Canadian Underwriter

What real-time, broker-carrier connectivity might cost

February 27, 2019   by David Gambrill

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Ninety insurance companies working with Ontario’s broker channel would be looking at a total investment of $4 billion over five years to conform to the CSIO XML standards required for an industry-wide, real-time data exchange solution between brokers and carriers.

Colin Simpson, CEO of the Insurance Broker Association of Ontario (IBAO), made the observation Tuesday during his speech updating the progress of the association’s broker workflow project. Simpson was speaking as a panelist at the 2019 Insurance Technology Conference in Toronto.

The cost reflects the work required by all carriers to bring themselves into alignment with the Centre for the Study of Insurance Operations (CSIO)’s XML data standards for real-time exchange.

“We started investigating where everybody is today,” Simpson said. “There are not many companies that have real-time CSIO XML APIs. The good news is, companies do have APIs [application programming interfaces] if we can figure out a way to access them. Fourteen out of 15 carriers do have at least one CSIO XML API.

“The problem is, they don’t return data. So, you generally end up with PDFs, or HTMLs, or you end up in broker portals. So, they are not the real-time that we’re really trying to target.”

The path that insurance companies need to go down to integrate with broker systems industry-wide is very difficult, Simpson said. “Each company, on average, would all have about 20 APIs, but they are all in a different state of flux as to whether they are heading for CSIO standards or not.”

To reach the state where everyone is on the same playing field would cost approximately $4 billion over five years. Simpson noted that this type of investment would be difficult for many insurers to make in the current market environment. Insurers are finding it difficult to sustain profitable business, particularly in the auto insurance line. Claims costs are rising in personal property and in some commercial lines segments as well.

“We are talking about $4 billion of investment that’s required – that’s a huge number,” Simpson said. He then continued facetiously: “How many insurance companies are in the room? Are you guys having fun making so much money these days? Not at all. That scale of investment, with the pressure that these [insurers] are under today to try and make money, becomes especially difficult.”

For two years, IBAO has been working with an industry group including 15 tech vendors and 15 insurers representing 80% of the market. Following a discussion about what could be done to bring everyone up to CSIO XML standards for a real-time API solution, the group sent out a request for proposal that closed last December. Sixteen tech vendors showed interest; ten of them dropped out immediately, five dropped out midway during the process, leaving a relatively small vendor left. The group did not go with that vendor, citing the need for scale on a project of this magnitude.

The IBAO will be meeting with the tech vendors and insurers once again in April to discuss options.

One option would be to move away from a non-profit model, as previously envisioned, and shift instead to a for-profit model. As Simpson explained: “The reality is, if you go out and ask anybody in the marketplace who’s running a for-profit company to come and do a charity case, and not make any money out of providing a service, the chances are a lot of people are going to pull back and say, ‘No thanks, somebody else can do that.’”

Regardless of what form the ultimate real-time data exchange solution might take – and it appears the D/X Initiative, which uses APIs, is gaining some momentum– any real-time solution to broker-carrier connectivity will require critical mass, Simpson said.

A brokerage is not well-served if only three out of their 12 insurers are using real-time data exchange, Simpson said, by way of example. In that instance, real-time data exchange would be just one more workflow for a broker to have to learn. “Critical mass” of real-time data exchange would mean most brokers have to learn one or a few carrier data exchange solutions instead of many individual ones.

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6 Comments » for What real-time, broker-carrier connectivity might cost
  1. Pam says:

    It is unbelievable that we keep talking about BrokerFlow. No one wanted to build this thing because the vendors that know about these types of projects knew it was a project doomed to fail and makes no sense. This project checks every box of a mega technology project that will have millions thrown at it and produce no tangible results. We have seen this before. Also, why does IBAO feel the need to always focus on these multi-million money making schemes that will blow up in their face? Remember telematics? Aren’t we still paying for that mega blunder? IBAC seems to have a project that all the insurers, vendors and other broker associations are behind. Where does the move to data standards fall within BrokerFlow? Why does IBAO feel the need to work against everyone else? I wish they would just focus on things like the automobile insurance crisis that is impacting my office today, and not putting themselves at risk of financial ruin through yet another expensive and risky project a broker association as no business leading. I am really questioning what my IBAO membership is really paying for.

    • Das says:

      Spoken like a true vendor or integrator in this space getting worried about the mega $$ you are getting today for really poor connectivity. *I see you there*
      Sorry, we are done paying for this old model. Together as a group we can do better.

    • JHC says:

      Hi “Pam”. I think we can agree that none of the existing vendors in this space [including you] wanted this built because it erodes their pretty lucrative [albeit not broker or carrier enabling] point 2 point connectivity work. Whereas DX gives them money for life. We went down the path so that nobody could feel that they weren’t given their fair shake at the build. We can now actually move on to making this a true reality. Pretty exciting stuff in my lifetime. I actually started my career in banking the US and worked on some other industry shifting projects. Having another major game changer is really motivating me to get this done with my peers in 2019!

  2. Mica Cooper says:

    There is another huge problem with this solution. The data model CSIO is using is very old and brittle. It is based on an ACORD model that is lacking modern universal data modeling best practices.
    The solution itself is probably a huge step forward for the industry.

    • Gavin says:

      Totally agree Mica. The CSIO model is inherently flawed and touting it as a baseline is silly. Finding a way to use it as a guideline if you will, is the way to go based on the lack of anything else. Our UK arm has identified a project just started there that’s looking to redefine data standards for insurance. This may be useful for us here in the future as they move further along. Imagine the costs savings by eliminating the need for CSIO. Modernization on all fronts is much needed with a view to cost savings for all. Using a hub approach will do miles to get connectivity quickly. We were talking about the approach just today in my department. By running each project to connect individually we feel that we’ll be in control of our own costs directly. It’ll be out choice if we move to CSIO APIs at some point in the future and if we don’t it’s easy to understand that mapping may tale more time. Not requiring a monolithic and costly build like the failed CSIO portal is also important to us. The vendor selected must be willing to play ball on dev for a trade off in the long run. Much to discuss at the next meeting in March for sure but all very positive.

  3. Amir says:

    Great recap of the session I attended. The cost to insurance companies is already crippling for very little in terms of integration. We know we aren’t giving brokers what they need to succeed and we aren’t going to be able to if something doesn’t change in terms of the industry. D/X is great for vendors (who are already cashing in). Not great for insurance companies. We need to get a dynamic startup on the case of building this hub and get this moving in 2019! Hopefully the politics of a vocal few can be overcome before we are all run out of business by Amazon.

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