The commercial lines portal imarket has failed to attract brokers in the numbers insurers hoped. Is it too cumbersome or does it simply fail to deliver?
Let’s be frank. The insurance industry is never going to win any awards for embracing change. So it is hardly surprising that the trading options created by the IT revolution of the past decade have only really had an impact comparatively recently. Even then, the brave wind of hi-tech change has been largely confined to personal lines business.
But electronic trading’s overwhelming success here made it inevitable that a similar service for commercial lines would have to be created. The obvious benefits – for insurers and brokers, savings in the shape of low costs and increased access to customers and, for them, a faster, more efficient service – made the need for an electronic system a no-brainer.
Major insurers created a commercial lines portal, imarket, run under the aegis of Polaris, the insurance industry’s IT vehicle. But six years from its launch, the free-to-brokers service has failed to attract the numbers that insurers envisaged. Many brokers complain that it is a cumbersome system that only provides access to a small panel of insurers, principally AXA, RSA, Allianz, Groupama, Aviva and Zurich.
Extranet sites give extra
But brokers aren’t the only ones expressing reservations; some insurers are not entirely happy either.
“The reality is that it has not delivered exactly what insurers expected,” says Malcolm Smith, commercial lines director at Groupama, a founding member of imarket.
“There is business being traded but a lot more is being traded direct on insurers’ extranet sites. Software houses are also increasingly building products for electronic trading with brokers and insurers. The hope was that imarket would be the main conduit for electronic trading but, in reality, it is now one of a number of forms of trading and not the biggest.”
Polaris managing director Martin McLachlan concedes that imarket is not where he would like it to be in terms of volume.
“We expected higher numbers by now, say 50% higher,” he says. “But we have noticed an acceleration since last year. There is now a perception among brokers that electronic trading is the way they are going to be trading in future, whereas in 2008 it was seen as interesting but sitting at the side.”
There are 3,100 broking firms registered for imarket which, McLachlan says, handles about 100,000 transactions a month. “Some of those are quotes, some are new business, some are mid-term adjustments, and some are brokers going on to an insurer’s website to find out about a claim,” he says.
But if brokers aren’t using imarket, what are they doing instead? It seems that many prefer to go direct to insurers’ extranet sites – basically closed internet trading sites where brokers sign on direct with an insurer and access its products. This is despite having to visit each insurer’s site and repeatedly key in their client’s information if they want a number of quotes.
The whole point of imarket was to enable brokers to get multiple quotes from a single point, but Smith believes that brokers prefer extranet sites because insurers have more products on them. He adds that Groupama, like many insurers, does more business on its extranet site than on imarket.
At the same time, a number of brokers are also using other multiple distribution software systems, such as Acturis, Broker Direct, Iprism and Towergate’s PowerPlace. These effectively provide the same service as imarket and have arrangements with many of the same major insurers. “Those software houses are progressively building products on brokers’ back-office systems,” Smith says.
But far from supplanting imarket’s role, many of these alternatives are working hand in glove with it. PowerPlace’s chief operating officer Matthew Reed laughs off suggestions that he is poised to usurp imarket. “We’re in negotiations with them to enable imarket users to access PowerPlace,” he says. “Imarket complements us; it provides the glue between brokers and insurer products.”
PowerPlace, which has about 350 brokers on its books – a number it hopes to double this year – is available on Open GI, the software used by almost half of UK brokers. Those without Open GI will be able to access the service via imarket. “Imarket is a messaging tool,” Reed says. “We’re able to satisfy imarket’s user requirement for products and insurers, and it is able to satisfy our insurers by giving us more volume. It’s a symbiotic relationship.”
Acturis volumes grow ‘substantially’
That view is echoed by Acturis chief executive Theo Duchen. “We provide brokers with the opportunity to access insurers’ products through a range of different integration models, including imarket messaging, hosting of the product on Acturis or integrating directly with the insurer’s products on a point-to-point basis. The imarket standards (which define questions and answers) help all this work in a consistent fashion so things all look the same for a user, thus improving usability.”
