Have we reached a turning point in carrier/agent technology? DebSmallwood, founder of Strategy Meets Action (SMA) believescommercial lines is the new frontier for connectivity.

“For the past several years the focus—especially for the largecarriers—was to automate personal lines,” she says. “It wasstraight-through processing and adding predictive analytics in thepricing. Progressive really raised the bar and the industry had tofollow suit. Those that weren't using predictive analytics with ascorecard were not pricing policies correctly.”

Large carriers began to split uptheir commercial markets, explains Smallwood. They took the conceptof the technology from personal lines and tried to become marketleaders for commercial lines.

While there are several market leaders for personal lines—StateFarm, Allstate, Progressive, Geico among others—there is no singleinsurance carrier who can match that sort of dominance on thecommercial lines, points out Smallwood.

“If [commercial lines carriers] could get automation they feltthey could go after market share,” said Smallwood. “Some were ableto leverage a lot of the platforms they had developed for personallines.”

Jeff Yates can point to many examples of personal lines insurersusing real time and agency download, but far fewer are takingadvantage of the technology in commercial lines. Yates, executivedirector of the Agents Council on Technology, believes commerciallines carriers are moving in that direction, thanks in part to apush from agents and industry associations such as ACT.

“Agents want to send submissions to commercial lines carriersusing real-time functionality, which includes attachments,” saysYates. “There's been a lot of activity in small commercial lines,and some carriers that have put an emphasis on the real-timefunctionality are seeing upticks in the number of quotes and thefact they are being considered for quotes [for prospects] wherethey were never considered before.”

Yates sees automation advances coming to middle-marketcommercial lines on the horizon.

“Those submissions are different because there is an underwriterinvolved; there is some back and forth, and it's not just onetransaction,” he says. “We hope agents will be able to sendsubmissions from their agency management systems along withattachments and then through use of activity notifications thecarrier can ask for additional information so that we can automatethat area of the business and take it out of an email-only system.Mid-commercial is mainly done through email, and that's outside ofthe agency system, so the agent has to wrestle with how to get thatbusiness into their system.”

Agents feel small commercial should be able toquote multiple carriers and use real-time, according to Yates. Manyalready use the inquiry functionality for claims status and policystatus.

“We want to see more submission activity using real time,” saysYates. “In mid-commercial it's mainly an email process today so weare trying to move it to real time.”

PRICING STILL KING

Independent insurance agents want what every consumer wantsthese days—one- stop shopping. When agents have issues, they don'twant to call 10 different people in the carrier's organization toget the issue resolved, explains Mike Fitzgerald, senior analyst inthe insurance practice for Celent.

“Carriers need to make sure the people in their organizationanswer questions quickly, effectively, and efficiently,” he says.“A lot of carriers are still working in the dark ages on theproducer-management side.”

Such ease of doing business is important for agents, butFitzgerald has no doubt that pricing remains the No. 1 issue foragents when shopping for their customers.

“Pricing sophistication continues to be a differentiator,” hesays. “[Carriers] have to get that part right, there's no doubt. Alot of carriers have worked hard on that and are seeing somepayoffs for their efforts. Then it comes down to ease of doingbusiness. It's still a solid number two, but given that the numberone issue has received so much attention, it's like 1B versusnumber two.”

Fitzgerald points out there are multiple factors involved in theease-of-business discussion. “There's ease of doing business interms of can you get a policy out the door quickly,” he says.“There's a fair amount of agreement around what that looks like andwho's good at it, but there's more to the relationship than justthe policy and billing transactions. It's also built aroundcommissions, licensing, and compliance. There are still some bigdifferences between carriers and agents in regards to how all thatworks.”

Grange Insurance has been in full development of itsagency-automation program for almost two decades, according toSherri Rarey, assistant vice president, agency interface for thecarrier.

“We encouraged agents back then to purchase a management systemand we dedicated ourselves to providing the functionality thatwould make that investment worthwhile for them,” she says. “Thatwas building the foundation. Today we support over 41 differentagency-management systems, all the comparative raters our agentsuse, and we provide real-time transaction servicing. We've kept ourpromise as far as continuing to develop the technology that makesit easy for agents to work with us.”

If a carrier is not priced competitively, ease of doing businessis not going to make a difference, explains Michael Fergang, CIOfor Grange Insurance.

“[The agents'] interest is the policyholder,” he says. “Thepolicyholder wants to be assured they have the right coverage atthe right price. You can't be out of line in the market—the marketwon't support it.”

