Is EDI the Answer?

There isn't a week that goes by without one of the UK's insurance publications running a story about a new Electronic Date Interchange (EDI) development. But is EDI the solution to the myriad of problems currently facing motor brokers as they seek sustainable profit margins and increased retention levels? The answer lies in both the operational and customer service advantages offered by the numerous systems on offer.

SSP, Misys, Sirius, CDL and InsurE to name a but a few all offer packages which will each appeal to different brokers. Overall it doesn't matter which system you opt for as long as you invest in installing one that has full cycle EDI capability as quickly as possible.

It is a fact that using manual systems costs more to process for all involved. Not many insurers have yet to take a stance of no EDI, no agency, but that time could come. Brokers need to be prepared for this eventuality.

On a business development front, brokers need to be in a position where they can compete against the direct writers both in terms of price and customer service. Where direct writers have the advantage over many brokers is the absence of legacy systems, either outdated IT or paper based. Whilst this advantage is not difficult to overcome, brokers need to take the plunge and invest in both switching to EDI and creating a delivery strategy which allows for future efficiency delivering technological developments.

Stepping back from the world of IT into reality, I would be very surprised to find a broker who wasn't concerned about the increasing threat of telephone and web based direct writers and their slick underwriting operations. We all recognise that to retain existing and win new customers we have to deliver good customer service. But can we really expect to achieve this when some brokers and insurers still ask clients to fill in their own proposal forms and then don't send them any documents for weeks if not months?

As an industry we must work together to eliminate these problems. It is a matter of reputation and survival. On the surface the sales solution is straight forward; proposal forms filled in electronically by the broker and policy documents instantly available. So why isn't every broker already doing this?

Using manual systems to submit business also reduces the efficiency of insurers. Insurers currently spend too much time processing data and not enough being available for customers and brokers. By using EDI, brokers are helping insurers to help them. As a result many insurers, including Highway, have begun to put their money where their mouth is by offering pricing differentials for EDI and non EDI products. With the introduction of these incentives broker that don't submit business electronically may not be as price competitive as they could be.

The premiums, terms and acceptance criteria on EDI products are nearly always fully guaranteed by insurers so brokers can happily quote the premium safe in the knowledge that they will not be held responsible for quotation errors. This is not necessarily the case for manual submissions.

In addition, EDI improves the claims service experienced by customers, often a key factor in retaining business. Whilst manual submissions can take several weeks before they are put onto insurers' computer systems, with EDI the business is usually on there within a day or two. So often we hear of customers phoning to make a claim early in the term only to be told that they are not on the system. Is this really acceptable in 2003?

The case for brokers switching to EDI is compelling. So why are we still talking about switching over 17 years since these systems were first introduced? One possible downside is the need for some IT knowledge. However, with the system suppliers vigorously competing for your business all the technical advice you will ever need is never far away. It's time to act.