Advocates of automation have traditionally argued that it prevents human inefficiency. In the wake of Eliot Spitzer's recent investigations, they can now point out that automation can also prevent human villainy. One example is IE-Engine, an online bidding platform that brings both efficiency and transparency to the procurement of group health and employee benefits, and potentially to other lines of business.
"We started the company focused on bringing transparency to the process, which meant allowing all parties -- the purchaser, the broker, the consultant and the carrier -- the opportunity to really see what the market is offering," says Brent Bannerman, founder and CEO of IE-Engine (Waltham, Mass.).
IE-Engine is designed to address the duplication of effort and data that Bannerman saw during eight years as an insurance sales rep. But in addition to reducing the inefficiency of gathering and presenting data through automation, the platform improves the bidding process by giving employer customers the ability to precisely shape the information they receive.
Traditionally, insurers would submit bids shaped by their own accounting practices, leading to apples-to-oranges comparisons for employer customers, according to Chris Parrucci, a senior account executive with Minneapolis-based HMO, Health Partners. "Carriers could provide the information that they wanted to the purchaser, which often times allowed someone to shine on those points that they wanted, and hide those that might be unfavorable," he says.
Within the IE-Engine model, all carriers must follow the same template to spell out how costs are built into their premium, Parrucci explains. "The customer will want to know, for example, what the cost is for office visits, what it is for mental health and chemical dependency, lab, X-Ray MRI, CT, etc., and have it broken out the same for all plans to respond, rather than the plans reporting the way they would have if it weren't for the electronic platform," he says.
That kind of clarity helps not only purchasers, but also carriers whose advantages to the customer can be obscured in the traditional process, Parrucci argues. "When the data requested of you is the same that's requested of all your competitors, it levels the playing field immensely," he says.
It also prevents any hidden commission, since costs are exhaustively itemized. Any attempt to bury illicit costs within the categories requested would require both an unrealistic degree of collusion on the part of those involved in shaping the bid -- and it wouldn't work anyway. "You've got to account for those dollars somewhere," Parrucci remarks, and given the line-item format of the system, "the purchaser can come back and say, 'Why are you more expensive here?'"
That said, in Parrucci's experience, the way platforms such as IE-Engine (other providers include Towers Perrin and Hewitt) prevent broker-related problems is that they confer little advantage to brokers, making it unlikely for them to even use this technology. Such platforms, he opines, "favor high-tech consulting firms, and you will see that very few brokers will use this technology."
Whether or not one eliminates the middleman, the overriding benefit for all parties, according to Parrucci is, "efficiency in the negotiation and purchasing of business -- something that's been lacking in this marketplace."
For the moment, carriers enjoy the benefits of IE-Engine free of charge. But Bannerman hopes to offer a value proposition that will make carriers themselves customers -- and he is building a prospect base with the users presently on the system. "We currently have 450 carriers and 4,000 carrier employees that use our application to submit bids into the marketplace, and we give them the technology, training and support for free," he says. However, Bannerman adds, "We would love to provide carriers with a platform through which all their bids went -- not just those responding to IE-Engine employer clients -- with which they would have an electronic history and record of that bid, and all records of change in bid, fully auditable, date stamped, time stamped and with the name of the person making the change."
Editor's Note: See Insurance & Technology's January print issue for further reporting about the importance of online bidding for the insurance industry and the impact of Eliot Spitzer's investigations on insurance IT organizations.
Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio