One might think the emergence of "e-surance" companies offering one-click products and services sans intermediaries might compromise the position agents hold in today's insurance value chain. But the contrary actually is true. The Internet has yielded more choices among comparative raters and aggregators, thus elevating agents to a more powerful position as the gatekeepers to multiple company ratings.
That is galvanizing a change in attitude among carriers, which have been slow to address agents' complaints around the difficulty of obtaining multicompany ratings through a myriad of hard-to-navigate Web sites. For years, agents have been frustrated at having to enter data into dozens of fields for the sake of answering just a couple of questions, only to have the data thrown away immediately afterward. Despite prodigious amounts of money invested in insurers' Web sites, few productivity gains had been realized — until recently.
"Traditionally, the industry failed to include agents and business administrators in the development of Web sites, so the development was left almost solely to architects who possessed little insurance knowledge," concedes Charles Brooks, CIO and SVP of operations for St. Paul-based Travelers' ($113.8 billion in total assets) personal lines. "Millions of dollars were spent to have fancy GUIs front-ending the same inefficient processes and methodologies that existed in paper form. That ended up aggravating producers, as they had to spend hours with tedious and repetitive data entry."
Agents have become so disenchanted with multiple log-ins and esoteric forms that ease of use now is an important consideration when weighing different quotes from multiple carriers. The lowest quote no longer gets the policy. Rather, the highest level of automation has become a critical factor in how agents decide with which carriers to work.
As a result, insurers are courting agents and establishing strong relationships by creating a path of least resistance. In the drive for automation, leading agents are most likely to work with those carriers that have done the most to integrate systems and enable straight-through processing (STP).
Trusted Advisers for Life
For life insurers, the driver of ease of use is a belief that in order to stand out in a market increasingly crowded by tech-savvy investment companies, the role of individual agents as trusted advisers will become the competitive advantage. To compete with the expectations now set by the Fidelities and Vanguards of the world, there will be more of a demand for proactive, positive contact between agents and customers, industry experts say.
"The baby boomers will be leaving the workforce, and they will brandish great purchasing power and expectations," says Don Mockler, second VP of annuity client services for Philadelphia-based Lincoln Financial Group ($234 billion in assets). "They are expected to change the retirement income market and the insurer's role in it. That is where the business is moving."
Mockler relates that Lincoln Financial is striving to move its administration systems toward STP by complying with the newly released National Association for Variable Annuities (NAVA) standards, which seek to establish uniform processes and procedures for improving the electronic annuity purchasing process. "Because the life insurance underwriting process is very paper-intensive, we felt it was important to simplify the electronic annuity purchasing process for ourselves and all our partners," he explains. Mockler adds that compliance with the NAVA STP standards should attract agents.
"Since December, we have issued 8,000 contracts according to the NAVA standards. That helps us ... as we shift focus from the accumulation side of the equation to the retirement side," says Mockler, noting that Lincoln Financial's recent release of Unified Product Portfolio (UPP) is a step in that direction. By achieving STP, he continues, agents will be freed up to concentrate on selling the special aspects of UPP.
"Where retirement income is provided by many types of financial services companies, baby boomers will demand more than the status quo," Mockler says. "They will want layers of protection against hidden risks that other investment channels tend to ignore, such as long-term care, market and inflation risk." [For more on Lincoln Financial's technology strategy, see "One on One" with the firm's Chuck Cornelio]
The need for real-time processing has been burgeoning in the property and casualty sector as well, particularly in personal lines, and now even in commercial lines. P&C insurers realize high-volume, low-premium products stand to benefit from the reduction in the number of touch points necessary to issue a policy or service a policyholder.
"The more we can move edits and controls to the agency level, the more we can cut out underwriting, especially for simpler personal and commercial lines," acknowledges Ray Huston, IT manager for Minneapolis-based Austin Mutual ($72 million in assets), which last year converted its manual application process to a Web-based submission system for processing applications, rating policies and fulfillment. According to Huston, the company is working on giving agents expanded access to its company portal to compensate for legacy agency management systems. "An agency management system that uses screen scraping could mean a $15 or $20 difference in the rate because credit scores and violations are not picked up in real time," he explains.
Integrating Management Systems
In that vein, insurers are pained in much the same way agents are, as carriers must work with multiple vendor and homegrown systems — each with its own codes for violations, credit scores and so on. To resolve the issue, Austin Mutual intended to open up its formats and schema to multiple management system vendors in order to expedite the speed with which agents could pull information from the carrier's systems through its Web site.