Those carriers that price their policies competitively find thatease of doing business is a differentiator, according toFergang.

“It's in the way claims are handled, the way you respond tocalls as well as the technology,” he says.

Grange accommodates its agents by directing them to thecarrier's portal, where the agent has the capability to get astatus of all their claims or any other communication between thecarrier and the policyholder.

“Every status an agent wants to know they canget in real time,” says Fergang. “We have subscriptions for up to26 alerts that anyone in the [agent's] office can choose. You canchoose one or all 26. On a real-time basis you are alerted onthings that are transactional—claims, pending cancellations,anything. You can get that in real time.”

Whoever subscribes to the alerts receives an email with animbedded link, which allows the subscriber to get into Grange'sportal to gain more information.

“They can get as much detail as they want,” says Fergang.

LINE OF BUSINESS

When discussing how well a carrier connects with independentagents, Smallwood explains you have to differentiate based on theline of business. And even those lines get broken down as well.

While the middle market for commercial lines will be able toautomate their processes on some level, Smallwood doubts thatmiddle-market underwriting will ever reach straight-throughprocessing because the underwriter remains involved in the finalprocess.

“There are ways to automate workflow, present external data tothe underwriter, and run some models on the side and that's where[carriers] are headed,” she says.

Smallwood believes every insurer that has both personal andcommercial lines has to set up an environment where they get paper,electronic faxes, PDF forms via email, or they have a portal orreal- time access.

“You have to create that multichannel distribution, bring itinto your back-end system, and be able to navigate depending on theline of business,” she says.

Smallwood also believes the carrier's business process has to beable to handle all of the various connectivity methods.

“There are still many insurers with policy-administrationsystems that are legacy, so trying to connect data from all thosesources into a legacy system is a problem,” says Smallwood. “I'mstill hearing stories [from carriers] about being unable to dostraight-through processing or real-time access, or they can't hookup to a comparative rater until they fix their legacy systems. Theinvestments for policy admin are just huge. Fifty-five percent [ofinsurers surveyed by SMA] say they still have to invest in a modernpolicy-admin system in order to do underwriting automation.”

Resources and dollars have helped the larger insurers tacklethese issues, but Smallwood believes it is more difficult for themidtiers and smaller carriers.

“When you go down to the midtier, there are some companies thathave made progress,” she says. “The regional carriers that aresingle state or single line of business have made progress, but Ithink those regional carriers that have both personal andcommercial lines are struggling because there's just so much todo.”

“If you talk to one of the top 10 carriers, the agents forpersonal lines and small commercial lines are entering data intosystems with the ability to do real time,” says Smallwood. “Butwith other lines, even if they have modern agency-managementsystems, they aren't set up to capture all the data. When you startto peal the onion it becomes very complex.”

Smallwood estimates that only half of independent agencies havemodern agency-management systems that can connect them to carrierswith real-time access. A higher percentage—80 to 90 percent—haveagency-management systems that are either older or outdated.

SMA research also uncovered that for the market leaders, themajority of their business—80 to 90 percent for personal auto andsmall commercial—is coming through either an agency-managementsystem with real-time upload, a portal, or a comparative rater.

“Those market leaders are probably pushing anywhere from 60 to80 percent straight-through processing,” says Smallwood.

But SMA also asked these insurers if they had mastered automatedstraight-through processing, and only 15 percent of personal-linescarriers believe they have reached that level. Another 20 percentindicate they are almost there.

“That leaves the rest in progress, just getting started, orstruggling,” says Smallwood.

For small commercial, just seven percent have said they havemastered the technology and 14 percent report they are almostthere.

Reasons cited for these failures includeworkflow or the technology the agents have in place. On the backend, though, the ones that report they have mastered the approachor are almost there have built both real-time access and aportal.

“It's not one or the other,” says Smallwood. “Depending on theirbook of business, some carriers have more business coming throughthe portal and some have more coming through real-time access, butthere is still a lot of room for improvement.”

As the risks get more complex, the slower the process becomes,points out Smallwood. Her research shows that for middle-marketcommercial lines, about 80 percent of a carrier's business is beingsubmitted via email with a PDF attachment.

“It's not coming through the agency-management system becausethe agents either don't have a system that can upload or they arenot keying in all that extra data that is needed for the morecomplex risks,” says Smallwood. “They have more than theapplication; there are a lot of attachments.

