Even as insurance companies in all lines of business are becoming more proficient at operating in an evolving multichannel distribution environment, they still face challenges in supporting what remains the most critical part of that environmentthe agent channel, which increasingly expects simplicity, convenience and speed in its interactions with carriers. Accordingly, there has been an upturn in insurers' investments in Web-based tools that enable agents to work more efficiently (and, through those efficiencies, sell more, increase commissions and make more money for the companies they represent).
The bottom line is that with organic growth a top priority among insurance industry CEOs, companies need to keep both captive and independent agents happy and motivated in order to achieve these strategic goals. "Agents value those technologies that help them produce more business, rather than technologies for compensation calculation, online licensing and appointment tools," according to Craig Weber, a senior analyst with Boston-based Celent's insurance practice (see related research, page 80).
But determining which kinds of support systems are the right ones is not a simple matter. The appropriate solution often is determined not only by the different agent model (captive or independent), but also by the types of insurance a carrier sells. There are basic differences in the ways property and casualty, life, and health insurance agents work, so support technologies have to reflect those differences, points out Brad Brown, director and leader of the financial institutions and technology practice at New York-based McKinsey & Co. For example, in the P&C space, distribution tends to follow the independent agent model, and producers typically sell for a number of different carriers. Therefore, the company that provides the tools that help agents be the most productive with both consumer and business prospects will tend to get the nod, Brown asserts.
"The name of the game is attracting and retaining the independent agents, who are the insurance carriers' customers," Brown says. "The more attractive they can make the business to [independent agents], the more business they will get."
Furthermore, even though the online sales model has made more inroads in the P&C spaceespecially in the personal auto segment (see related article, page 13)than in the life/annuity and health segments, agents still represent the dominant sales channel. So the technology focus for P&C insurers has been to service the agent, who, in turn, services the end customer. This means stepped-up investment in building strong interfaces with agency management systems for rapid quotes and other online self-service tools, Brown relates. "It used to be that insurers would spend 2 percent to 2.5 percent of premium dollars collected on agent-facing technologies," he says. "Now, they are spending 3.5 percent to 3.8 percent."
Companies are spending much of that money on back-end systems that service agent portals, such as automated underwriting applications and ratings engines, Brown continues. The more efficiently those systems function, the quicker the agent can respond and grab market share.
Agent portals have twice the functionality that they did a year ago, Celent's Weber estimates. For example, AIG subsidiary National Fire Insurance Co. (Pittsburgh) in late January launched an AIG-developed, Web-based system that enables brokers to quote and bind management and professional liability coverages designed for private companies with up to $100 million in revenue or up to 1,000 employees. Still, Weber contends that agent portals perform only half of the functions that producers would like to see.
In addition, independent agents who serve several companies don't want to be burdened with multiple forms or multiple messaging methods for dealing with each carrier, so it's important that insurers leverage standards, points out Denise Garth, vice president of membership and standards for ACORD (Pearl River, N.Y.). While the largest insurers and most of the midsize carriers have adopted ACORD XML standards for conducting electronic transactions, according to Garth, there are many companies that still rely on older Electronic Data Interchange (EDI)-based communications.
In mid-January, Garth notes, ACORD began to survey agents and brokers about the technology they need to better serve customers and improve their operations. Results of the ACORD-User Groups Information Exchange (AUGIE) Study are expected to be released in May. In response to the findings of the last such survey, which was conducted in 2002, a number of ACORD-member carriers and vendors incorporated expanded real-time inquiry and commercial policy download capabilities into their agent offerings, Garth adds.