Broker-Carrier Data Exchange: All Sorts of Solutions

When the CSIO portal imploded in December 2005, industry pundits at the time predicted a mad race by third-party vendors to deliver a tech solution that fulfilled the hopes of Canada’s brokers. Who, experts wondered, would be the first middle-ware party to develop and deliver a single-entry, multiple-company interface [SEMCI] solution, so that a broker could simply upload data from a policy application and have it transformed into the language of many different insurance companies’ Web service models?

Perhaps industry experts didn’t realize at the time, but now, two years later, it appears the mad race isn’t really a straight sprint but rather a hurdle race. And the hurdles, some argue, are not related to technology, but rather to business and politics.

Brokers still insist SEMCI is the answer to reducing the double entry of data and improving the ease of doing business. This is important, brokers argue, because if they can’t improve the speed of their service delivery to clients, they risk losing business to direct writers with whom they are in competition.

At the same time, however, vendors and insurers appear to be focusing on developing standards and promoting solutions to enhance carrier’s proprietary Web models. Many vendors say technology is not the stumbling block to providing what the brokers want: real-time technology solutions are available. But, they add, either the lack of broker demand doesn’t justify the effort to develop the technology, or a one-size-fits-all portal would dull any competitive advantage for insurers.

So where will this state of affairs lead the industry in four years? Some say the future is promising, that solutions are just on the horizon. A push towards the industry-wide adoption of XML standards is all that it will take to cure electronic data exchange woes and improve the ability to do business. Others are not as positive, insisting that the industry is too far fragmented to solve the broker workflow puzzle in an ever-shrinking market.

PORTALS V. STANDARDS

Randy Carroll, the CEO of the Insurance Brokers Association of Ontario (IBAO), says the broker mindset really hasn’t changed since the wind-up of the CSIO Portal project. He says a SEMCI solution is still needed so that the independent broker channel can keep afloat in a market that is increasingly seeing more direct writers devouring the profits.

“It’s not a matter of the technology not being there,” Carroll says. “I think it’s a matter of the technology not advancing as fast on the broker side as it needs to. I think the challenge for those that are truly supporting the broker channel is to step up to the plate and try to move along those advancements for the non-multi-channel providers.”

Steve Zylak, a founder and developer at Power Broker, disagrees. In his view, carriers are swallowing up brokerages, and thus the independent broker channel represents a shrinking market. Zylak says when he launched Power Broker in 1992, there were 2,750 independently owned insurance brokerages in the province of Ontario. Now he estimates, there are roughly 1,100. “So that’s frustrating from a supplier’s perspective, in that you are selling into a market that is really reducing in size each year,” he says. “I don’t think the demand has ever been there.”

Patrick Durepos, president of Keal Technology, says he has also noticed the increasing ownership of brokerages by insurance firms, which, he adds, raises a lot of questions as to how the carriers will operate in order to keep the independents involved. “It’s about learning what brokers do well and getting the brokers to do more of it, and [learning about] what insurers do very well, and let’s avoid doing the same thing.”

Zylak says the CSIO standards, if followed properly, will help brokers because the brokers’ data will more easily “flow through the BMS portal” to the carriers’ systems. But, he says, there needs to be a concerted effort by both brokers and carriers to develop the standards. “Both partners have to dance,” he says. Otherwise, “if there was a real market need out there, wouldn’t the CSIO Portal have succeeded?”

Peter Symons, a managing partner at OARBIC Inc., an insurance technology consulting firm, says the issue is not a technology issue, but rather a business issue. Transactions in the property and casualty market are extremely complex and data-intensive, he observes.

“The end result is a series of entities processing very complex and data-voluminous transactions, in which each entity requires similar but slightly different sets of data — all being executed on similar, yet different systems — with each wanting to retain control over the data,” he notes.

THE PROBLEM WITH SEMCI

Some vendors suggest the sheer number of industry players creates a difficulty in creating a one-size-fits-all SEMCI solution.

Rick Morgan, senior vice president of marketing and strategic services at Applied Systems, Inc., says some carriers have unique data fields that interrupt the SEMCI process. “Some carriers are more technically sophisticated than others,” he says. “So when you’re talking about … there being enough information for a carrier to create a quote without any communication back and forth, that also creates a glitch in the process.” Simply putting a policy application in place and having it speak the language of six different carriers’ systems in real time, without any additional back-and-forth communication, “is, well, probably unrealistic,” Morgan says.

