2006 I.T. FOCUS: Reality Check

Whatever else the tersely worded press release announcing the winding down of the Cdn$12-million CSIO Portal signaled last December, it surely laid to rest a few hoary myths about technology and the elusive single-entry, multi-company interface (SEMCI) solution for the broker distribution channel.

The first myth is the concept of community “ownership” of an industry solution for all companies and brokers. Spinning through the continuum of Cebra, Synchron and the CSIO Portal, the question has always been “ownership of what?” Jointly owned projects often collapse under the weight of a committee decision-making structure and the political reality of competitors at disparate stages of IT development. And the portal was no exception.

“One of the real challenges on any industry initiative is to get companies, who are competitors and have very clear strategic mandates, to work on joint projects,” Dan Danyluk, CEO of the Insurance Brokers Association of Canada (IBAC), says. “It is a bit like getting a team of wild mustangs together to pull a beer wagon.”

“A private software company has the speed and nimbleness to make decisions by their own executive, whereas CSIO has to seek consensus from a board or from working committees,” David Patrick, CEO of the Centre for Study of Insurance Operations (CSIO), adds. “This means we are always looking for the lowest common denominator that everyone can agree to.”

The second myth is that insurance companies do not, and perhaps should not, compete with each other on back-office technological efficiency and processes. Of course, they do – and should. Even as insurance companies were putting their rhetorical support behind the portal, they were at the same time investing massive resources in individual Web solutions to attract brokers.

“For us to have lost the CSIO Portal initiative is a disappointment because we were the largest single funder of it,” Alister Campbell, ING Canada’s senior vice president of marketing and communications – and CSIO board member – says. “But in the end, we have to support multiple options because brokers are different and they will choose different ways to operate.”

“Insurance carriers were hedging their bets by openly supporting the Portal, while quietly pursuing other options,” Kevin Campbell (no relation), president of PolicyWorks, says. “It’s a free market economy. If the portal were doing a better job, or meeting a real need, then it would still be here.”

The third myth is that the creation of a true industry-wide SEMCI should follow the model of, say, the banking community in its adoption of centralized cheque-clearing facilities or Interac standards. This argument neglects the transactional complexity of policy change. In fact, endorsements were abruptly pulled off the CSIO Portal table, with the substitution of more modest goals of a new business submission and single sign-on. Even these proved unattainable, and the Portal was left with the bare bones of a comparative rating engine that brokers didn’t really need or use. Of the 180 Ontario brokers signed up in principle to support the Portal, less than 20% regularly used the rating service.

“The reason we originally embraced the vision of the CSIO Portal is that it sought to integrate the processes and technology between all the people who make the typical insurance transaction,” president of iter8 Incorporated Glen Piller says. “But it was extremely difficult to get a uniform broker process that provided value and a uniform company process. What was left to provide was data integration for comparative quoting. The Portal never made it past Phase one.”

Patrick Durepos, president of Keal Technology, outlines five key functions where automation can make a difference for brokers: single sign-on, policy inquiry, upload new business, endorsements and comparative rating. His firm’s studies show transactions in a typical broker’s office break down to 10% new business, 40% renewals, 40% policy change and 10% customer inquiry.

“From what I have seen, the biggest productivity bang for the buck is in endorsements,” Durepos says. “I was one of the first to be pro-Portal – provided it brought this kind of functionality to the broker system. It certainly didn’t get there. The functionality that is least important, because it is available elsewhere, is comparative rating.”

Dispelling these myths is part of the knowledge gained in the wake of what can only be called a massive IT project failure. There was scant justification for ongoing investment in a project that held out little chance for success and required significant funds just to improve the rating service, according to Alister Campbell. The Portal’s funding partners had little choice but to pull the plug.

PORTAL OPENED DOORS?

So what did the CSIO Portal accomplish? Some argue it spurred private IT providers, including broker management system (BMS) and rating vendors, to improve their products and enhance service levels.

“I think we drove solutions outside the Portal to where they are today,” Randy Carroll, the IBAO’s chief operating officer, says. “The Portal was viewed as a threat by some of the BMS vendors and the rating vendors. If you talk to brokers, the service, accuracy, new features and just plain choice in BMS and rating solutions are a lot better than they were five years ago.”

Whether the Portal prompted a sharpening of the pencil among vendors is up for debate. “I would say that clearly they have not been looking at what Compu-Quote has been doing over the last 10 years,” Compu-Quote president John Savage says. “We have been promoting and pushing technology that many in the community likely didn’t even know we had. I think it is clearly embarrassing for someone to have spent upwards of $12 million and come out with nothing. They are looking to justify the investment.”

