join him in an online conference call in which he fills out the policy and makes a sale simultaneously with customer.

"This is a nice and more convenient way to do business," Frankel says. "I haven't met with a client in 14 months."

Time-saving process

Frankel says the real benefit of the AHCP site comes from the complete change it has brought to the way he now conducts business.

By handling applications and payments via the Internet, he no longer encounters additional work to answer carrier underwriter questions. He no longer spends 20 or more hours on the road each week or pays the added expenses for gas, hotels and dry cleaning. He's virtually eliminated client no-shows.

And, he no longer pays six-figure annual amounts for express shipping to send applications to carriers for approvals. Better still, he gets paid twice a week given that insurance companies can more quickly process and approve applications.

"You can sell something every hour, on the hour. Customers feel much more at ease with this process," says Frankel.

He adds that his long-time clients have enjoyed the shift to online applications to extend or change their existing policies.

Lance Helgeson is a freelance business writer based in Chicago.

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