CSC has a lot of systems for brokers. What's the strategy?

CSC has a lot of systems for brokers. What's the strategy?
Through our acquisitions made in the past five years we've acquired many good products, and a large broker user base. The key to us retaining this user base is to ensure that the broker's investment in their systems gives them the payback they expect over the economic lifetime they expected. In a nutshell, our strategy has been to retain these users, and to cut maintenance costs across all of our systems by sharing as much core technology as possible – mainly quotation engines and EDI componentry. By doing this we expect to be able to economically run our products in parallel, and over time migrate users to newer systems, when the time is right for them.

These newer systems are being made available in component form wherever possible, allowing them to be interfaced with older systems, so allowing brokers access to modern sub-systems without them having to replace existing administration systems. For example in the Icons internet quotation component, we are offering brokers the ability to add internet trading capability to existing systems. Incremental modernisation and evolution is the guiding principle.

But what are the implications of supporting so many products? Isn't there a danger that your R&D spend will be stretched because you are running too many systems?
Wherever possible we try and write our new software in modular form in such a way that it can be interfaced with more than one system if appropriate. There are several examples of this, such as CLEO, which as a commercial lines point-of-sale module, interfaces with all bar one of our administration systems. Where new functionality is required in the heart of systems, and it is not possible to bolt on a new module, we can end up duplicating work over more than one system. However, with such a large installed base, we spread the cost over a number of users.

What is CSC's stance on acquisitions now? Have you reached a limit?
We've grown the CSC Retail Insurance Division using acquisitions in the past five years or so. Throughout that period our focus was predominantly on gaining market share. We now have more broker systems installed in the UK than any other software house, so we're pretty happy that we've reached the levels of market share that we wanted. That doesn't mean we aren't interested in acquiring further, but it does mean we will be more interested in acquiring for product and technology reasons, rather than for pure user base.

Given the hype surrounding the internet and the way that many insurers seem to be looking for select panels of brokers, are you still confident that your strategy of growth by acquisition is the right way to go?

The internet gives consumers yet more choice on insurance products, but as yet little advice on what may be best for them. It is a great tool for communication and data gathering, but interpreting that data can be difficult and consumers will still value independent advice and guidance. For that reason we still believe that brokers will have a role in the re-defined insurance marketplace, and that the principle challenge for brokers is how can they satisfy their customers demands for internet trading and communication.

The hype about the internet is everywhere at the moment, and almost every business has it both as a threat and an opportunity in some form or other. Insurance will be sold in quantity on the internet, and that will be at the expense of some vendors, and to the benefit of others. CSC has a responsibility to its customers to articulate their vision for what the internet means to them into a reality, and through a variety of projects, that is what we're doing now.

In terms of insurer's preference for dealing with select panels of brokers, that is nothing new to the market. Insurer's will look to their best agents for more and better business, and a closer relationship with fewer insurers can pay dividends. The broker has his own customer's interests to balance against this, and his ability to offer range and choice to them needs balancing with that of the insurer's. CSC's role is to allow the broker to offer choices to his end customer without the burden of increased cost of working, and administration. The customer asks the broker for advice and competitively priced insurance. CSC provides systems that allow the broker to manage the 'many to many' relationship needed to offer a range of choice to many diverse clients.

In our interview with Steve Verrall (chief executive, Policy Master) last month, he was predicting e-commerce could bring about the demise of thousands high-street brokers. Agree?
Yes, I read Steve Verrall's interview – his non-broker business must be doing very well!

I do subscribe to the continuing fall in broker numbers, indeed I think the recent acceleration in mergers and take-overs will continue for the next three years at least. I would think, however, that we will be left with 3,000 brokers at the end of three years. These surviving super-brokers will be larger, specialised, and the most numerous will be regional commercial lines brokers. I also think they will be as comfortable doing business on the web as they are in telephone or face to face business. They will use the web so customers can 'self-service' their business, and concentrate on marketing and researching solutions for clients.

So CSC has made huge acquisitions within rapidly shrinking/changing market. Strategically, is that not a hindrance?
While the numbers of brokers has reduced over the years, the amount of business written by brokers in the market has remained remarkably stable. The amount of insurance written and administered through CSC systems by brokers will be to a large extent unaffected by falls in broker numbers. Brokers will be larger and CSC is well-placed to serve these brokers' needs for new multi-channel technology.

The practicalities of new and revised products being sent straight to brokers are considerable. The business' dynamic nature where insurers are continually changing data requirements ripples through brokers point of sale, EDI and administration systems each month. Keeping brokers systems in synchronisation with the new insurance products is a difficult production task needed to be done. Software houses will need to perform this, long after Polaris technology becomes the norm in our market place.