Those involved in the Portal argue that there were significant byproducts of the process that are clearly helping brokers in today’s marketplace. “One of the great benefits of the Portal is that it revealed problems with electronic data interchange (EDI) integration,” Patrick says. “When a company downloaded policy information back to the BMS, data would get wiped out or incorrect data put in a field. When this came out, people started fixing things and the brokers could see the impact they could have through reporting.”

“The insurers in CSIO finally understand what the brokers have been telling them for years: that the EDI nightmare needs to be repaired,” Carroll adds.

Patrick notes the same kind of EDI assessment done in Ontario will now expand to Western Canada and Quebec. (There was little interest or participation in the CSIO Portal from intermediaries in Western Canada, Quebec or Atlantic Canada.) Also, there are plans to reintroduce EDI “certification,” wherein the CSIO will test and assess the quality of data from insurance companies and BMS vendors.

DEVELOPING STANDARDS

The reinvigorated role of the CSIO will be – andsome argue, should have always been – on developing and implementing XML standards for personal and commercial lines. Patrick says the standards side of the organization has been beefed up, with four new employees, a more disciplined planning process and the imminent introduction of XML commercial standards in version 4.0.

“We play an unseen and unheralded role in this mundane world of standards,” Patrick says. “It’s almost like people are saying: ‘So you are going back to standards.’ Well, we never left standards; they just didn’t get any press, because the Portal got everything.”

“I would say the work we have put into standards over the last 10 months as an organization has been very productive,” Alister Campbell says. “It is not the glamorous stuff, but we have reconfirmed our commitment to try and make EDI work better. It is still the backbone for a big chunk of our industry, and too many brokers have to do too much work on dealing with data that gets corrupted on the download.”

This is where the industry is poised to make some real gains on efficiency. And this will likely be where the CSIO will act as a true catalyst in accelerating individual SEMCI solutions and reinforcing XML standards required for straight-through transactional processing.

Aside from the CSIO and EDI standards, the issue quickly turns to how the private vendor market will work with brokers and insurance companies to bridge gaps in technology and business processes. The upshot of the Portal’s demise is that companies and brokers are already witnessing important strides in individual solutions for SEMCI. This will involve companies and, in many cases, brokers throwing their lot in with private sector IT vendors. This is the new reality, many argue.

OPEN SEASON

“You should see a lot more energy put into the open-market, personal lines initiatives in the next year,” Kevin Campbell says. “I think that dissatisfaction with multiple entry is also going to drive demand for a SEMCI solution on commercial lines. CSIO’s renewed focus on commercial standards will be a boon.”

“I think brokers are going to look at the various solutions now out there, and depending on the way they work, they will choose a solution that will suit them best,” Durepos says.

On the BMS side, you have four major players in the market – Applied Systems (TAM), Keal Technology, CIM-Data and PowerBroker. These vendors are all making headway in creating real-time transaction capabilities between brokers and select insurance carriers. For example, Keal recently announced it is using a SEMCI solution known as Nexisys to allow brokers real-time upload to AXA Insurance’s Web portal. Similarly, Applied System Canada’s real-time insurance technology, WARP, is up and running for Ontario brokers doing business with ING Canada.

Also, rating vendors such as Compu-Quote and PowerSoft are creating opportunities for brokers to connect to insurance companies. Some brokers prefer to start off the insurance transaction in their rating engine and then bring the transaction into their BMS.

“We have over 600 brokers that are connected directly to insurance companies, doing transactions,” Savage says. “In Qubec, for example, that is how brokers communicate with ING for new business: it comes up through Compu-Quote. We are doing that with a number of companies in the marketplace and we expect to have more announcements this year.”

For insurance carriers, their company Web portals must be able to handle the multiple access points from brokers in this increasingly complex environment. “Insurance companies are going to continue to invest in trying to make their portals the most functionally rich, to make it easier for brokers to move their business to those insurance companies and therefore gain more market share,” according to Wayne Beck, vice president of CGI’s consulting services.

“The ING approach is that we were going to support the broker no matter how they chose to operate their workflow and business,” Alister Campbell says. “So we were supporting CSIO, we were supporting our own portal, we are supporting integration efforts with BMS and with rating vendors. We are focusing on cleaning up our EDI on the download, enhancing policy change functionality for our brokers, and investing in a range of solutions to give brokers single-entry from either their comparative rating applications or their BMS. And I am sure we will not be alone in these kinds of initiatives.”