"We tried to work with about seven vendors at once, but we ended up having to take a step back. We had to work with ACORD to figure out how XML messaging could accommodate the unique attributes of each management system," says Huston, acknowledging ACORD's role as critical to finding commonality in how questions could be asked. "We wanted agents to enter once and to many," he continues. "Now a policy inquiry can be standardized in terms of how XML messages are sent from the agency management system to the carrier."
As management systems vendors incorporate ACORD standards, carriers likely will do more to reveal schema and to harmonize calculations and methodologies around rates. To expedite that process, there have been substantial efforts in the past few months by business administrators, architects and technology vendors to collaborate.
"It's easy to get overwhelmed by all the rules and requirements if you work in a vacuum," says Huston. "You have to be willing to put your developers in a collaborative atmosphere with businesspeople who can define and interpret things, such as ISO rules. Each party has to understand how one change can affect the database and the algorithms in programs, as well as the screen designs. That is invaluable as it gets harder and harder to find .NET and C# developers that understand insurance."
"We hear all the time that it's the carriers that are the holdup to STP and real time," adds Travelers' Brooks. "But oftentimes, it's the agency management systems that are not ready to accept the data." Brooks notes that Travelers has dedicated resources to working full-time with agencies, their vendors, and comparison raters and aggregators toward the common goal of STP, and also participates on the ACORD board to further AUGIE (ACORD-User Groups Information Exchange), a collaborative initiative of agency management system users and their business partners intent on expanding the use of ACORD standards.
AUGIE conducted a study last year that found that carriers that enabled real-time inquiry were able to reduce processing time by 25 percent to 75 percent, according to Brooks. Additionally, the study found that billing inquiries through these carriers' proprietary Web sites took about 35 seconds (as opposed to the industry average of 1 minute and 45 seconds).
According to AUGIE, benefits extend to claims inquiries as well. It can take eight to 10 minutes by phone to make a claim inquiry; but via carrier Web site it takes between 70 and 90 seconds on average. The group also found that the time required to rate policies dropped from one hour to 15 minutes once redundant data entry was eliminated.
As carriers increasingly recognize these benefits, they are pushing their agency management systems vendors to step up STP efforts, and the major vendors are heeding the call. For example, Transformation Station is the result of collaboration between Applied Systems (University Park, Ill.) and IVANS (Stamford, Conn.).
Transformation Station is an IVANS-managed data exchange designed to work within existing agency management systems. Trading partners can interact through an agent interface, called Agent Station, and Destination Station, which allows the recipient to receive and process data streams. Agent Station allows for the creation, parsing and mapping of data for real-time transactions. AMS (Bothell, Wash.), Applied Systems and DORIS (University Park, Ill.) each integrate the IVANS Agent Station communication component into their respective agency management systems.
AMS' Transact Now product incorporates ACORD standards and XML messaging to integrate carrier Web site functionality into agency management system workflow. AMS-based agents have real-time, single-entry workflow through Transact Now, the company claims. The product launched with billing and claim inquiries, and has since expanded to include policy view inquiries, Carrier Passport, real-time endorsements, and quote-and-issue functionality.
"Carriers should rally around these common plug-ins so that policy, claims and billing data can be procured through a common set of tools," says Steve Yacik, the personal lines e-business manager for Chubb (Warren, N.J.; more than $14 billion in 2005 revenue), which uses 8,000 independent brokers and agents. Chubb, he notes, sent developers through training on data exchange standards early on so it could be an early adopter of both Transformation Station and TransactNow.
"In some instances, a carrier might provide billing, but not policy or claims information. But we feel it is important to build integration to billing, policy and claims so agents want to work with us," says Yacik. "If an insured misplaces a bill and wants to know the amount due, the agent shouldn't have to leave its management system and go for a hunt on the Web. Rather, the agent should be able to go through a stored carrier-specific user name and ID in its agency management system. Then, the system should automatically pull the necessary billing information from the agency management system."
As these capabilities evolve, agents and carriers can go to the Agents Council for Technology's (ACT) Web site (www.acttech.org), which posts updates on which carriers and agency management systems are working together to integrate and push automation efforts. ACT is the Independent Insurance Agents and Brokers of America (IIAB) partnership of independent agents, technology vendors, user groups and associations.
