The consistent implementation of standards can be highly advantageous for companies looking to remain competitive in today's information-based economy. Standards can help brokers and insurers communicate with one another more quickly and efficiently, thereby saving time and money.
The smartphone market provides an excellent example of the value of implementing standards - Google's Android operating system was reported to have captured 72.4% of the overall smartphone market share in Q3 2012. This is largely because Google has embraced open standards in the development of Android, which has allowed the operating system to run on many different devices. Compare that to Apple's iOS, which runs exclusively on the iPhone and has been steadily losing market share.
The broker channel can learn from Google by also adopting standards actively. The Centre for Study of Insurance Operations (CSIO) offers a number of standards, including its XML standards. XML is the backbone used to transfer structured policy and service transactions from the broker's management system to the insurance company's system, then back again, completing the cycle.
CSIO standards allow brokers to use one accepted method of communicating with multiple trading partners, thus reducing complexity and increasing collaboration. CSIO XML standards are designed to efficiently transport and store insurance policy data between brokers and insurers. XML is arguably the most efficient means of transferring insurance policy data currently available.
With CSIO XML standards in place, companies will be well-positioned to compete against direct writers. An important competitive advantage that brokers have over direct writers is that they can offer quotes from multiple insurance markets, whereas direct writers can only offer quotes from their own companies. The real-time capabilities of XML allow brokers to communicate with all their markets more quickly, thus increasing the likelihood of outcompeting the directs.
A number of the largest insurance companies in Canada are consistently implementing CSIO standards to achieve significant cost savings. In January, CSIO interviewed a senior executive from one of its member companies, The Dominion, to get more information on how implementing CSIO standards has translated into concrete benefits for the company.
"We integrate with five broker management systems (BMSs). If we had to build a custom solution for each one of them, our cost would be [at least] five times what it is today. Time to market is also faster with standards because, of course, it takes a lot longer to build five different solutions than just one," said Steve Whitelaw, The Dominion's senior vice president of business solutions.
"We can build a solution that uses CSIO standards and have the vendors [integrate their software with] the standards," Whitelaw continued. "We receive the information in our systems, pitch it back to the vendors and they catch it using the standards. If there's a BMS having to do the same thing with all the insurers, they wouldn't be able to keep up. The work to build all those interfaces with all the insurers would be incredibly massive. They would have to have a dedicated team for each company they're integrating with and, clearly, that's not efficient," he reported.
Whitelaw suggested a key component to building efficiencies into the broker distribution channel demands recognizing that custom, one-off solutions are ultimately not helping the channel as a whole. Custom solutions "may help an individual company on an individual product or transaction, but from a channel perspective, there's little value in that," Whitelaw said.
CSIO takes the view there are adverse ramifications for the broker channel if these proprietary, one-off solutions continue proliferating, such as companies siloing themselves, thus making it harder to transact their data efficiently with other industry stakeholders.
If a software provider implements CSIO standards, but a broker using that vendor's solution turns off the edits in the BMS, then the standards have not achieved anything because the broker is now doing business in a proprietary manner. Similarly, if an insurer transforms the standards before sending data to the BMS, not all brokerages will be prepared to parse that insurer's proprietary information delivery method.
To date, the CSIO standards have already achieved significant industry buy-in. A number of the largest insurance companies in the Canadian property and casualty industry regularly participate in CSIO working groups to get involved in the development of the standards. Furthermore, any company that consistently implements CSIO standards is enhancing its opportunity to produce innovative solutions.
Whitelaw affirmed that standards have helped The Dominion innovate and advance the company's technology platforms. "In 2012, we used CSIO XML standards to develop and roll out an innovative personal lines solution for submitting new auto and property business. The solution was well-received by our brokers and now over 50% of our new personal lines business is coming in through that solution. A lot of that business used to come in on paper and through the old AL3 (EDI) standards," he said.
"We're now delivering a policy to the broker and customer a lot more quickly with this new solution than we did with the old," Whitelaw added.
A major factor in increasing standards adoption is identifying ways to measure the value of standards. The persistent misconception that the value of standards cannot be measured may deter some companies from exploring, let alone adopting, standards. However, there are concrete metrics that companies can use when adopting standards, such as looking at reduced project duration times, reduced project costs, reduced labour costs, increased successful transactions and the amount of new business created.
Whitelaw said that The Dominion would not be receiving more than 50% of new personal lines business through the aforementioned solution had standards not been involved in its creation. The consistent implementation of standards enables companies to communicate more readily with one another, facilitating the process of innovation that is essential to keeping the broker channel competitive and retaining its market share.