Technology Systems Vendors Out of the Gates

Six months after the CSIO Portal shut down, several information technology providers have noticed a more pragmatic and open approach in the industry. Many have observed that insurance companies, which spend the lion’s share of money on IT, are simply stating what they want to achieve and selecting the provider(s) that can accomplish the tasks at hand.

This is welcome relief for an industry that has seen both broken IT promises and failed projects during its 20-year quest for a SEMCI solution. Today, multiple solutions are being offered, sometimes through strategic alliances between vendors and companies. These relationships reflect the diversity of doing business in the broker channel.

“After the CSIO board made the Portal decision, we quickly heard companies say: ‘There are going to more solutions out there, and we will support all solutions that bring value to the relationships between us and brokers,'” Pat Durepos, president of Keal Technology, says. “It has opened up the opportunity to do more agreements with the companies, and get their participation in an open manner.”

Chris Lang, president of PowerSoft, says “the one nice thing about the CSIO portal failure is that insurance companies are no longer playing favourites and going after one or two vendors – they are now willing to go out to all vendors. What that has said to the vendors is: ‘You can reinvest in your business, and bring products to the marketplace.'”

Jacy Whyte, vice president of sales and marketing at Custom Software Solutions Inc. (CSSI), believes companies are showing a more direct interest right now. “All along, the majority of companies were looking at alternate solutions other than the CSIO portal or other means of communicating with brokers or to the client. Companies can be even more straightforward now on asking about alternative products.”

PATH TO INNOVATION

Some point out the demise of the Portal did not create any void or vacuum; still, they acknowledge a path has been cleared for future development. “I don’t think a great deal has changed,” Compu-Quote president John Savage says. “It was the technology improvements not only at broker level but at the insurance company level over the past four years that opened up the real opportunities in data transfer and connectivity. I think you will now see a drive by a lot of different vendors out there to take up their portion of that space.”

This more mature technology involves Web services for insurance companies, as they build functionality for real-time transaction processing in everything from inquiry to new business to policy change. For broker management system (BMS) vendors, data aggregation and translation tools like WARP, nexisys and I-Biz allow broker systems to communicate with multiple company front-ends. In all of this activity, essential players are pushing for adherence to XML standards to avoid the nightmare of multiple proprietary solutions.

“You are going to see more carriers building Web applications to process policies and do transaction work,” Doug Johnston, the vice president of interface services at Applied Systems, says. “Obviously, being able to do a new piece of business, or renewal or endorsement from broker to carrier seamlessly is the Holy Grail. They tried to do it with the Portal through a quasi-EDI approach. Other people are trying to do it with scripting approaches that mimic data entry into Web sites, which we don’t think is the way to go. We feel the true opportunity for the whole industry is to embrace CSIO XML as the message packet and Web services as the response.”

OARBIC managing partner Peter Symons says he thinks there is a possibility – “and it is a negative one if you will” – that the industry will stop pretending a SEMCI solution is ever going to happen. “The next best thing is to do it on a company-by-company basis,” he says, “but it really depends then on how the individual company transactional portal works.”

Brad Worth, senior vice president of product development at MFX Fairfax, says he always believed brokers and companies would make their own, seperate investments. “Our focus has been trying to develop technology solutions that fit in between the two, and can be used to benefit both,” he says. “These benefits exist through things like process management.”

Process management and integration differentiate the needs of the companies from those of the brokers, according to iter8 president Glen Piller. “The current Web sites out there tend to follow the workflow that is appropriate for the underwriter, as opposed to a workflow that is appropriate for a customer service representative in the broker office,” Piller says. “An end-to-end process needs to be simple, sales-oriented and connected to all the people and data required to complete the transaction.”

PROBLEMS PERSIST

In many ways, the hard work is just beginning in the post CSIO-portal era. The termination of the portal did not vanquish any of the complexities of the broker distri- bution channel. Insurance companies still have – and will retain – cumbersome mainframe legacy systems. Many companies have already developed Web portals, but connecting these to back-end systems has not been seamless, to say the least. Most of these company portals were designed to interact with multiple broker management systems; however, there have been pitfalls here as well in terms of service, speed and simplicity.

In areas such as proper construction of Web services based on XML standards, real-time connectivity between companies and multiple BMS and straight-through processing of policy transactions (including endorsements), there have been some early success stories. But none of these solutions have achieved widespread critical mass, and the race is on to capture market share. A number of questions still stand front and centre:

* How can insurance companies ensure consistency between back-end legacy systems and front-end Web services?

* How can companies and brokers send and receive data given different technology requirements and business processes?

* Should the actual transaction work be done through a BMS, comparative rating vendor or company portal?

Lastly, is all this IT investment really achieving anything that a PDF, fax or phone call to a service centre can do just as quickly?

BROKER MANAGEMENT SYSTEM SOLUTIONS

Some answers are starting to emerge. For example, early multi-company transactional capability for things like billing and policy inquiry and new business are coming on board for many brokers. Tentative steps have been made towards making endorsements through “data-bridging,” which essentially transports the broker right into the company Web application. BMS vendors are experimenting to develop a real-time connection to multiple companies without the time-consuming navigation process or a separate sign-on.

