The life and health insurance industry is going digital and looking to a familiar technology player in the mutual fund industry to achieve that end.

The Canadian Life Insurance (EDI) Standards Association, or CLIEDIS, is negotiating with Toronto-based FundSERV Inc. to extend the association’s processing and transmission service for life and health insurance contracts.

“As transmission of data goes, there’s already a viable option worth investigating,” says Scott Sinclair, co-chair of CLIEDIS and chief operating officer of Transamerica Life Canada, a subsidiary of AEGON NV of the Netherlands.

The hope is that turning to FundSERV could save the life and health insurance industry considerable time and money in converting to digital transactions.

This past January, CLIEDIS announced that insurance manufacturers, distributors and advisors had made a commitment toward the goal of transforming the current 36-day application process into one that will take no more than a couple of days.

Jamie McGeachin, co-chairman at CLIEDIS and also vice president, operations at Hub Financial Inc. of Toronto, notes that FundSERV, which has provided the process technology for manufacturers, carriers and distributors to the mutual fund industry for 20 years, already offers a similar service to some insurance manufacturers and distributors for segregated funds.

Sinclair admits that the choice to consider FundSERV looks like an obvious one, and indeed, the announcement is somewhat of an about face. As recently as a month ago, CLIEDIS had the financial backing of the industry to explore its own options for a digital network.

But Sinclair says that the industry has moved forward quickly.

“We started speaking in a common language and about assumptions that we didn’t have nine months ago,” he says.

“This makes total sense,” says Byren Innes, principal and senior vice president of NewLink Group Inc. , a Toronto-based consultant to the insurance industry. “FundSERV has the network in place, is a provider trusted by both carriers and distributors, can provide the governance and security, and operates on a cost-recovery model. Not considering [FundSERV] would be an error.”

CLIEDIS is still in discussions with FundSERV over financing, the timeline and other details. The proposal to partner will still need the backing of the sector overall, but, Sinclair says, in principle, the steering group has expressed agreement. A final decision is expected at the end of September.

The vision is to create an entirely digital application and underwriting process for CLIEDIS members. What’s still missing is a technology that can collect client details, plan data and underwriting details at the point of sale.

Advisors and some managing general agencies have been complaining about the amount of paperwork and administrative duties that are duplicated in the policy approval and underwriting processes. And the application process for seg funds, for the most part, is still done manually, whereas mutual fund sales are processed electronically.

Brian Gore, president and CEO of FundSERV, says the plan would involve migrating the lion’s share of the seg fund business in life and health contracts into a digital pipeline. “I really do hope,” he says, “that we can get the commitment from the [sector] and get their support.”

It’s too early to guess when the sector’s digital processing system will be complete, Gore adds. But, based on previous experience, it’s possible that within a year, the sector will have a model to consider: “Then, it could take two to five years to get significant adoption across the [sector].”

FundSERV is in the process of rolling out another network, called GICSERV, for banks and other distributors of guaranteed investment certificates.

FundSERV runs at an annual cost of about $20 million, says Gore, who estimates that once the life insurance and GIC lines of business are implemented, that number will rise to between $23 million and $25 million.

“The fund companies will benefit because they won’t be supporting all of the infrastructure themselves,” says Gore. “And the GIC and insurance [sectors] will get a world-class infrastructure at the fraction of the cost of doing it themselves.” IE