Two earlier installments of this series provide more background: see Hybrid Management Systems, Part One: The Real Solution to Interface Problems and Hybrid Management Systems, Part Two: Inherent Problems, Potential Solutions.
Hybrid management systems are integration platforms more than traditional database applications. The software brings together data and functionality from a variety of sources and presents it as one seamless application to the agency user. With hybrid management systems, unlike traditional agency management systems, the vendor doesn't attempt to create (and extend) one massive, comprehensive application, but rather pulls together (integrates) third party services provided by carriers, information suppliers, and other vendors.
Independent agents are increasingly branching out into related areas to provide their customers with broader offerings, but traditional management systems aren't keeping pace; instead, they're increasingly an impediment to agency growth and evolution as agents either forego opportunities their management systems won't support or are forced to set up parallel and non-integrated systems.
Traditional insurance technology solutions posit separate, distinct, and self-sufficient systems for each party to the insurance transaction (islands of computing). Thus, agents and carriers each have their own computer systems and each stores detail on the same policies. The problem then is to synchronize each system; that is, make each consistent with the other. Rather than passing paper and then doing duplicate key-entry, agency/company interface is supposed to provide an automated solution to the synchronization problem. But even after 20 years of proselyting and probably hundreds of millions of dollars spent, ideal interface remains an elusive goal and automated synchronization an exception rather than the rule.
Because a key concept of a hybrid management system is that data should be stored only once and then shared by all parties that need it, traditional interface and agency/carrier database synchronization problems disappear.
With the appearance of carrier Web sites, as well as remote Web services, hybrid management systems are now a technical possibility. But so far no vendor has intimated even a remote interest in moving from the agency management system paradigm to the hybrid management (or integration platform) paradigm. In future installments, we intend to bring agents, vendors, and carriers into the dialog. In this installment we'll look at the need for change in agency/carrier relationships.
Changing agency/carrier relationships
Hybrid management systems depend on the idea of data sharing more than data moving. One implication is that when agents need to view policy detail or to make a change, they'd make use of the carrier's database, edits, rules, and system functionality. Technical issues aside, agents sharing and depending on their carriers' systems has implications that aren't yet fully appreciated and have yet to find widespread answers acceptable to all parties.
Note that agency dependency on carrier databases and systems isn't solely a concern of hybrid management systems; it's part and parcel of the increasingly widespread practice of carriers providing Web portals to their agents to write new business, do inquiry, and make changes. Carriers are falling all over themselves to share their data with their agents. They are, in fact, becoming ASPs (application service providers) to their agents. The concept of hybrid management systems builds on the idea of carriers as ASPs and suggests that agents need a layer of consistency and order between themselves and all the carrier sites they use — thus the need for an integration platform.
Who owns the data?
The simple answer is that the carrier owns the risk from effective to expiration date and the agent owns the expiration and the customer. Though these simple ideas are widely shared today, their implications for carrier Web sites (carrier ASPs) and hybrid management systems aren't. In the next few paragraphs, we'll tease out some of the details, but agents — especially through their producer associations and user groups and with the participation of carriers — need to work toward full understanding, a consensus on answers, and the contractual, technical, and practical details that follow.
24x7 access: If an agency is expected to use and depend on a carrier Web site or remote Web service, the carrier must make its service available (nearly) all day long, every day. As agents increasingly provide Web services out to their customers through their sites, and those services depend in some way on carrier systems, the need for 24x7 access will become even more pronounced.
But the fact is that today even some of the largest and most technically advanced insurance carriers do not provide 24x7 access; instead, they shut their systems down overnight and on the weekend. That won't work. If a carrier expects to operate as an ASP, it must provide the same level of service professional ASPs do (24x7 and 100% reliable). Current expectations, developed when overnight, batch processing was the norm are no longer adequate. By exposing their services as real-time, carriers implicitly accept the responsibility of continuous access, but some at least have yet to understand the connection.
