How often have you spent too much time on a $100, or even a $500, policy? Direct entry by the producer on the Internet for quoting has become routine. Now, automatic issuance of a policy is becoming more common, provided it fits the underwriting box. Carriers have developed most of the initial systems, but now agents and other third parties are starting to offer insurance products to their sub-producers using the Internet.
Maybe you're an agent or broker who has a strong program that you've developed over the years and you want your sub-producers to have access to Internet automation. You're not trying to sell directly to the consumer - that's an expensive proposition and the road is littered with the dotcoms that were going to take over the world. Or, maybe you're an MGA that is getting killed with back room costs on small premium policies and you're looking for a better way. Are there realistic options that will make MGA life better?
MGA dilemma same as retail agency
I attended the annual AAMGA Automation Seminar in Atlanta in early March. Among other things, I interviewed a number of MGA principals who attended. Most MGAs have the same problem that retail producers do in that they both need to deal with multiple markets. MGAs have been waiting to see what their E&S companies would do in the way of Internet offerings, and now that a few of them have projects underway, they, like retail agents, are faced with systems that differ from company to company. It's not very helpful for internal workflow and doesn't give them a way to easily offer the automation for quoting and issuance to their producers.
The first systems used by a sub-producer will give those markets an initial advantage for ease of doing business, but that will turn into a problem as more of the companies come out with proprietary approaches. MGAs have a history of building their own internal systems and a number of them are now firing up their first Internet-based policy rate and issue systems for use by retail agents.
I spoke with a principal of a large southeastern MGA and several members of his seven-person IT team. This group has implemented an Internet rate and issue system for dwelling fire, homeowners, and motorcycle policies, and is now starting to work on some of their slot-rated commercial products. They know that most companies will provide automation for them eventually, but they can justify the investment in terms of cost savings in the short term. And, like most MGAs, they need to control their own data to maintain flexibility when they need to roll a book of business. Furthermore, the size of their IT staff is not untypical. In one conference session, a survey indicated that more than half the MGAs in the room have an IT staff of five or more.
The first generation systems being developed by individual MGAs are all single market, non-comparative systems. The products they are automating initially are ones that lend themselves to automated underwriting and are mostly personal lines — non-standard auto, dwelling fire, boats, motorcycles, etc. Slot rated commercial lines products are also planned by a number of MGAs. A few MGAs have implemented vendor-developed systems, and a number of exhibitors at the Atlanta meeting have product offerings in this market.
MGA product offerings
Results International Systems (www.resultscorp.com) is an Application Service Provider (ASP) that has installed customized systems for MGAs and carriers. Both Express General in San Diego and D. S. Barkley in Scottsdale use their system to quote and issue non-standard personal auto policies. Barkley started with Results for back office functions, and then added the Web rate and issue capability to pass some of the work done by his staff to his producers. Barkley reports that business is up and that his staff has held steady as more than 50% of his retail agents are doing their own policy inquiries, policy issuance, and change requests. He plans to grow that to 90% of his agents. Producers not only issue the policy online, but can request MVRs and accept credit card payments. A binder dec is issued immediately in the producer's office with the full policy produced as part of an overnight cycle at the Results data center.
Results CEO Atul Saxena described a next generation Java-based front end/rating engine currently being beta tested that will allow the retail agent to receive the full set of policy documents immediately at the point of sale. The Results ASP system automates all the functions that follow policy issuance as well — accounting, claims servicing, and statistical upload to the carrier.
Superior Access is a California MGA that has created an Internet-based underwrite, rate, and bind software system for its own use. (See "Facing the Hardening Market" in December 2001 Sounding Line). The key to their Internet approach is to have the retail producer enter all the data on the Internet and have the risk underwritten as part of the quoting process. A quick quote is provided to give an indication of the premium. The producer can then go ahead with the rest of the data entry necessary to underwrite and get a firm quote. The quote is saved, and when the producer is ready to bind, can be retrieved and submitted for binding. Following a quick review by an underwriter, the bound quote is automatically transferred either to their internal policy issue software or directly to the carrier for issuance.
SAIS has had to develop a custom electronic interface to each carrier as the ACORD XML standards are not yet broadly used. However, they have successfully interfaced with XML and are currently testing the latest ACORD XML standard with the Hartford. More than 90% of the business submitted on the Internet in the last three years has been issued, resulting in more than $125M in premium. Quoting on the Internet system is currently running at more than $45M per month.
In 2000, SAIS formed a subsidiary to market the software capabilities to other MGAs and carriers. The software company, Superior Access Internet Software (www.sais.com) builds a customized solution for each customer, using the core components that have proven successful in its own MGA. One of the unique features of the software is the Quote Vault. Not only is the entered quote data kept private in a secure database, but the retail producer can perform quotes for multiple lines of business, each for more than one company, without entering any common data more than once. Each customer that obtains the SAIS software to quote and issue their own products can have a custom approach to creating the policy documents, and SAIS accommodates them by transferring the information into the necessary format. The company has already implemented systems for several MGAs and agencies and offers their software for use at the customer's location or at their hosting facility.