In this space, Applied Systems, Keal and CSSI are leading the charge on data aggregation and translation issues between different BMS and multiple company systems. There are as many as seven different broker management systems in the market; it is estimated that Applied and Keal account for roughly 75% of the electronic transactions done in the English Canadian marketplace. These vendors are aggressively selling interface services that can theoretically adapt from any BMS to any carrier Web services front-end.

Applied Systems’ solution was to develop technology called WARP. Currently WARP is up and running, and four insurance companies in Canada are using the technology; Johnston says there are letters of intent with other carriers. There are live WARP connections with close to 400 brokerages in the Canadian market. Capabilities right now extend to policy transactions like quote, issue and data-bridging, and to service transactions such as billing status, claims status, loss runs and endorsement bridge.

“WARP is the enabler of the Web services
from the broker end,” Johnston explains. “In order for the transactions to occur to one or more carriers, the data has to be put into a format that each carrier is going to understand. That is what WARP does. As the carriers respond, WARP collects the responses, aggregates them and delivers them back to the broker’s desktop.”

Johnston says the main reason WARP exists is because brokers do not have Web servers that can handle complex transactions. “WARP effectively outsources that function and does all the heavy lifting on the Web services end,” he says.

Keal uses technology called nexisys, which was developed by software solutions company Brovada. Durepos says a full suite of real-time transactions is available over nexisys such as single sign-on, upload of new business, inquiries and endorsements. Prototypes for a comparative-rating feature currently exists but not yet in production. Keal’s nexisys can connect to 20 insurance companies, but AXA Assurances Inc. is the only carrier currently using all the transactions.

“We are in the development process to [encourage] companies that are in various stages to add more functions,” Durepos says. “This may be because companies are changing Web sites to Web services at their end, or they might have different regional approaches. Companies are telling us openly that they want choices. They may not want 10 solutions, but they want to be able to offer brokers choice.”

CSSI offers an interface product called I-Biz. Developed through company partner Wawanesa Mutual Insurance Company, I-Biz electronically exchanges edited and underwritten application risk data from broker to insurance company, allowing policy issuance and policy change processing with exception-only underwriting intervention. The processed policy data then flows back to the broker’s office and automatically updates the broker’s policy.

One hundred and sixteen brokerage operations are using the I-Biz product, amounting to 10,000 real-time policy transactions every month in Manitoba, Saskatchewan, Alberta, B.C. and Atlantic Canada for habitational business.

CSSI is also testing I-Biz for auto insurance in Atlantic Canada, which should be live in June. Whyte adds that Alberta is next and eventually Ontario.

“Wawanesa is a test company, and the only one we do I-Biz with right now,” Whyte says. “We have interest from five companies… We are getting more brokers on it and real-time transactions are going through. Brokers are starting to put pressure on carriers, saying: ‘Hey, we want to do business like this with you.'”

STANDARDIZED SOLUTIONS

BMS vendors are playing a pivotal role in the development of today’s technology market. In many ways, it is up to these vendors to provide the “heavy lifting” that will allow for connectivity from BMS to multiple insurance company Web services. It is an expensive proposition that will likely mean more consolidation and perhaps fewer players in this space.

“It will be hard for all BMS vendors to step up to the plate,” according to Symons, who has experience selling these systems. “I think this is where the rubber is going to start hitting the road. The technical direction seems to be becoming a bit clearer for straight-through processing; it is up to each BMS vendor to start creating some sort of process where this can happen.”

Some BMS vendors, like CIM-Data president Bob Hornick, say the industry is shooting itself in the foot with its approach to common solutions and standards. “If there is a marketing advantage for some company short-term they are going to take it and that is such a myopic view for the industry,” he argues. “It is now obvious that if the brokers want their channel to survive, they are going to have to step up to the plate and say: ‘We want more efficient systems, we want the vendors to develop them and we want the companies to support them.'”

On the comparative rating side, many note the CSIO Portal achieved a modest rating engine in an area already well-served. There is plenty of competition in the rating and underwriting technology field, including vendors additionally providing real-time data connectivity between carrier and broker.

PowerSoft has done this kind of integration with ING Savers and its Web portal, and is currently working with four other companies, according to Lang. “Those companies offering Web services to their brokers are looking at how they integrate that into the vendors out there, including BMS and rating,” he says. “Every broker out there has different workflows, they may want the information to come from the BMS or rating product.”

From a broker point of view, it makes sense, Lang notes. “You do a comparative; once you decide on what the market is, you want to send it to the company’s Web services/portal and complete the application and bind the policy on the fly. Then, integration flows back through EDI to the BMS. That is a perfect workflow solution.”

Compu-Quote has also been connecting data directly to insurance companies. “We have six companies in play right now, either fully rolled out or in the process, whereby we take the data and migrate it directly up to the insurer,” Savage says. “We believe we are in a particularly good position because we are so tightly knit into the new business component of it, and because of our penetration into the marketplace.”

