Martin McLachlan of Polaris says electronic trading is cheaper, faster and more efficient.
few weeks ago I wrote about the ecological aspects of reducing our devotion to paper. Several brokers claimed I had placed too little emphasis on a key point – that paper equals cost plus inefficiency. We are all devoted to saving the planet, but we also have to improve business efficiency.
They are right. A visit to the average broker’s office shows the burden that this love affair imposes. Typically, filing cabinets are full of paper, desks covered in the stuff and cupboards bulging from the presence of processed, dead forests. It can only be a matter of time before an industrial tribunal is hearing a case from the first broking firm employee who has been entombed by a Ben Nevis of paper avalanching past the quill pens and ink wells.
In fairness to brokers, they are probably very aware of the issues paper causes and anxious to address them. Paper represents considerable inefficiency.
In a previous life, before deciding to go straight, I worked as a management consultant. In one study I found that 35% of time in offices was spent looking for documents. The reasons for this could be recited by any office junior: they are awaiting filing, they have been wrongly filed, they have been destroyed or they never existed in the first place. Whatever the excuse, a search party must be dispatched.
For managers, the problem threatens to become worse. Young recruits into the industry just don’t understand its obsession with dead trees. They resent being asked to undertake unnecessary, convoluted and boring tasks such as filing and retrieval.
Sadly, there is no magic solution. This war will be won battle by battle. But three immediate ways to improve efficiency by reducing our paper addiction are available.
The first is trading electronically. In the personal lines market this is old hat. Personal motor and household risks have been successfully traded this way for years.
In the commercial lines market, it is just beginning to enter the mainstream. Using a system such as imarket, a broker can obtain quotes and place new business for SME risks from his or her system virtually immediately. The broker completes the data capture, identifies the insurers from whom a quote is required, sends off the request over imarket and receives the quotes.
The major broking systems contain facilities to file quotes with a few clicks of the mouse. When a particular quotation is accepted, the insurer can be placed on risk with a few more mouse clicks. No paper is involved, filing is carried out on the system, a full audit trail is provided and the system is in use daily by hundreds of brokers.
“Young recruits donâ€™t understand the industryâ€™s obsession with dead trees and resent unnecessary, convoluted and boring tasks such as filing and retrieval.
As a bonus, the broker can then forward the electronic documents to the client, saving on time and postage.
As managing director of an SME, I would much rather have electronic documents than reams of paper. It is cheaper and faster for the client, the broker and the insurer.
A second area where efficiency can be greatly enhanced is electronic accounts reconciliation. A number of companies offer some form of service. For example, AXA has its own system for brokers, while Allianz and Norwich Union provide a similar service hosted by CGI, a large software house. These systems all allow brokers to access facilities that assist the reconciliation process and again are cheaper and faster than paper.
The third way brokers can remove paper is by issuing cover notes electronically. For
full-cycle electronic data interchange business, the brokers’ system provides cover notes as part of the transaction. For other types of motor business, brokers must store cover note books.
Insurers also audit their use from time to time. This is another distraction from selling business and servicing clients. The idea behind electronic cover notes is that they are issued over imarket on request by the broker. The broker receives a professional cover note within seconds in a pdf file.The software to handle this is commonly used and free.
Sadly, efficiency ends there since the client must, as legislation currently stands, receive a printed version. By removing paper storage and reducing the insurer audit overhead, the new process is again cheaper and faster than the old.
There may be no magic bullets. However, there are some very simple, cheap and easy ways to improve efficiency very quickly.
Martin McLachlan is managing director of Polaris.