Insurance distributors push for electronic data standards

Paper is bad.

That was the simple message insurance product distributors sent to carriers
at today’s annual CLIEDIS general meeting. The association is dedicated
to the development of a viable electronic data exchange between insurance
carriers and distributors.

“Our management system has been able to give you all this data for years.
You just won’t take it,” said John Hamilton, president of Financial Horizons,
a Kitchener, Ont.-based MGA. “You have a web site that we can manually
enter data on. You might as well give us a piece of paper.”

He noted his firm and those of his competitors are able to exchange files
with their other business partners, “but not with our most important partner,
the carriers.”

While Hamilton said the cost of entering data manually is high (he estimates
he has 2.5 people on his payroll who do nothing but input commission data),
he stresses distributors wouldn’t just bank the savings.

“If we could free them up and put them into sales support and new agent
training, we could be brining you a lot more business,” he said.”

While there are more than one hundred MGAs currently operating in Canada,
Hamilton said consolidation is inevitable and added the 17 firms represented
by CLIEDIS at today’s meeting accounted for the bulk of the business carriers

“How difficult is it for you to get into a room and realize 90% of your
business is coming from 17 companies and do something about it?” he asked. “You
need to start listening to us because we’re your future.” He added insurance
distributors are only looking for a system similar to that already enjoyed
by their counterparts on the mutual fund business.

NewLink Group senior VP and director Byren Innes backed up Hamilton’s
comments with statistics from a survey he conducted among distributors,
carriers, suppliers and vendors.

He found 74% of brokers and AGAs prefer distributors that can accept
an electronic data exchange, and 71% prefer those that can feed such data
out. Meanwhile, 71% of distributors showed preference for insurance companies
with which they can exchange data electronically.

In terms of priorities going forward, respondents said they’re most interested
in electronic applications, imaging, and adoption of standardized codes. “There’s
a strong increase in people paying attention to E-app,” said Innes. “There’s
interest on both the distributor and carrier side.”

Distributors are particularly interested in imaging, he notes, because
it’s a cost saver. And standardized codes for insurance products are a
key hurdle, because everyone currently has different names for nearly
identical products. The first hurdle, Innes said, is to reach a point
where a specific code equals a certain insurance product, such as Term-10.

When the information is segmented by respondent, Innes notes distributors
rate code standardization higher than other respondents. That shows they
see a business need.

For example, Innes said, code simplification would speed mergers and
acquisitions activity by providing a common point of comparison for those
examining the books. Further, it would help with communications, analysis
of what policies are in force, and enhance data mining within a book of

“When we start sending data back to insurance companies, they might embrace
standardized codes more,” commented Jamie McGeachin, vice-president, operations
at HUB Financial.

Paul Brown, president of Worldsource Insurance Network, noted some U.S.
distributors simply won’t do business with insurance companies that don’t
cooperate with their requirements. “So, distributors need to turn the
tables and tell the companies they’ll vote with their feet,” he said. “We’re
not going to take it anymore and you’re not going to get the business.”

Dennis Craig, vice-president RBC Insurance, said his and other carriers
are mindful of the comments and, while there are a lot of demands on carrier
resources, the squeaky wheels will get the grease. He urged distributors
to perfect their so-called elevator pitches and deliver their needs messages
consistently. “Senior leaders have to say, ‘This is what we need and this
is why we need it,’ ” Craig said.

Margaret Lyne, vice-president and head of operations at Dundee Insurance
Agency, pointed out advisors frequently drive which carriers a distributor
does business with. So, if distributors simply told advisors it costs
more to do business with carrier X, and less to do business carrier Y
(and that the grid would be adjusted to reflect those cost differences),
there would be a dramatic shift in who gets the business. Innes pointed
out this practice is already used on the IIROC of the business.

Among those Innes surveyed, 80% said they’d be willing to attend a meeting
relating to guidelines development. Further, 63% said they’d either completed
or were working on implementation of the CLIEDIS-sponsored CITS data standardization
initiative; and 57% said they were doing CITS training.

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