For many IT experts, the connection between company portal and broker management system is where real process integration has to take place between brokers and insurers. “To provide true service to a broker means that a transaction is completed, fully underwritten and rated as quickly as possible,” Piller says. “It’s important to make the distinction that it is not how fast you can accept a transaction from a Web site, but how fast the end-to-end transaction process is completed.”

Competition for broker link-ups with company Web portals, BMS vendors and rating engines and the opening up of new options to drive efficiency would, one would think, be a good thing for brokers. But that is not necessarily the case.

WHAT BROKERS NEED

“Brokers are in a different pickle, in that they are likely going to have to rely on the suppliers of their systems to act as the buffer to back-end company systems,” Beck says. “But that only meets one segment of the market, not the greater needs of the industry as a whole. Just as companies are going to try to tie brokers to their systems, so vendors will try to tie them to their systems. Brokers are likely going to feel like they are being corralled one way or the other, with little or no control over their destiny or direction.”

This precise issue concerns broker representatives. “I think there is a danger in insurers trying to preoccupy brokers – not just for brokers, but also for insurers in their own longer-term self-interest,” Danyluk says. “For a broker to function effectively, he or she needs availability of markets, and we want to make sure we as an industry don’t hinder that. I think the CSIO board is looking at an opportunity for a very candid discussion between insurers and brokers to decide how we positively impact the electronic environment.”

Randy Carroll is more blunt. “Everyone is trying to get market share and right now those insurers that are providing ease of use to brokers will be the ones that come out and win at the end of the day,” he says. “But we really need to sit back and take a long, hard look at where that is going to lead us into the future as a distribution channel.”

In fact, some brokers argue that insurer-broker communication has not really moved that far from the old “terminal” days, in which brokerages had to hook up individual computer terminals for each of their markets. “We have seen technology advance to the point where brokers can now access a single insurer with one click, but we have not seen the technology to give the same access to multiple insurers,” notes Carroll. “The reality is that brokers live in a world where they use multiple insurers. To really move forward, we need to give the brokers the same level playing field in terms of providing service to their customers that the direct writers have.”

Alister Campbell says tangible progress has been made in how companies provide service to brokers – particularly for new business. “If you are looking at new business flow, if brokers are in their BMS and inputting data into customer file, they can select the market and the data is imported into the company’s portal,” he says. “They can complete the transaction single sign-on in real time. I think that is a huge upgrade from where brokers are today.” He concedes that in the area of policy change, “we are unlikely to have EDI standards that really work. It is a big portion of the workload and one where our applications are not as up to date as we would like. In the end, I think brokers are going to have to access different company portals to do policychange.”

In terms of a single sign-on for brokers – an issue that has nagged intermediaries and caused headaches due to multiple standards for user-names and passwords – there is still no one official standard. However, the CSIO did develop a single sign-on protocol that would make life much easier for brokers entering multiple company Web portals. “I am very eager to see that broadly embraced by the industry,” Alister Campbell says. “What we are looking for here is an alignment of security standards around common approaches to username and password.”

For many brokers, it may still be tempting to go down the path of a single industry solution. But tension still exists between what is ideal and what can be accomplished in the short term. “I don’t think there will be a reincarnation of an industry-driven solution the way we envisioned it,” Carroll says. “Moving on standards and XML technology will open up access by free enterprise to communicate with the insurer and BMS more freely
. I think we will see things evolve. We just need to make sure whatever happens includes the vision we see and still maintain we need, which is single sign-on and new business submit.”

SON OF CSIO PORTAL?

Beck notes that, with the advent of XML standards, it may be only a matter of time before the next industry solution rears its head. “The bigger issue will be how long before the next attempt at something like this bubbles up,” he says. “CSIO’s role will be to flesh out XML standards. As companies and organizations move their products to more of a services model, standardization around transaction sets becomes even more important. If someone wants to develop ‘Son of CSIO Portal,’ the more these standards exist, the easier it will be to be more successful next time.”

Others say it is time to give up the dream of an industry solution once and for all. “I personally don’t believe that having a common industry vehicle will ever work,” Savage says. “The difficulty that this ‘solution’ always faces is that you have to homogenize, and the insurance companies need to have a point of differentiation. It is not about a screen or data collection. It is about how that information is used by companies. If you try to homogenize that, forget it.”

For someone who has spent numerous hours as a volunteer for the CSIO Board and who is also on the front lines of broker communication, Alister Campbell says he would never rule out another industry solution. But he cautions that players have to go into the process with their eyes wide open.

“It is important in the future for people to draw the right lessons from the CSIO Portal experience before embarking on that strategy again,” he says. “That is not to say it will always be always the wrong solution, but there are many limitations to what an industry association can build. We have to remember why it is so hard if you choose to try and do it through an industry model.”