Managing general agents trying to make their operations more efficient face two big obstacles to progress--Lloyd's of London and U.S.-based technology vendors, MGA executives say.

Members of the automation committee of the American Association of Managing General Agents shared their views on the two automation barriers in September during the annual convention of the National Association of Professional Surplus Lines Offices, Ltd.

NAPSLO sits on the AAMGA Automation Committee, as do representatives of insurance companies and retail agencies, noted Euclid Black, AAMGA's current president, as well as president of Black/White Associates in Louisville, Ky.

The AAMGA's Automation Committee also felt the need to set up a subcommittee to reach out to the second-biggest writer of U.S. excess and surplus lines business--Lloyd's, the members said.

"We read all the time in National Underwriter that London is going to automate. London isn't doing anything with their automation that relates back to what we need or do," according to Robert Schacher, president of Continental Special Risks in Roswell, Ga., and AAMGA board liaison to the association's Automation Committee.

"Three years ago, [Lloyd's] came out with an ACORD-type standard that said, 'Here's the data we're going to need,' [but] none of our vendors can provide it," Mr. Schacher said.

In addition, he said that while Lloyd's officials have said the market will have one format, MGAs end up having to provide information in many formats because each individual Lloyd's syndicate and each individual Lloyd's broker has added more information requirements.

"Our systems can't generate it," Mr. Schacher said. "I've got people who spend five or six days each month putting together data for Lloyd's," he added, suggesting that if Lloyd's would sponsor one vendor, then there would increase efficiency on both sides of the transaction.

Among the sessions planned at the upcoming AAMGA Automation & Technology Management Conference--an event that is open to NAPSLO and AAMGA members--is one titled "London Exposure Management." During the session, Paul Nunn, head of the exposure management team at Lloyd's, will provide an update on Lloyd's processes for information and data transmitted to the market.

Mr. Nunn will begin with an explanation on prior data gathering systems, going on to describe what changes have evolved and future Lloyd's data standards, according to the AAMGA conference brochure.

"A major topic of interest to attendees is an insight into what is done with data that an MGA sends to Lloyd's," the AAMGA conference brochure notes.

During last year's interview, Mr. Schacher noted that the U.S. market accounts for nearly half of Lloyd's business. "They've got to recognize our needs and come and address them, as well as their own internal automation" issues, he said. (Editor's Note: According to financial reports posted on the Lloyd's Web site, North American business was 44 percent of the total Lloyd's pie in 2007.)

Bernie Heinze, AAMGA's executive director, noted that U.S. AAMGA members under binding authority write about $2.4 billion of Lloyd's direct written premium, pointing to the figure as an indication of the leverage that MGAs have with Lloyd's executives.

According to a report on the surplus lines market published by A.M. Best and released at the NAPSLO meeting, Lloyd's was the second-biggest writer of E&S business in the United States in 2007, based on direct nonadmitted premiums of $6.4 billion. (American International Group had the lead spot with $8.3 billion in direct E&S premiums for 2007, according to Best.)

Both Mr. Schacher and Mr. Heinze reported that one large syndicate--Travelers' Syndicate--is already carrying the ball forward and working day-to-day with others in London to address the MGAs concerns.

They understand that "we have to move toward simplification," Mr. Schacher said.

Mr. Heinze said, going forward, it is also necessary for AAMGA to work toward automation solutions adapted to the needs of U.S. retailers. "The goal is to find a standard that encompasses everyone's needs and becomes as least costly as possible," he said.

On that score, Mr. Schacher recognized the efforts of Greg Ricker, chief information officer at Strickland Insurance Group in Goldsboro, N.C., and Mike Roy, CIO of CRC/Southern Cross in Birmingham, Ala., who are co-chairs of the AAMGA Automation Committee, noting that they have formed a joint subcommittee--or focus group--with the Agents Council for Technology.

The joint ACT/AAMGA E&S Working Group seeks to tackle the issue of electronic exchange of information between retailers and surplus lines producers directly, by getting representatives of all parties concerned in the same room--including the vendors, Mr. Ricker said. He views vendor participation as a big leap forward.

For years, there have been "a lot of efforts taking place both at the carrier level, the [general agent] level, the retailer level and at the vendor level, but there really wasn't a whole lot of coordination between all those groups. Part of the disconnect was that the vendor plays a much larger role in bringing all these people together than anyone realized," Mr. Ricker said.

"The vendors will say they have ways for the retailer and the GA to interact, but if you go ask the GA or the retailer, they say that solutions either don't meet their needs or don't work," he said. "So we really brought some of the vendor community in because we thought they needed to hear firsthand from all these people."

"Interestingly enough, we found out from the vendor community that they weren't soliciting a lot of involvement from the retailers," Mr. Ricker reported.

The AAMGA executives also suggested that mergers among vendors specializing in retail agency management systems with those that traditionally focused on the needs of MGAs aren't helping to bridge the gaps, and in fact may be aggravating the situation.

"They don't speak to their own people" to figure out how to integrate platforms so that what one division provides to retailer clients will work for the other's wholesaler clients, Mr. Schacher said.

Mr. Ricker gave a specific example involving the acquisition of a provider of software services aimed at retail agent productivity with a developer of solutions designed for wholesalers and MGAs.

He said users can't take information from the MGA agency management system into the rating system and into the document management system--all now products of a single vendor organization.

"You can't do it. You have to build your own custom pieces," Mr. Ricker said.

"Now it's becoming much more apparent when they're all sitting around the same table and we say, 'Why don't you talk to him?' Before they were enemies and they could shoot arrows at each other and blame the other guy. Now they can't," he said.

"There's a revenue model issue at play here," Mr. Ricker continued, noting that vendors are hesitant to make a significant investment if they don't foresee a return on that investment.

"Industrywide, that problem has to be addressed," he said. "The focus has always been on the carrier side because that's where the money is," according to Mr. Ricker, who works for an organization that includes an insurance company and a general agency.

Mr. Black noted that vendor organizations have grown to a point through mergers and acquisitions where "they can't get any more market share" by improving products to suit the needs of all their customers. "Unless somebody comes along and knocks them off their perches, they're not going to make changes. They're not going to invest in new software," he said.

Returning to the overall goals of the Automation Committee, Mr. Ricker said a key goal of the electronic data exchange focus group has been to vet the underlying issue of standards.

"ACORD has this published data standard for exchanging information, but everybody backs away from it, and we're trying to understand why," he said.

Specialty carriers remain a stumbling block, he suggested--noting he is aware of one insurer that has 1,000 applications for their E&S business, even though 85 percent of the information is common to all of them.

"We're making this problem worse" than it needs to be, he said, also noting that a major MGA systems vendor has no ACORD automated import into its system.

"When I was on the Automation Committee 20 years ago, we talked about standards. That was our first project," Mr. Black said.

Special Reports /

London Needs To Wake Up To U.S. MGA Tech Issues, Group Says

Related Stories

Recommended For You