Acturis operates on a “software as a service” (SaaS) model which means brokers don’t host the software but simply access it online. Duchen says volumes have been growing “substantially month on month. Broadly speaking, electronic trading is up around five-fold since 2007. We have more than £2bn of commercial premiums transacted on Acturis annually.”
Polaris sales and accounts manager Philip Nunn says working with the likes of PowerPlace and Acturis enables imarket to increase the choice for brokers. “Imarket is a technical success but we want higher volume and, when a broker gets into the system, we want to ensure there are an optimum number of products and enough insurers on board to make it worthwhile. So when someone like Towergate comes along with PowerPlace, something that can gee up participation in commercial electronic trading – and wants to do that on an integrated basis through imarket – it’s a bonus,” he says.
But there must be a risk that insurers will prefer to place more products on these other distributors’ sites, or on their own extranets, if volumes on imarket fail to pick up. At worst, there is a danger that the success of the software houses could make imarket redundant.
McLachlan insists that imarket is unique. “If you want a real-time price, imarket is the only platform on the market,” he says.
Smith insists that Groupama remains “firmly committed” to imarket; Reed and Duchen also believe that it will continue to have a pivotal role in the marketplace. Head of SME broker and affinity markets at Allianz – and a Polaris board member – David Martin adds: “We trade a significant volume of business through Acturis, but all that business is only enabled through imarket-compliant standards. It’s important to remember that imarket has not just provided the portal, it is also providing the standards for which we all build against our rating technologies.”
PowerPlace has a broad range of providers, including RSA, Groupama, Fortis and Zurich and, of course, Towergate Underwriting. Acturis’s providers include AXA, RSA and Aviva.
You could be forgiven for thinking that the industry appears to be operating a scatter-gun approach to see which pays off the best.
“At the moment insurers are hedging their bets a bit, waiting to see which horse is going to work,” Reed says. “Do any of us completely know which way electronic trading will go? Not entirely, although obviously I believe PowerPlace is the way ahead. But basically underwriters and insurers are having a look at the moment.”
Some believe that the take-up of imarket has been slow because the complexities of commercial lines makes it ill-suited to the rapid demands of electronic trading.
McLachlan disagrees. “There will be risks that cannot be traded fully electronically, such as pharmaceutical liabilities risk or petrochemical risk, but that’s the bespoke bit of the business. Most people don’t go to Savile Row, they go to Marks & Spencer, and in the Marks & Spencer’s bit the risks that can be automatically underwritten account for the vast majority of market transactions.”
Online sometimes the only way
In fact, Groupama’s Smith says that electronic trading may offer the only way to get some classes of SME cover as competition to drive down prices intensifies. “A lot of tradesman and shop and office products are only available online because it is simply not economic for either us, or a broker, to place smaller policies traditionally, with an underwriter quoting it and processing it. Online trading takes the cost out of transactions so we’re able to deliver highly competitively priced products.”
The bottom line is that electronic trading will become more sophisticated as commercial lines systems evolve and with that, as has happened in personal lines, it will become survival of the fittest. “Electronic trade will provide a proper value,” says Reed. “The access to information is changing things and insurers have to capitalise by getting better – or they will lose out. PowerPlace and others provide a transparent marketplace; there is nowhere to hide. If your product isn’t good enough, if it’s not the right cover or right price, people won’t buy it.”
‘Part of the solution … but not all of it’
But commercial lines still has a long way to go before it can reach the levels of personal lines electronic trading. James Gerry, chief executive of broker JLT’s underwriting subsidiary Thistle, believes imarket must seek to substantially increase the products brokers can access.
“Imarket is part of the solution, but not all of it,” he says. “From a broker’s perspective you have to consider whether you can go to a client and say you did an exhaustive search of the market by just going to imarket? Does the broker feel he has distinguished himself in a busy market by going to one site with products from five or six carriers on it?
“As a general concept it makes sense, but you could argue it’s the usual suspects that have their products on the site – and elsewhere too. Many insurers are not on these sites; all of the Lloyd’s syndicates, for example.
“Imarket is a step in the right direction to single-point access but it’s the beginning of the process.” IT