Insurance Technology Solutions (www.insurancetechnolgysolutions.com) has invested substantially in developing their Rate, Quote, Bind and Issue (RQBI) capability. Their first customer in the E&S market is the Interstate Insurance Group, which has already installed the software in MGAs writing professional liability products, with Interstate transportation products soon to follow.
The ITS RightRisk(SM) System is the first to service multiple tiers in the insurance distribution process with a single Internet-based software system. The data is entered into a shared database and the insurance company can view the data at any time without having to wait for an upload. Each MGA can use the system for all its policy administration functions and can offer access to the system to both its retail producers and the insureds. The view seen by users at each level in the system can be personalized to provide branding unique to that distribution partner, along with the appropriate restrictions on data that can be accessed. For example, each MGA using the system can offer access to the system for quoting and binding to their retail agents, with the appearance that it is the MGA's system they are using.
ITS has also entered into a partnership agreement with DocuCorp and plans to provide seamless transfer of data to the company-specific and ISO policy documents provided by DocuCorp's printing engines. Policy data can also be transferred to the MGA's internal systems.
Other MGA vendors
Several other vendors will be entering the Internet quote and issue space in the future, and include:
Insurity (formerly Programming Resources Corporation) has a long history of providing commercial lines rate and issue systems for carriers and MGAs (including the Sicaro system provided to Scottsdale Insurance MGAs) and is now rolling out its Internet product for all lines. Insurity is the largest vendor in commercial rate and issue today with a staff of more than 300 people who support rate, rule, forms, and statistical processing for all states and commercial lines. As a business unit of ChoicePoint, its products will also be well integrated with its Choice-PointAgency.com agency portal with access to multiple carriers (see the March 2002 issue of Sounding Line).
Sirius Financial (formerly Policy Master) has the largest installed base of MGA back office systems. In addition to existing offerings of integration to rating and policy issue products of other vendors, Sirius will be introducing new products from its UK parent that will give its MGA customers the ability to install Internet based quoting and issuance for use by their retail producers.
Computer Sciences Corporation - Financial Services Group (formerly know as Policy Management Systems Corp) has a complete range of carrier and MGA software. Their Internet quote and issue system is available as part of an ASP service that includes all the hardware and software necessary to operate the system at their facilities. As part of that total package they also include the printing and mailing of the policies from their distribution center.
Pros and cons
As might be expected, there are pros and cons to all these varied approaches. Producers still have the problem of dealing with multiple proprietary systems, and it's simply not cost efficient to deal with many different systems in the normal course of business.
Yet, most Internet systems being implemented today are funded by carriers that seem unconcerned about working toward common user interface solutions. In the current hard market, producers may have few options but to use proprietary systems. What will happen when the cycle swings back?
In my opinion, SAIS is closest to the ideal for the producer. It offers many products in a single Internet site with a common user interface, even though not all products are underwritten or issued internally. By providing a pass-through to carrier systems using custom interfaces, it is probably the easiest and friendliest for producer functionality. SAIS will provide other MGAs using its software access to any of its markets to help round out that MGA's Internet offering.
The key to the future of multi-market systems may depend on the success of the ACORD XML standards. Large carriers like Travelers and the Hartford are funding the early versions of these systems. Once they are proven, any vendor can communicate with carriers using XML data streams to perform quote and issue functions utilizing standard transaction screens in their local system — provided the agency management system can support XML interface. MGAs and retail agents with products they want to market and deliver through their Web sites have the same problem as companies — the need to receive XML data streams and provide the quote and issue responses to the producer systems. Creating these hook-ups will be an opportunity for both existing and new vendors.
In preparing this article, I had envisioned that the process would also include printing the policy documents as part of completing the transaction. However, Results International is only vendor reviewed here that can print policies at the producer site immediately (less than a minute). Printing can be problematic, although the use of Adobe PDF files has simplified the process considerably.
Is point-of-sale response important? All other vendors reviewed are performing the printing and mailing as a back office function, and, it turns out, the savings in underwriting time are the major payoff. If internal systems can handle the policy document production with little cost, that alternative may be preferable. There could also be advantages in receiving the application and payment before issuance that would warrant a separate step.
Overall, it appears that Internet quote and issue functions will become increasingly common and likely represent savings for carriers, MGAs, and agents alike.
Erik Pedersen is a consultant focusing on the implementation of MGA and carrier policy systems and their related workflow. He can be reached at 339-225-0056 or at provista@rcn.com
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