Despite false starts and considerable fragmentation of effort in the past, the insurance sector is making headway in improving the electronic data exchange between key carriers and distributors.
Toronto-based Canadian Life Insurance Standards Association (CLIEDIS) is pushing forward with its efforts to bring the insurance sector into the 21st century with its eData initiative, formalized in January 2012. The primary objective is to standardize the way that information is exchanged electronically by insurance sector members. Meanwhile, some individual firms have been developing their own electronic data and application platforms.
These developments should come as good news for the insurance advisors surveyed for Investment Executive‘s 2012 Insurance Advisors’ Report Card, many of whom voiced their interest in having access to better electronic processing or even, perhaps, to a universal electronic application (an “app”).
The ultimate benefit for insurance advisors from all this eData discussion, says Tim Fitzpatrick, president of Calgary-based VirtGroup Inc., is that insurance distributors will be able to offer improved, one-stop reporting, allowing advisors to provide clients with information about all of their contracts with various carriers. VirtGroup produces VirtGate, a distribution-management system that automates the workflow of insurance agencies.
However, Fitzpatrick says, developing a universal app without better standards for data-sharing would be “like building the front door of a house before you build the foundation.”
At the moment, there are only broad sector guidelines for the electronic exchange of information, so a more formal procedural facelift is needed if the sector is going to be successful in modernizing its practices.
“We recognize, collectively, that we are behind in terms of automation,” says Andy White, co-chairman of CLIEDIS’s eData committee. “The insurance industry moves pretty slowly, but this is a pretty good start.”
Historically, the insurance sector’s biggest challenge has been to bring all of the key players onto the same page. In fact, Jim Virtue, president and CEO of Calgary-based PPI Solutions Inc., says the insurance sector has not been very good at working together in the past.
“I think it would be better if we had standards,” Virtue says. “[But] maybe the only way it is going to get done is for individual companies to do it for themselves.”
To date, many insurance firms have taken that approach. For example, London, Ont.-based Freedom 55 Financial is currently in the midst of a large automation project. Mike Cunneen, senior vice president of the firm’s wealth and estate planning group, says Freedom 55 now completes about 75% of its insurance applications electronically. And over the next six to 12 months, the firm will continue to roll out further automated processes, he adds: “You have to be improving your productivity always or you’re just going to be left behind.”
Another firm riding the digital wave is Waterloo, Ont.-based Sun Life Financial (Canada) Inc. Vicken Kazazian, senior vice president of Sun Life’s career sales force, says he believes that Sun Life has developed a “best in class” technology package in which “a good chunk of your business doesn’t even touch a human being.”
Once an advisor completes a policy application in Sun Life’s system, and it has been verified, the results are immediately assessed electronically. If all the information provided in the application is accepted, the application is never touched by an underwriter. This allows the firm to produce policies in as little as 24 to 48 hours because there is less back-and-forth discussion, which normally slows down the process.
“We are a leader in electronic processing,” says Kazazian. “I know our advisors love it. They don’t even know what paper [applications] look like anymore.”
A Sun Life advisor in Ontario agrees: “It took them a while, but they’ve entered the 21st century.”
Byren Innes, senior vice president and director with NewLink Group Inc., a consultancy firm in the life insurance sector, says that although the eData project is much needed, the three years it has taken to get to this point may be a reason why some firms may have felt forced to move on. “People said, ‘We are not waiting [anymore]’,” says Innes. “When [companies] do stuff, they do it proprietary. Transamerica does things that are right for Transamerica. Manulife does what’s right for Manulife.”
Over the past three years, CLIEDIS and its members have considered different ideas, including the development of a universal app, among others, to help modernize how information is exchanged within the insurance sector. CLIEDIS had negotiated, albeit briefly, with Toronto-based FundSERV Inc. to extend FundSERV’s processing and transmission service for life and health insurance contracts, although that process did not result in an agreement.
The problem for many managing general agencies (MGAs), however, is that electronic applications are controlled by the insurance carriers. As such, it is up to those same carriers to deliver the platform to MGAs so that the MGAs can pass the electronic applications along to their advisors.
“If it was our choice, we would have done it by now,” says Ron Madzia, president of Mississauga, Ont.-based IDC Worldsource Insurance Network Inc. “[The Canadian Association of Life Independent Brokerage Agencies] meets once a year to go over the things we want to discuss, and that is always top of the list every year.”
Although there have been concerns among players in the insurance sector in the past related to the sharing of electronic data, Fitzpatrick says, many firms now have shifted their mindset and are adopting a much more open-minded approach – they want to do what’s best for the sector as a whole.
“Some companies have the culture in which they say, ‘What’s going to be the benefit to us?’ And [with that attitude], it doesn’t get done,” Fitzpatrick says. “Other companies have the culture in which they say, ‘It’s hard to quantify [the benefits] and to put a dollar amount on it today, but it is one of those things you have to do’.”
That said, some advisors surveyed for this year’s Report Card say that their firms could be doing more in providing electronic applications or access to data online.
“We still have no online applications,” says an advisor in Ontario with Mississauga-based RBC Life Insurance Co. “We are far behind because everything is paper-based.”
Adds a colleague in Alberta: “RBC Life isn’t as innovative as others that have electronic applications.”
Although RBC Life continues to struggle with getting up to speed on paperless insurance policy processing, other firms already are seeing a strong return on their investment in this technology.
Innes says he believes the insurance sector has come to an important realization: that data is critical – advisors need data to be able to run their businesses:
“Once people get their heads around how they can transmit data,” Innes says, “we will see more electronic commerce going on between various parties in the life insurance world; it will be e-everything.”
Nevertheless, advisors should remain patient: the CLIEDIS eData plan is expected to take at least five years before it becomes fully developed. However, White asserts, “demonstrable improvements” will be evident within the first year of the plan – particularly for new business practices.
CLIEDIS’s eData strategy will be discussed at its next annual meeting on Sept. 13.
© 2012 Investment Executive. All rights reserved.