While placing commercial insurance electronically has the potential to benefit the buyer and the seller, it has yet to gain widespread acceptance and even faces some resistance.
Electronic placement of commercial insurance currently is most prevalent in market segments where the business is more commoditized and margins are tight.
“There is a lot of promise in the concept of electronic placement,” said Patrick Donnelly, Chicago-based chief broking officer of Aon Risk Solutions. “There are certain segments of the business that need us to use technology to drive greater efficiency. For example, in the affinity and small-commercial segments, there is already broader adoption.”
Conversely, adoption of electronic placement platforms has been slower in mid-market and large commercial accounts due in part to a lack of a common structure for exposure information and insurance company products, said Kabir Syed, Greenwich, Connecticut-based CEO of business intelligence and analytics firm RiskMatch L.L.C.
For example, cyber risk policy terms, conditions and even terminology may vary widely among brokers and insurers, making apples-to-apples comparisons difficult, he said. “How does Carrier A compare with others in terms of product, conditions, pricing, ratings and experience? You have to design form information very carefully because if you make one mistake, it can be rejected by an underwriting algorithm.”
The bespoke nature of many commercial products works against widespread adoption of electronic placement platforms, Mr. Donnelly said. “There's a lot of need and demand for electronic placement technologies, but we still struggle with the basics such as standards,” he said. “It remains a gating factor to wider adoption.”
Buyers also have yet to embrace the idea, although electronic placement is more common among smaller buyers than larger buyers, according to research by Deloitte Development L.L.C.
Jonathan Prinn, Essex, England-based chief operating officer of global placement at Willis Group Holdings P.L.C., said another factor that limited past attempts at electronic commercial insurance placement was convincing brokers and insurers to alter longstanding processes that work well for ill-defined benefits.
“E-trading is inevitable if you think about it from a transactional perspective,” he said. “Some of these systems in the past have failed because they asked brokers to effectively become data input clerks in order to send information electronically to underwriters.”
Another expected benefit from electronic placement is more data for analytics, Mr. Prinn said. “As more and more data is captured and more analytics are applied, we could have a very fundamental shift in the marketplace.”
Stephan Upshaw, Chicago-based vice president of risk management at apartment complex owner Equity Residential, said the prospect of using analytics based on placement data to weigh the suitability of products and insurers is intriguing. “Generally, my insurance buying philosophy is based on long-term relationships,” Mr. Upshaw said. “However, it sometimes does strike me as curious how a carrier was selected, so anything that increases transparency in the insurance transaction is good thing.”
Max Pell, London-based managing director of U.K. insurance at business processing and technology provider Xchanging P.L.C., said the firm spent time trying to un-derstand why previous electronic placement initiatives faltered as it worked on its new placement platform, unveiled in June.
“We're still not guaranteed to achieve broker and carrier buy-in,” Mr. Pell said. “That said, we believe that having spent a lot of time addressing all the reasons that these platforms have not worked before should afford a level of comfort to those players willing to take the initiative at this time.”
Anthony Siggers, London-based group knowledge director at Willis, said new placement platforms face a challenge getting enough brokers and insurers on board to make the change worthwhile for early-adopter buyers.
“The challenges in the past with e-placement have been getting traction and critical mass,” he said.
Yet Mr. Syed said he expects electronic placement to gain steam over time due to potential cost benefits for buyers and exposing brokers to more insurers.
“Right now, the commercial insurance market is largely based on who you know,” Mr. Syed said. “A broker may go with one of five carriers he knows well, but what if 35 carriers are writing that business?”