Commercial Opportunity

After many unsuccessful attempts at creating an open technology marketplace for business transactions, one electronic platform has actually gone live – the LexisNexis Insurance Exchange.

As of October 2010, 16 insurance brokerages in the United States have used the exchange to submit prospective business in real-time to multiple markets, get quotes and bind business via a Web platform developed by LexisNexis. The latter, a provider of information and business solutions to a variety of industries, teamed up with the Council of Insurance Agents & Brokers (CIAB) to launch the placement platform.

“Given the history of these electronic exchanges in the insurance world, many people thought we were crazy to even try it,” says Clyde Owen, general manager of the LexisNexis Insurance Exchange. “But we are the first of its kind to actually go live.”

The exchange provides a central and collaborative technology platform through which data and documents can be shared between brokers and insurance companies. It is a Web-based exchange allowing brokers to submit insurance applications to multiple carriers in a one-step, real-time process. A “software utility” provided by LexisNexis is available to all participating brokers and their staff to submit business to contracted markets.

Many of the goals of the exchange are similar to recent real-time initiatives in the Canadian property and casualty market – elimination of multiple data entry, ease of doing business and greater efficiency.  

“I think the real driver behind this is the huge margin pressure on brokers,” says Ken Crerar, president of the CIAB. “Yes, the technology has come of age so we can do this, but brokers do not have the margins or the tolerance to deal with the inefficiencies and noise in the traditional insurance process.”

That “noise” comes in the form of commercial insurance processing, in which brokers typically send multiple emails and attachments to several individual companies, thus beginning a cumbersome back-and-forth process.

“The biggest problem with this process,” Owen notes, “is that hardly any of the communication is about the risk itself.  We want to take the chatter out of the business and focus on the actual risk profile and the best insurance solutions in the marketplace.” He adds that as many as 60-70% of commercial submissions are never even quoted by carriers.

Core Principles

The prime benefits of the exchange for brokers are greater access to carriers, improved market knowledge of detailed insurer risk appetites, pre-filled and validated submission data from broker systems and fewer errors. Many big-name brokerages in the United States are among the first set of “early adopters,” including Brown & Brown Inc., EPIC Insurance Brokers, Sterling & Sterling Inc. and Roach Howard Smith & Barton.

Owen says other brokers will be brought onto the exchange “in a controlled fashion” throughout 2011. Crerar says at least 30 brokerage firms are waiting to join the platform. Brokerages do not need to belong to the CIAB to join the exchange, but only members who pay fees will access full services. Neither the CIAB nor LexisNexis would disclose subscriber fee structures.   

For insurance companies and wholesalers, advantages of the LexisNexis Insurance Exchange include the ability to get more accurate submissions, write more closely targeted business and gain underwriting and loss experience. Owen says any carrier or wholesaler can access the exchange, but companies that join as paying members get more information and analytics geared to risk placement and market trends. Currently, about 100 carriers are using the exchange, he says.

“Right from the start, we have emphasized openness and neutrality,” Crerar says. “I think one of the problems with previous attempts to do this is that they tried to own or corner the marketplace. We want to leverage the marketplace.”

In late 2010, the Insurance Exchange Trust, an advisory board composed of brokers, carriers and wholesalers, was created to monitor and ensure the platform adheres to its principles of fairness, neutrality and protection of data.
For Crerar, the idea of the exchange is to replicate the relationships currently existing in the marketplace and to bring the parties closer together in a Web-based platform. In addition, the process of collaboration is intended to be much more efficient.

“We are not trying to commoditize insurance, quite the opposite,” Crerar says. “If anything, there will be more customization between brokers and carriers on specific risks. Instead of just looking at price, the exchange will allow all parties to look at products, features and terms to get the best solution for the client.”

Owen notes the broker and carrier sides of the industry really represent “two sides of the fence. Each has built its own systems and processes and these work fairly well, but they don’t work well together.”

Crerar agrees. “We have operability on both sides of this industry. By that, I mean we have our broker management systems, and the carriers have their
policy management and underwriting systems,” he says. “What we don’t have is interoperability.”

The LexisNexis Insurance Exchange represents an attempt to address one key aspect of that interoperability – the placement or “upload” function. In particular, it takes that process from an email world and puts it into a Web-based electronic medium. Brokers can create electronic submission folders simultaneously to multiple markets. The exchange does not, however, synchronize the real-time download of data from carrier underwriting system to broker management system, a thorny problem in the side of the insurance industry in the United States and Canada.

“We recognize insurance carriers in the U.S. all have underwriting processes and systems, but these are in various stages on a company-by-company basis,” Owens says. “Some companies can use the platform as is; others will need integration to exchange forms and data with their brokers.”

The core of the exchange is a standardized and structured insurance database, according to Owen. For most lines of business, this will begin with the ACORD Standards data definitions. However, the exchange will extend these standard data definitions to accommodate the needs of participants.

In terms of ownership and control of information, the LexisNexis Insurance Exchange believes the data contributed by participants belongs to those participants. The role of LexisNexis itself is to secure and maintain privacy of
all data. To that end, any analytics and market information will be aggregated, but individual company data will not be shared.

Application to Canada?

Could the exchange apply to brokers and carriers in Canada? Crerar sees no reason why participants from other countries could not use the exchange, “although we have not had those discussions yet.” For non-subscribing participants in the exchange, all brokers technically require is a contracted relationship with select carriers.

In the meantime, the remainder of 2011 stands as a crucial test period for the LexisNexis Insurance Exchange, according to Crerar. While the exchange is initially focused on mid-sized commercial accounts, one of the least automated aspects in the industry, it will expand over time to encompass all lines of property and casualty insurance, as well as life, health, employee benefits and reinsurance.

“For me as a broker, I don’t really need to know how the technology works at a micro level,” Crerar notes. “What we are talking about is a business process change. And when you look at it that way, the possibilities really open up.”