Game On

The game is on. The next question is, whether the partners brokers rely on are in this for the whole season, or just this period?

One terrific shift is not enough for a win, if the coach does not have the resources to keep the competition in check throughout the entire game. And there is no doubt that leaving assets sitting on the bench, while the opponents’ score climbs, is a recipe for disaster.

In business, wins are determined in the end by how well strategic choices align with customers’ greatest needs. Specific operational goals around budgets and expense management are, of course, necessary, but can actually be counter-productive if they do not support overall strategic ends.

Just as a coach allocates players with the ultimate purpose of scoring goals, businesses must determine priorities for budgets and resources with strategic customer delivery objectives in mind if they expect to win long-term success.

In the insurance world, brokers and the insurers who partner with them understand that competitive products and pricing are table stakes. Beyond that, customers need choices, objective advice and trustworthy advocacy.

In addition, consumers now also expect to obtain information and to access choice, advice and advocacy on their own terms and at their own convenience.

The technology does already exist for the industry to deliver on these expectations, and for customers to obtain up-to-the-minute information through the access points they prefer. To translate the potential into reality, however, brokers, insurers and technology providers must together make the necessary decisions to invest in infrastructure that will keep them in the game, not just through today’s overtime, but through to the end of the season.

TEAM INVESTMENT

In Canada, investment in information technology generally lags behind the spending levels in many other countries. Bob Humphreys, country leader for Demand Programs and Digital Strategy at IBM Canada, emphasized this point during his presentation at the 2014 Insurance-Canada Technology Conference, while referencing recent Backbone Magazine and Deloitte studies that link limited information technology investment and low productivity.

The insurance sector, in particular, is noteworthy for its relatively modest IT spending.

Inadequate investment becomes even more evident in a digitally transformed marketplace replete with amplified customer expectations. The need for alignment and collaboration between marketing and IT is increasingly critical.

Humphreys noted as part of his presentation that using technology to “build new capacities and competencies within the organization… will (in turn) help ensure improved relevance of IT efforts to the customer audience.”

This is not possible, however, unless key foundations are first developed.

The problem is, of course, that there are a great many possible avenues for investment. When budgets are limited or even reduced in the face of realities such as catastrophic losses or premium erosion, there are difficult choices to be made. The pressure on bottom lines for Canadian insurance businesses has seldom been greater, nor has the scope of change ever accumulated so rapidly.

But inaction is not a viable option, as businesses are forced into choices unwillingly or not by the simple evolution of the technological environment. Further, there are always risks in making decisions with far-reaching impact.

Nevertheless, one positive outcome is that a fresh scrutiny of purposes and priorities can reveal areas where funds are not well-deployed. The industry can no longer afford to tolerate outdated practices that perpetuate waste while a shift to more accurate, more efficient processes is postponed.

Imagine (if you can) that your favourite hockey team is headed into the playoffs, squared off against its arch rival. The three star players, however, are to be assigned to the locker room for the first two periods of each game, and tasked with taping old practice sticks.

The coach has promised that in two years’ time, they will no longer have to do this chore, but in the interim, the stars will be expected to carry the game during the ice time they do have in the third period.

MODEL GAME PLAN

Most industry stakeholders agree that the model for data exchange long promoted by the Insurance Brokers Association of Canada (IBAC) makes sense. It represents long-term efficiencies for brokers and broker-distribution insurers not only for automated policy change, but for other transactions as well.

Key elements of the design include the following:

• transactions start and finish in the broker management system;

• information is packaged and transmitted in strict accordance with Centre for Study of Insurance Operations (CSIO) XML standards;

• data transfers from broker to carrier systems, and a response returns to the broker, in real time;

• information moves electronically, without manual user intervention or additional data entry;

• transmissions avoid connection to carrier portals, but rather send data directly to carrier systems; and

• any necessary accommodation of carrier-specific coding occurs behind the scenes on the insurer’s side of the transaction and requires no customization of brokers’ systems.