John Savage, president of Compu-Quote Inc., points not only to the sheer number of players involved in developing an industry-wide SEMCI solution, but to the variations between each player’s technological capacity. Should these carriers sit down and exchange notes, that’s essentially exchanging proprietary information, Savage argues.

“Let’s say that you and I are insurance companies and we’re trying to agree on something,” he says. “But you’re smarter than I am, you’re further down the road and your actuaries have come up with some new and unique formulas that they use. Some of those [formulae] dictate some questions that need to be asked. All of a sudden, you have to expose me to your thinking. I’m not so sure that you want to do that, because that is your competitive advantage — at least for the period of time until I can catch up with you.”

Steve Kaukinen, president of the Centre for the Study of Insurance Operations (CSIO) conceded technology might provide a competitive advantage for insurance companies. But, he adds: “We all want [independent insurance brokers] to exist and proliferate, because they are the wisest and best choice for consumers that want advice. For the independent broker to truly compete against their competition, which is direct writers, they need a better way of doing business.”

The insurers’ core business, he argues, is not technology, but rather underwriting, marketing and claims. “Why not compete with underwriting, marketing and claims and allow the broker channel to do business in the best way possible?” he asks.

ING Canada’s former director of commercial lines research and development, and currently ING Insurance’s vice president of finance for Ontario and Atlantic, Karim Hirji, pointed out that the technology used by ING is not meant to provide the organization with long-term competitive advantages. “The technology we are using is based on specific industry standards and as a result can be replicated or copied by anybody,” he says.

As far as Tim Scurry, senior vice president sales and operations of iter8, is concerned, the whole thrust of what an insurance company really has to do is service the broker and to appreciate that the broker has a completely different workflow and set of processes than an insurance company. “So, the challenge for an insurance company is to really get to grips with what those challenges are and to design systems which they can use internally, but are also useable and provide the right benefit to the broker.”

Scurry, like others in the industry, believes that a portal, which creates a level playing field is, “in essence, an impossible task,” because the notion of satisfying everyone is beyond the industry’s reach, and more importantly, would dull the competitive edge of both the insurer and the broker.

“So, the key for an insurance company is not to have one single point where everyone has a level playing field. The key for an insurance company is to be able to deal with a broker however the broker wants to deal with them. That’s the challenge for the insurance companies and that’s where they can leverage technology to help them with that.”

So what is best for the insurance industry going forward? An industry-wide SEMCI solution? Or further co-operation between independent brokers and insurers in the development of future standards?

INDUSTRY DIRECTION(S)

“There is no doubt brokers are disappointed with the failure of the CSIO portal,” the Insurance Brokers Association of Canada (IBAC) said in a recent report to the Insurance Brokers Association of Alberta’s annual general meeting. “It would have been a wonderful tool to help brokers work more efficiently and more effectively for our customers.”

Having said that, IBAC recognized efforts that are near completion in Quebec to develop a portal-like solution called the RCCAQ Central. In this broker-owned solution, the broker uploads data from its BMS to the RCCAQ Central, which then “translates” the data so that it can be transmitted to and recognized by a carrier’s policy system. The process similarly works in reverse: an insurer’s information can be “translated” for use by a broker’s BMS. As this technology is being piloted, in the wake of the CSIO portal’s demise, IBAC’s technology committee is surveying brokers across the country as to where the committee must now centre its energies going forward.

At the same time IBAC is clarifying its post-CSIO Portal technology mandate, the CSIO is sharpening its focus. CSIO is now making the endorsement of XML standards its primary focus. In doing this, Kaukinen says it’s up to the brokers to push for the adoption of the standards.

“If the brokers demand in unison that the companies and their vendors adopt XML standards, it’s theoretical that in three years’ time we would see real-time transactions between brokers and companies for policy changes, new business and cancellations,” Kaukinen says. “But, the key is how much brokers understand that this could be possible through the universal adoption of XML standards. Because if they don’t demand it, then we’ll go at the same pace that we’ve been going, which is a slow pace because there is not a demand for it.”

