The revolution underway in IT provision for the insurance market overturns everything that went before. Lower running costs and free software are sweeping aside the previous rip-off culture. Brokers have had enough. They are fed up of investing large sums up-front, only to be disappointed by poor delivery. The same goes for insurers. Despite Polaris, they still have to queue to go on some systems and often have to pay for the privilege.
Talk to most brokers about IT and you are sure to receive a mixed reception. Not hostile exactly, but close. Delays, costs and unfulfilled promises have driven many brokers to frustration over software provision. “The latest buzzword is ‘solutions', but my software provider rarely solves anything,” one intermediary told me recently. “Surely the idea is that IT should make our lives easier and save us money, rather than the opposite?” asked another.
The state of play in what can now be described as “traditional” IT provision for the insurance industry has grown out of the past. Intermediaries have been dependent on software houses for data to provide comparative quotations for some years. These “third-party” suppliers have historically manipulated the intermediary through locking them into agreements that restrict their control over product, rates and distribution.
In addition, intermediaries have also experienced significant cost disadvantages, including expensive equipment and upgrades, EDI charges and acquisition and operational costs. To make matters worse, technological progress has now advanced so far as to make traditional systems slow, expensive and prone to error by modern standards.
The primary business approach of the original IT providers was to treat the insurance industry as a gravy train, ripe to provide guaranteed income streams for years to come. The traditional software houses are finding it hard to shake off that image and come to terms with the changing world of cost-effective technology for all. It is no longer obligatory to be locked into one system. Neither is it necessary to automatically expect to pay for the basic software.
Need for innovation
The internet revolution has prompted more companies to develop better IT solutions for the insurance industry. Unfortunately, some have repeated the mistakes of the past, without fully utilising internet technologies. What is urgently needed is a new and innovative approach to insurance IT systems, with the prime aim of helping the insurance industry to work smarter.
Brokers are at the sharp end and they need e-commerce systems that enable them to use the internet to their advantage. Not necessarily to sell to clients on the web, but simply to use the medium to work more efficiently.
Connection to a good back-office system should also provide seamless communication with a suitable portal that delivers comparative quotations for motor and household business in real time. That means no more waiting for updated rates to be loaded. No more negotiation to put on a new scheme while the software houses decide whether they have the resources to do so. This opportunity is available now – there is no need to wait until tomorrow.
These solutions are suitable for intermediaries of all sizes and include full-cycle EDI processing, and point-of-sale documentation, together with a host of administration back-office functions, including financial accounting, document and diary management, delegated schemes, claims handling and management reporting.
The money that brokers spend on these tasks can be dramatically reduced, allowing staff to be re-allocated to more productive duties, while simultaneously transferring resources to brokers' service strengths.
This is likely to be the only way the broker market will meet the challenges it faces from the innumerable distribution channels that now exist. Unless intermediaries can make savings in their operational costs, the only other place such cutbacks can come from is out of commission, and remuneration levels have already fallen far enough.
While considerably cheaper to run, new technology also provides faster access to quotations. The speedier access to participating insurers improves customer service at a time when competitors may be struggling in this area via traditional connections. Re-keying is eliminated and brokers at last have the freedom of not being locked in or dependent on a third party who may have their own agenda.
Unlike the traditional software house approach, the aim is to put intermediaries back in control. The delivery of accurate comparative quotations in real time and the elimination of third-party intervention speeds up the entire process with significant cost benefits.
It's clear that intermediaries do have a prosperous future as the understanding of new technologies, and the ways they can be applied, continues to grow. The arrival of next-generation application service providers (ASP) and desktop solutions will enable intermediaries to compete more effectively by keeping operational costs low. The internet will continue to evolve to become the new vehicle for conducting insurance business, rendering the traditional software houses obsolete.
Not unexpectedly, the traditional view is to disagree. A spokesman recently predicted the new providers arriving without any baggage would nevertheless eventually find themselves in exactly the same position as their longer established competitors. The argument goes something like this: “If it has taken us this length of time to get to where we are now, you're going to suffer in exactly the same way.”
In truth, that's not going to happen. Times change and things move on. The originators took too much time in getting technology of the 1990s into the 21st century. Just look at how long it took to implement software house full-cycle EDI, when one user, the AA, had it years ago.
The traditional insurance IT industry has acquired a burdensome legacy trail, acting as an anchor, slowing down forward progress. Meanwhile, technology never stands still. It is impossible to believe that the insurance industry will not grasp the opportunities that now present themselves.
The new innovators will succeed because their systems pay their way without draining yet more resources from the broker market. If direct writers have spent millions on wasted advertising over the years, then the broker market has spent similar amounts trying to reach cost-effective electronic communication. That long-sought goal is now very close – the opportunity is available now, not tomorrow.