In the past couple of months, two major initiatives have been launched which could shape the future of the industry. Both are bold in their vision and are designed to propel brokers, insurers and suppliers into the ecommerce age.
These are Rarringini & Rosso's (R&R) 24-7 initiative of an application service provider (ASP) for brokers and Misys's I2i Link which is backed by the major insurers with the intention of creating an industry portal on the internet.
What are the chances of these reaching their goals and being successful in transforming the industry?
History appears to be against them. Over the past 20 years a number of new broker software systems have been launched, only to disappear or be absorbed by the larger players. All have failed to reach the critical mass required to fund future development and keep their systems at the leading edge.
They could not match the power and resources of the big three, irrespective of their innovation or excellence. Faced with a market that could decline rapidly as broker consolidation increases and ever escalating development costs, the odds must be stacked against any new entrant.
Not much luck so far
History is also littered with failed industry initiatives to provide a common platform and industry standard. Insurers have owned software houses, invested heavily in them, funded development and joined together in ventures such as Mediat, Brokernet, CLMI, Polaris and various Association of British Insurers (ABI) standard bodies. None of these have been particularly successful but they have all absorbed high levels of cost and resources from within the industry.
Expenses have not been reduced, events have overtaken the initiatives and all sectors of the industry have been slow to embrace new ideas. Mergers have meant that insurers have had to prioritise resources on internal IT rather than industry-led ones.
Fundamental changes in the industry such as insurer, software house and broker consolidation, technology advances and changing customer buying habits have meant that many initiatives are obsolete before they reach critical mass and the investment has gone down the proverbial black hole.
Are these two initiatives any different? As I have not seen either or been involved in their development, my comments are based on what is in the public domain.
24-7 is a bold initiative. It deserves to succeed. From what I have heard, it is an exciting and visionary project. Its marketing has been inspirational, the strong teaser campaign leading up to what is considered by some the best launch of a new service in the market. It takes on the big three in an area where they have been very slow, as they have had to balance the need to maintain revenue from old systems and invest in new.
Its functionality and applications point the way to the future and provide a real alternative to brokers for handling IT. However, innovation, excellence and boldness does not guarantee success.
Need to go with the trend
Brokers, especially those involved in commercial insurance, are slow to embrace change. Many complain about technology but invest the minimum they can and still do not use it to its full potential. A large number are reluctant to invest heavily as they are unsure about their own future. Many are technophobes and certainly are not convinced about the “brave new world”.
The issues are:
Will 24-7 survive, then? R&R, no doubt has convincing answers for all of these points but the issue will be if there are sufficient converts to make the system financially viable before the money runs out.
Whereas 24-7 is a welcome initiative, I2i on the face of it seems to suggest that nothing has been learnt by past failure and it is destined to go the same way of other industry initiatives.
Brokernet failed because neither side of the industry at that time would embrace new ideas. CLMI disappeared because it was not possible or desirable to standardise commercial business and was insurer/national broker-driven.
Polaris has not succeeded because it was a major insurer-sponsored initiative and only obtained reluctant and token support from broker software houses. Indeed, few insurers, if any, ever integrated the toolset in their own systems, yet expected broker software houses to do so.
Despite investments of millions, only 47% of motor business is full cycle, household traffic is nominal and commercial business is virtually nil. It has only been successful in new motor, where some 80% of all business is transacted by EDI, but this was driven by lower rates for EDI business rather than the new technology.
This new initiative once again is from the major insurers but at least this time they have the support of one software house. However, an industry portal needs the support of all insurers, including Lloyd's and all software houses. The odds against this happening must be very high. It seems unlikely that other software houses will embrace enthusiastically an initiative developed by a competitor.
The major factor is whether a portal is really needed and whether it will succeed. Issues that that need to be addressed are:
Standards to come first
Portals are likened to what Railtrack is to the railway sector and BT to telecoms. It provides a structure on which everyone operates. But these are not ideal models.
An industry portal may be desirable, but standards should come first. All sides of the industry need to be committed, an independent study produced and a fair and open tendering process gone through. The issues need to be fully understood, recognising the strategic direction of the insurance sector.
If not, it will go like the rest and in hindsight will be seen as a failure. All sides of the industry will be asked to invest many millions in supporting the portal development and encouraged to offer services over it.
The entire industry must be absolutely sure that it is the future and that this is what they want. Still, lots of consultants will earn lots of money.