The IBAC model also lays essential groundwork for brokers to be able to provide quality information in digital form to consumers, while still delivering on promises of advice and choice in an electronic forum.

Much work has already been done on the design, verifying the concept’s viability and confirming such details as synching broker and insurer systems before a policy change transaction is initiated.

DELAY OF GAME

The debate now is around timeline and priorities for implementation. While some carriers are moving ahead, others may postpone actual implementation until next year to stretch budgets.

In the interim, their brokers will still be forced to perform manual double entry and their resources will continue to be squandered.

It is a complex task to measure just how much the industry has been wasting on the inefficiencies of the status quo. Costs at the brokerage level are well-documented, but the drain on insurer funds is harder to quantify.

Each carrier’s internal budgets are, of course, confidential. Any calculation, however, would have to include a tally of direct ongoing costs, such as those noted below:

• expenditures for multiple layers of web portal development and maintenance and repeated mapping between back-end systems and presentation layers, each time rates or underwriting are adjusted;

• programming and staffing expense for maintaining user IDs and passwords, including continuous changes for brokerage staff outside the insurer’s authority; and

• staffing costs for both IT and underwriting personnel dedicated to portal operations, including training and support, auditing and monitoring brokers’ use of the insurer policy management system. A loading for supervisors and managers of these staff must also be added.

Even more difficult to determine, though, are the indirect costs that this arrangement is extracting right now from an industry that can ill afford the waste. Each insurer will have its own answers to these questions:

• What potential income is lost when brokerage staff are engaged in redundant data entry rather than focused on customers and their needs? What is the possible damage to an insurer’s market share?

• What are the real costs of time lost in corrections or the consequences of errors, when brokerage staff are manually keying information into unfamiliar insurer systems?

• What is the ultimate cost of lost goodwill with customers, if brokers cannot immediately provide requested information, or in the future, if the most cu
rrent data is not easily available via the brokers’ websites?

• What are the unintended consequences to both insurer and broker incomes, if insurer budget-cutting downloads additional clerical tasks onto distribution and diverts more broker resources away from customer interaction?

• What is the impact on an insurer in situations where brokers must reduce the number of markets they access, due to the administrative burden of portal entry, and as such, no longer have other alternatives for placing risks that an insurer would prefer not to underwrite?

• What are the long-term environmental impacts of persisting with legacy systems and processes that foster inefficiency and redundancy?

• What is the cost of falling behind in market share, if the prerequisite building blocks for online customer interactions through broker access points are not developed?

COMMON GOALS

These negatives could be eliminated if the outdated double-entry practices were replaced with effective, up-to-date automation that prioritizes complete customer service. It is true the expenditure needed to construct functioning data exchange – moving information “straight through” between broker and insurer systems using standards and interoperable functionality – is not insignificant. But it is finite.

In the interim, funds spent now, to perpetuate processes that ultimately must be replaced, are simply lost, and existing and prospective customer relationships are put at risk. Insurers need to ask themselves, How much was spent this past year on technology that sabotaged their brokers’ productivity?

Creating effective interaction between brokerages and multiple company systems is simply the first, essential step towards giving consumers choice, advice and advocacy digitally, in whatever shape that might take. It is in insurers’ interests, as well as those of brokers and consumers, for the industry to move to a common form of data exchange where information flows between multiple systems, as easily as it can within direct writers’ closed networks.

The chance for real teamwork is here. Collaboration does take practice, but common strategic objectives do motivate team members and bring them together.

Sometimes coaches have to make tough calls. Sometimes they have to diverge from old practices to leverage opportunities. And sometimes a group has to stretch itself to reach the next level of competition. Certainly, prudent coaches will eliminate distractions and exercises that do not contribute to the plan.

In the insurance game, consumers are no longer just spectators; now they are the referees, and they expect a certain level of play from organizations thatwant to participate in this league.

It is up to each industry player to make sure that they are ready for game day.