Savage says Compu-Quote sees itself as an underwriting and rating technology company, not as part of the BMS business. “It is not our intention to get into that: there are too many good ones out there,” he says. “What we will do is take our technology and build on it. We are now in several large insurance companies, providing them with technology that they will use as part of their enterprise. We have particularly seen a lot of growth from insurance companies taking our technology and incorporating increasingly complex underwriting components into it.”

CLARIFYING COMMUNICATIONS

For insurance companies, the transition to Web services has not been an easy task. Some have experimented with massive IT transformation projects or early attempts at Web front-end development. However, the ability to offer straight-through transactions to brokers has been forced to negotiate several detours because of technology and business process roadblocks. Vendors are now focusing on how carrier Web services can be successful for the broker at the front-end and still communicate with the legacy systems on the back-end.

In late April, OARBIC launched a transactional insurance portal that it says addresses the needs of company Web services. “This is not a simple process,” says Symons. “Contrary to some claims, these types of systems don’t just ‘plug in.’ It is both complex and demanding to make Web services architectures interface seamlessly with legacy applications.”

OARBIC built its own Software Enterprise Application because Symons says few solutions on the market worked well for carriers. “We have worked on other Web front ends for company projects and it has been tough slogging,” he says. “We thought we might as well build our own and now we are looking for customers. “

While maintaining consistency between Web services and legacy systems, iter8 also provides insurance companies with ways to offer brokers choice. “We have seven insurance companies already using the technology to allow broker choice,” Piller says. “This process integration means a broker starts the transaction in the BMS [and] completes the task seamlessly and in real-time with a company’s systems, with a sales and service workflow and with no duplicate entry. That is exactly what iter8 helps companies accomplish.”

Piller says the technology is available to achieve these goals right now; what is missing in many cases is the connection between business processes, people and technology. “Insurance companies need help with those requirements, someone to bring value-added services, instead of just saying: ‘Here is the technology,'” he notes.

Much of the activity in Web services, BMS
connectivity and business process integration has taken place on the personal lines side of the insurance fence. More vendors are starting to pay attention to commercial lines and the advantages of bringing efficiencies to the traditional paper-based business method.

Worth says most of MFX Fairfax’s recent work has been done on the commercial side. MFX Fairfax is offering a product geared to brokers called WriteNow. “Our strength on the administration and fulfillment side is real-time processing,” Worth says. “We will allow a broker to come in and get access to rates; if they decide to go forward with that company and that product, we can link them directly into that process through single-sign-on.”

MFX Fairfax also offers products called RiskVault, a paperless claims handling system, and ClaimsAssure, a full claims management solution. Each are Web-based, rules-based and collaborative, according to Worth. ” Often what we do is sit in the middle between company and broker,” he says. “One of the things we bring is flexibility, because we integrate both product design and workflow management. Every system we build involves all entities in the transaction.”

Policy Works has also promoted the need for a true commercial management system for brokers. Its president says there is still a lot of catching up to do with progress made so far in personal lines insurance. “The greatest opportunity in commercial lines right now is to move towards achieving the same levels of efficiency that EDI brought to personal lines a decade ago,”Policy Works president Kevin Campbell says. “The new CSIO XML standards for commercial lines and the adoption of commercial management systems by brokers will drive this shift.”

MAINTAINING CSIO XML STANDARDS

This multitude of vendor-driven technology applications will lead to future challenges in the race for market share. If insurance companies pursue individual Web services solutions, the big fear is the proliferation of proprietary technology. That is why many vendors openly stress the need for adherence to CSIO XML standards.

“We could develop proprietary links into each company’s Web portal but we would rather advocate for the consistent use of CSIO XML standards,” Johnston says. “If everyone agreed to use that data transport, whether it is for a real response or data populating a Web site, it would make everyone’s life easier.” How many insurance companies are actively working on full compliance with XML standards – and how quickly – is a question that will play out in the years ahead.

The threat of brokers turning into captive agents because of excessive tie-in to specific company Web services is a concern for some vendors. In fact, some argue brokers may lose control of client-specific information by relying too heavily on insurer Web services to process transactions.

“I think some of the fear we have seen is that a broker many collect a certain portion of the data and go to a company portal and enter more data, but have no way of keeping that data,” Whyte says. “What happens when it comes time to re-market or if you need access to that data? How do you get it back efficiently?”

However, perhaps the biggest challenge cited by many vendors is the unwillingness of brokers and carriers to research or embrace many of the technology advances that have occurred during the past five years. “I would say reluctance to change is probably the biggest obstacle,” Durepos notes. “Some of the brokers may be in a place in their business where they are thinking more about retiring or succession rather than investing in technology.”

That may be understandable, given the hype and the failures of many insurance industry IT projects. But vendors say it is incumbent on brokers and insurers to conduct due diligence and tap into those solutions that fit their strategies. As these vendors move out of the gates and stake their position in the race, it will be up to brokers and insurers to bet on what they consider the right horse.