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Issue October 12, 2009 |
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WASHINGTON—After years of discussion and numerous failed attempts, backers say a new online tool being introduced today promises to make the insurance procurement process a lot more efficient and a lot less repetitive for brokers and insurers.
The Council of Insurance Agents & Brokers and global technology and information provider LexisNexis will unveil plans to launch a Web-based insurance exchange, an online marketplace open to all industry participants to transact business.
The goal of the exchange, which is owned by LexisNexis and supported by the CIAB, is to improve the efficiency and transparency of the broker-based insurance distribution system while enabling insurers to continue to differentiate their products.
Via the exchange, for which a formal name has not yet been chosen, intermediaries will be able to submit a proposal for coverage to any of the participating insurers or wholesalers and collaborate with them on the underwriting, pricing and ultimate insurance placement.
Currently, agents and brokers can interface with each insurance partner's proprietary computer system, and manually review and enter policy information into the respective systems—a repetitive process that generates a high percentage of errors, observers say.
In addition to increasing efficiency, the exchange also will aggregate data flowing through it to track marketplace trends including insurance pricing, individual insurer appetites, and new coverage introductions, in real time.
Such information will help guide agents and brokers in their risk-placement process, ensuring that buyers receive the best coverage available, exchange advocates say.
While the core of the exchange is for industry participants including agents, brokers, wholesalers, managing general agents, insurers, associations and vendors, “I could see, down the road, a potential for portals that allow risk managers some interaction with it,” said Ken Crerar, president of the Washington-based CIAB.
While efforts to build such technology solutions have failed in the past for a variety of reasons, Mr. Crerar said he believes the right financial strategic partners and technology finally have come together.
“It's never been an issue of if this was going to happen; it was just an issue of when,” Mr. Crerar said.
LexisNexis brings an “enormous reputable brand” to the exchange. It understands data and how to provide data to people who need it, and it understands technology and how to manage the data on that technology. “Those are the two primary pieces of any exchange,” he said.
For CIAB to be involved, the exchange had to be an “all-industry” exchange, Mr. Crerar said. It's not just for CIAB members, he said. “This is Switzerland. Everyone can play on it.”
“The enthusiasm of the broker community and the clear opportunity to improve their day-to-day processes made this a compelling business case for us,” James M. Peck, chief executive officer of LexisNexis Risk Solutions, said in a statement. “Our technology behind the insurance exchange is a great fit for helping this industry overcome some of its current challenges.”
Pilot programs for middle-market general liability business are slated to begin in the third quarter of 2010, with full operability scheduled for early 2011. The insurance exchange will focus initially on middle-market commercial lines, with the eventual goal of supporting all sizes and lines of property/casualty insurance as well as group benefits.
“This has been everyone's dream forever and for good reason,” said H. Wade Reece, chairman and CEO of Raleigh, N.C.-based broker BB&T Insurance Services Inc. “In looking at marketing anything on behalf of a client, it's just such a redundant system to have to go to each individual carrier,” he said. “It's long been a dream...to have a process to make that much more efficient.”
Mr. Reece said BB&T plans to participate in the pilot program.
“The battle cry of risk managers for the last 15 to 20 years has a lot to do with quality,” CIAB's Mr. Crerar said. “Part of the quality issues has been driven by basic administrative issues around the input of data.”
CIAB estimates that between 60% and 70% of the policies that brokers receive from insurers to review contain errors.
“A lot of that will end up being less of an issue because there will be single entry,” Mr. Crerar said. “So the quality of what we do on the administrative side will improve substantially enough to allow brokers to really focus on what they are doing.”
But more than making the distribution process more efficient, the exchange also will be able to provide real-time market information, Mr. Crerar said.
For example, “right now there is no real-time data on rates,” he said. All rate studies, including CIAB's quarterly market index, are retrospective. With the exchange, the industry will be able to “look at where rates are in a particular line of business and particular region essentially in real time,” he said.
To protect the data flowing through the exchange, the CIAB will establish The Insurance Exchange Trust that will be run and managed by insurance brokers and work with LexisNexis, Mr. Crerar said. The trust will act as the custodial agent for all data flowing in and out of the exchange, ensuring the exchange operates according to its founding principles of fairness, neutrality an-d data protection, Mr. Crerar said.
In regard to the new exchange, BB&T's Mr. Reece, for one, said he is “very hopeful that we've found the right answer and the right solution to bring better efficiency and certainly a much smoother process to both the insurance carriers and brokers.”
For reprints of this story, please contact Lauren Melesio at 212-210-0707 or email lmelesio@crain.com