To further promote ease of doing business with agents, ACT recently launched the "Real-Time/Download Campaign." The goal is to give agents direct access to their books of business with a single workflow for servicing and quoting business. The real-time component enables agents to click on a button from within a client file in an agency management system or comparative rater and immediately access carrier information for items such as billing, claims, loss runs, policy views and first notice of loss.
"The purpose of the campaign is to show how automation and integration improves agency workflows, customer service and bottom lines, and [ACT] wants to see more agencies gain these advantages," says Jeff Yates, executive director, ACT, who explains that agents want to see images of their own policies and reports so they can work at a policyholder level and allow customers to make payments, view bills or make queries in real time. He notes the campaign's target is to double the number of real-time industry transactions over the next year.
To do so, Yates and others believe download capabilities are as important as real-time inquiry capabilities. True real-time policy servicing works only if carriers can electronically download policy information directly to agency management systems after transacting with an agent for policy coverages, locations, drivers, vehicles, premiums and so on, he explains. That download often takes place through ACORD's AL3 standard, which allows carrier systems and agent systems to communicate with one another.
"There has to be a cyclical feedback of data so that the next time the agent is doing something in real time, like a rate or inquiry, the policy number and account information is accurate because it was downloaded right from the carrier's system to that of the agent," says Yates.
"Download is an essential complement to real time, because it enables data feedback into agency management systems following a real-time transaction," adds Travelers' Brooks, who believes automated download is necessary for customer servicing, cross marketing and agency analytics. "We'd like to forge ahead with automated download capabilities for claims information into agency management systems," says Brooks, noting that for now "agents' management systems throw us data and we send a quote and do the download on their behalf. But it would be nice to have it all automated."
While initiatives for real-time and automated download capabilities are burgeoning in personal lines, ACT's Yates believes the industry must push for the same in commercial lines. "There is a need for eliminating duplicate data entry and improving the quality of data for customer servicing, E&O [errors and omissions] loss control, and real-time transactions," he says. Having downloaded information in the agency management system would help to assure that the agency system has the correct carrier policy number available for the next real-time transaction, Yates adds.
The Facilitators: SOA and Web Services
The concepts of real-time policy access and automated downloads will benefit from the momentum of service-oriented architecture (SOA) and Web services, says Karen Pauli, senior analyst with TowerGroup (Needham, Mass). "SOA can help orchestrate componentization of architecture and the Web-enablement of applications."
And Web services will help the new generation of producers who are replacing retiring baby boomers. These new agents increasingly possess more technical skills, and thus greater expectations. "Distributors increasingly want to be in the driver's seat with information, and they want to push the envelope with electronic transmission," says Don Flannery, IT head at Ohio National Financial Services (Cincinnati; $22.6 billion in assets under management).
But while these up-and-comers are perceived to be more tech-savvy, they often lack the insurance savvy of the previous generation. For that reason, SOA and Web services will be very important during the changing of the guard, as these technologies will enable insurers to encapsulate and automate their existing knowledge base in order to streamline the quote-to-issue cycle for future generations of agents. "Carriers have to move ... toward Web services so they can expose the real-time rating technology on the back end to the front end," says Bill Bunker, SVP of products and marketing at AMS.
SOA promulgates componentization of back-end policy administration, claims and billing systems so carriers can extract the complex behind-the-scenes processes. By extracting the necessary data from existing systems (i.e., policy management, claims and billing), carriers can create centralized platforms on which data can be cleansed and put into consistent formats. That enables processes for rating, entry, servicing of policies, reporting and billing to be fed with clean data in consistent formats.
This process will enable components of insurers' architectures to be broken down and pieced together in more-generic frameworks, so that carriers can more readily integrate with agent systems and those of third-party intermediaries, such as IVANS and ChoicePoint (Alpharetta, Ga.). "Crucial are the Web services and the messaging capabilities built around XML schema," according to Travelers' Brooks. "As changes are made in real time, there can be feedback systems for populating the data sources with the up-to-date information." As these steps are taken, insurers get closer to the holy grail of getting the necessary data pushed to agents' fingertips in real time for predictive analytics and the ability to up-sell and cross-sell.
"The good news is that carriers, vendors and agencies are collaborating. The bad news is everyone is moving at different speeds," adds Brooks. "All interested parties — vendors, agents, carriers — seem to be going in the right direction."
To expedite the journey, many insurers are opening up their walled-garden development approaches of the past. Now there is a movement to engage the help of consultants, vendors and standards bodies that can move the agents toward a world of single entry for multicompany interfacing, and ultimately toward real-time and STP capabilities.