Imagine how difficult it must be for an independent agent to locate a carrier that covers beekeepers or acupuncturists. Or, from a carrier's perspective, finding agents who will sell employee dishonesty or bailee coverages.MarketScout, a Dallas-based venture that was launched in June 2000, is using the Internet to help retail insurance agents get quotes and bind polices for more than 700 classes of business, primarily specialty insurance. Since it's inception, the company has registered more than 13,000 agents who have free access to information and quotes provided by 67 carriers, including such heavyweights as American International Group Inc. (AIG), Travelers Insurance The St. Paul Cos., Safeco, Cigna and Fireman's Fund.
MarketScout is an online community where independent agents can link with experts-typically underwriters for an insurance company or a managing general agency-to discuss technical issues pertaining to a specific industry segment. These "e-industry specialists" must have a minimum of 10 years experience in their industry or coverage class, and they also have binding authority on behalf of the carrier.
"Our goal is to enable retail agents to have access to markets and coverages that they don't have access to," says Richard Kerr, chairman of MarketScout and its holding company, Insurance Data Systems (IDS).
"An agent may understand the complexities of shipping and logging coverages, but not coverages for railroads. What we do is connect the agent who is an expert in a specific business classification."
Best of Class
Unlike insurance marketplaces where carriers are pitted against each other in an auction process, MarketScout limits its offering to just one carrier per coverage classification. The company's 'Best of Class' model protects a carrier's brand and bottom line in a tight underwriting market, Kerr explains.
"If I'm a carrier, why would I want to write a book of business on the Internet where the cheapest price wins?" he says. "In a soft market, that's alright, but with today's hard market, no underwriter wants to tell his boss that he just got $10 million in new business from the Internet, and the reason he got it was because he offered the lowest price."
"What we like about MarketScout's model is that they're not auctioning insurance," says Mark Willis, senior vice president, Central U.S. region, for New York-based AIG. "We're not happy with Internet markeplaces where people can go to get 20 different quotes, where sales aren't based on a carrier's product or reputation but rather on price."
MarketScout rates carriers and their designated "e-industry specialists using 17 criteria including a carrier's financial rating, length of time writing the specific coverage, the combined loss ratio for the book of business, compensation rates for agents, the carrier's reputation in the industry and an underwriter's experience in the business.
"We have a tribunal committee that includes myself, our chief financial officer and executives with backgrounds in insurance," Kerr explains. "We have 67 carriers that we've rated best of class, and we've had to remove some because they either lost their reinsurance or had their financial rating lowered, or they had a bad response time. We have a provision that a carrier must respond to a rate quote within eight hours of submission."
Simple process
The process of securing insurance through MarketScout is completed primarily via the Internet. Agents must first sign a producer agreement with MarketScout, hold an active retail agent insurance license in the state where they place business, and carry a minimum of $1 million in professional liability (errors and omissions) coverage, before they can submit policy quote requests.
Once they've registered, agents can log on to the site, at www.marketscout.com, and using drop-down menus either for industry classification or coverage type, locate the insurance product they're interested in. After clicking on the category, agents are directed to a screen providing brief information about the "Best of Class" carrier that's issuing that particular type of insurance.
From this screen, agents, who are not charged any fees by MarketScout, can click on a button to get details about the market for the coverage.
They also can view information about various liability coverages under the insurance, or they can get information about a designated insurance specialist. If they need additional information, agents can click on a button and e-mail the specialist.
Agents who want to get a policy quote are asked to fill out an online application that's specific to the coverage in question. The application for mining general liability insurance, for example, is quite extensive. Once the application is completed and submitted online, MarketScout notifies the carrier via email that a request has been made.
The carrier's underwriter then logs on to MarketScout, and enters a secured area to view the information, and replies either with a request for more information or with a rate quote. One stipulation is that coverages may only be bound in writing; fax or other electronic forms are acceptable if signed originals are sent to Insurance Data Systems, MarketScout's parent, on the day of signing.
Extending reach
Although MarketScout is designed to enable independent agents to extend their reach into specialty insurance markets, the company's model also benefits carriers looking for a cost-effective way to build business through independent agents.
"Many insurance companies covet rural books of business because they tend to have a higher profit margin, but it's difficult to penetrate rural areas," Kerr says.
AIG became interested in MarketScout because the company wants to deliver its specialty products by expanding its relationships with brokers and agents, AIG's Willis explains. AIG offers directors and officers liability, errors and omissions coverage and excess liability through its 'click and bind' process with MarketScout.
"We saw value in MarketScout's approach because we get to reach brokers and agents that we weren't in touch with, and it's very cost effective," he adds.
MarketScout charges carriers different fees depending on the coverage type. Some carriers pay an undisclosed licensing fee in addition to a percentage of written premium. Carriers are also required to pay agents the full commission rate, a stipulation of their inclusion as a "Best of Class" insurer.
Kerr declined to say how many policies have been sold or the amount of written premium since the company's inception. He also declined to say what the submission-to-bind ratio is, but says that agents are becoming more comfortable with the process.
Howard Handler, president of The American Agency, an Overland Park, Kansas-based company that began providing ambulance insurance through MarketScout in 2001, says the relationship has resulted in some policies being written, but declined to indicate how much business has been generated.
"Time will tell how successful we'll be, but it has been a good investment for us," he says. "We have a challenging line of business, and pitting one carrier against another is what's wrong in a soft market. We want to work with brokers who are interested in solid, bonified coverage and not someone who will sell based on the best quote. That's why we like MarketScout's model, because we're considered 'Best of Class.'"