Persistent access: If an agent is expected to depend on the carrier's policy database, policy detail must be available to the agent well beyond the end of the term of the policy. The need for inquiries, claims, and other recourse to policy detail can persist for years past the expiration date. If an agent can't depend on the carrier for archived policy detail, but must store it separately, that defeats much of the point of depending on the carrier in the first place. Agents should be able to get at policies for some prescribed period of time, perhaps seven years, beyond expiration. After all, data storage is now incredibly cheap, so cost really shouldn't be an issue for carriers. Besides, they need to archive the information anyway.
On the other hand, there are some alternatives to persistent access into carrier systems. One suggestion is that carriers transmit the complete policy image to the agent on expiration (perhaps in PDF or Word/XML format) and then it's up to the agent to archive the data. And some agents have suggested the creation of an industry data warehouse to archive policy detail, with agents paying a fee to retrieve and use the data. Or rather than an industry solution, competing vendors might well create archive services that take feeds from carriers and then store policy data for agents to access if and when they need it.
Whatever the answer — persistent access with the carrier, detail back to the agent for storage, or one or more third party archiving services — agents are going to need a solution for hybrid management systems to work, or even for carrier portals to make sense over time.
Though I've pointed to the need for persistent access to policy detail, that is, the insurance contract, consider "policy detail" shorthand for all of the information tied to that policy's life cycle — from application through endorsements and payments to claims. In order to really depend on the carrier, the agent needs more than the dec sheet; rather, the agent needs potential access to the whole policy "file folder."
Parting of the ways planning: Part of the strength of the independent agency distribution system is its flexibility. It's in constant flux as carriers and agents reconsider the marketplace, legislation, regulation, technology, opportunity, competition — and their customers' needs. Carriers come and go from states and markets. Agents reconfigure which carriers they write through. If agents are to successfully use carrier Web sites over time (and evolve to the next stage, i.e., hybrid management systems), access to policy detail must outlive the termination of the agency's contract, the willingness of the carrier to write a line/state, and all the other changes the industry requires to be flexible. But today, as far as I can tell, the industry hasn't adequately thought through the implications of changing relationships on carrier ASPs (Web sites) and thus hybrid management systems.
One specific example is the potential need for an agency to move a book of business from one carrier to another. If the agent is expected to depend on the carrier for policy detail storage and to load the carrier system in the first place, the agent must have the right and opportunity to unload — that is, move a book — to another carrier. Carriers may object to being the source to feed a competitor, but it goes with the territory of wanting to be the agent's ASP. The data door has to swing both ways.
Carrier system failure, sale, or demise: Carrier software can have bugs that corrupt or destroy data. Carrier systems can be subject to catastrophic failures that can lose or compromise data. Hackers might breach the carrier firewall — or more likely, an irate employee "adjust" data. And carriers go out of business or sell off all or part of their book of business. How can an agent be confident that all the data on each policy will survive these major changes? How can an agent be comfortable depending on the carrier as data source?
The reality today is that carriers are eager to have agents depend on them for data and functionality services, but the carriers have not provided the appropriate system, operational, and contractual safeguards to their "ASP" agent customers. And most agents don't even realize the increasingly tenuous position use of carrier systems put them in. Some help will come from work by organizations like ACT and AUGIE, but that will only happen if there's increased awareness by agents of both the perils and opportunities afforded by carrier hosted services.
So…
The hidden mismatch between carrier and agency expectations about carrier Web sites is a lawsuit waiting to happen.
Hybrid management systems (integration platforms) have great potential to build on the foundations of hybrid interface and the proliferation of carrier and third party hosted services, but only if the legal and operational implications of these changes are exposed and addressed. And as I've pointed out above, this increased awareness and changing roles applies to carrier Web sites — right now, today. The hidden mismatch between carrier and agency expectations about carrier Web sites is a lawsuit waiting to happen.
This survey on the need to understand and describe the evolving relationship between agents and carriers — given the technologies of carrier Web sites (and the next step, agency hybrid management systems) — is intended to provide an introduction to some emerging issues, but only scratches the surface. It's clear to me (and probably to you) that the industry thinking process, in this area at least, is way behind the actuality.
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Independent agents are increasingly branching out into related areas to provide their customers with broader offerings, but traditional management systems aren't keeping pace.
Hybrid management systems depend on the idea of data sharing more than data moving.