Kaukinen believes the industry-wide acceptance of standards is possible in three years, but he says it’s likely going to be more along the lines of five to 10. “I can see that it costs the vendors money to change their systems,” he says. “It costs the insurance companies money to change their systems. So if the demand isn’t there by the brokers, it will just happen over a course of time.”

The lack of demand, Kaukinen argues, stems from a lack of awareness on the part of the broker. “It’s just that too many are unaware of XML standards and the potential they bring for improving the information flow between brokers and insurers,” he says. “The companies and the vendors will eventually adopt XML standards, but without a demand, there isn’t an urgent rush to do it.”

Carroll notes that standards, for the most part, have been robust for a number of years. But whereas the desire to use standards has increased, there are still gaps and holes in the standards that need to be filled. “As a good example, there is information that does not flow easily from a BMS to an insurance company because there are holes that need to be filled,” he says. “And those are gaping holes, because those are either standards that have not been put in place, or vacancies on the BMS where the data can not be collected.”

As a result, the broker ends up taking the time to fill any holes and gaps that appear when uploading data from the company systems, he adds. “I think there needs to be more of a collective effort,” he says. “There needs to be another driving force that interjects to get the BMS to move in a direction a little faster.” The IBAO is in fact looking at possibilities for pushing technology in the direction brokers wish it to go, and for brokers to influence both the vendors and the carriers in this endeavour.

SAY HELLO TO XML

Symons says adopting XML standards will allow the insurance companies to develop systems that will increase the ease of doing business in the broker channel. “I think what needs to happen is that each company needs to do its own thing,” he says. “[Individual insurers] need to work with brokers, with the broker management systems, and to get their own processes in place effectively.” The widespread adoption of XML standards would make this easier, he adds. “I think it’s easier to intercept an XML data stream than it is to work with disparate vendors.”

Morgan agrees. He says the complexity of policy quotes and issue by and for multiple companies can be overcome once brokers and agents understand the value of real-time communication and focus their energies on that. He says in the future brokers will need to gather smaller sets of data, because other required data already exists elsewhere on the Web or may be collected by third-party systems. When the data is sent to the carrier, for example, it may “then be enriched by third parties, because this information – PIN numbers, motor vehicle information, etc. – is all housed on the Internet somewhere.”

Kevin Campbell, president of Policy Works, says the industry needs to simplify small commercial lines business so that risks can be automatically rated, much like personal lines are today. Technology and pressures of the market are going to force the standardization of this sector, he predicts, although the movement probably won’t occur right away.

“Our initial strategy is to use CSIO commercial lines XML standards to ease the pain that brokers have in dealing with multiple small-business-quoting Web sites,” Campbell says. “As time goes on, I think some of the more progressive insurance companies will start feeding this XML directly into their real-time rating engines and underwriter tools.” There will eventually be a point when the practice will also open up to the mid-size and larger markets, he predicts.

Hirji sees the use of CSIO standards as the best means for achieving the brokers’ ultimate objective of reducing duplicate entry and making it easier to do business with carriers. He points to the United States and its implementation of ACORD standards as an example of where the Canadian market might be in five years.

In the United States, information can be captured in a broker’s commercial management system using the ACORD standards; in turn, that data can be passed off to three or four different companies, Hirji notes. But the problem is that 100% of the data is seldom ever transferred. “So what happens is, three or four company portals come up and you have to answer two or three questions in each one,” Hirji notes of the U.S. system. “It’s better than what we have today in Canada, but it’s still not ideal.”

To remedy the problem, some of the extra questions captured in carrier systems are actually stored in the vendor systems within a module that carriers can access directly, he continues. That way, a broker doesn’t have to leave his or her management system and a carrier can still maintain control over its own specific underwriting questions. “That’s exactly where we want to go in Canada,” Hirji says.

Campbell cautions against believing that the use of standards will remove the need for a business arrangement between the vendors and the company, so that data can just be tossed over the fence, so to speak.

Campbell says the more he works with industry players, the more he realizes the nee
d for a standardized business agreement. “The standards are just one piece of the puzzle,” he says. “I think there’s a bit of education required on that front so that the people can understand what a standard can and can’t do. It’s not a silver bullet. The devil’s in the details still. Forging strong business relationships ensures complete and accurate data transfer over the long run.”