Portals are not a good option for the agents because they don'twant to key that information into several different portals.

What they have found is it's easier to create an ACORD app usingPDF and send all the attachments by email to all the carriers,”says Smallwood.

Not surprisingly, SMA's survey found just one percent ofinsurers claim they have mastered connectivity and 12 percent saidthey are almost there. Fifty-eight percent of carriers report theprimary method for receiving applications for middle market isemail, and 16 percent report the data is still coming to them onpaper or through fax.

Of the remaining 26 percent, 20 percent is coming in through aportal and six percent through real-time access.

“To me, the middle market has stalled because it's so much workfor the agents to key in data,” says Smallwood. They don't have thesystems to accommodate that.”

CARRIER/AGENCY RELATIONS

Frank Petersmark, CIO advocate for X by 2, a softwarearchitecture consultancy, believes there is a natural frictionbetween agents and carriers when it comes to keying in data. Fromhis days as a CIO at Amerisure, Petersmark recalls dealing withagents that wanted the carrier to take care of as much of theprocessing as possible and unburden [the agents] of theresponsibility so they could just sell.

The reverse was also true, remembers Petersmark, as the carrierswanted agents to perform those tasks.

“Process and administration usually relates to expense,” saysPetersmark. “Carriers tried to push that process down the foodchain if they could to agencies. There has been a tug-of-war forthe past few years, particularly as the recession hit. You had sortof a mad scramble of carriers and agencies to find ways to reduceexpenses so they could stay profitable. I don't think that worldhas come together just yet.”

Many carriers tout themselves as being easy to do business with,but Petersmark isn't ready to concede that ease of business issomehow more important than having the best price.

“Particularly among the midsize carriers, there was arecognition at least five years ago that part of the way theyretained business and built new business was by making themselveseasier to do business with,” he says. “We used to market ourselvesthat way when we went up against national carriers. Part of ourpitch was we were easier to do business with. That didn't just haveto be technology or automation, but personalized claims service,easier to get a hold of, and more responsiveness.”

Petersmark feels some large carriers—butcertainly not all—have reacted to that strategy by working towardthat same goal.

“I think [large carriers] have definitely moved in thatdirection, but not as quickly,” he says. “There are a couplecarriers that are arrogant enough to believe they don't have toworry about it because [premium decisions] are all about price tothem. If they return a good dividend every quarter it's all hunkydory.”

Smaller carriers and midsize carriers have learned to becomemore nimble in comparison to the larger carriers, which Petersmarkdescribes as the difference between trying to turn an aircraftcarrier and a destroyer.

“It's a little easier to turn the destroyer, but a lot ofmidsize companies have larger-company attitudes, cultures, andpersonalities,” he says. “They can't just snap their fingers, butthey still are able to get things moving quicker and that goesright to price. If they can drive down expenses internally and passsome of the process onto agencies, then they can afford to be morecompetitive on price.”

Insurance carriers realize the independent agents are going toplace business with carriers that are easy to deal with.

“Time is at a premium now,” says Yates. “It's a tough market foragents. They are trying to be as productive as possible. Thoseagents that can eliminate duplication and have fewer errors aregoing to do well. Carriers are generally receptive to that.”

Yates agrees the carrier has to be in the ballpark in terms ofpricing and product, but assuming they are in the ballpark theagent is going to be very concerned about ease of doingbusiness. 

“Agents aren't going to be interested in doing business with thecarrier that doesn't have personal-lines download,” says Yates.“Real time also is going more that way. Agents are using real-timerating tools in personal lines.”

MOBILE TECHNOLOGY

“Some agents have introduced mobile apps, but so far we haven'tseen a great amount of usage,” says Yates. “The fact [the mobileapps] don't have a lot of functionality may be a part of that.”

Yates believes agents recognize they are going to need mobileapps and need to increase the amount of functionality.

“We look at this issue in two ways—apps for the client andtablet devices, which are a great tool for agents in the field,” hesays. “Traditionally, agency principals and producers haven't usedthe agency technology so much—it's more of a back-room thing—butthat's going to change with tablets. It's already changed withsmartphones to some extent, but the opportunity for agencyprincipals to be able to access the information they need to dotheir business from the management systems and from the carriers totheir tablet is enormous.”

SMA's research shows between 15 and 20 percent of insurers havesome type of mobile project taking place in 2011.

“Most are pushing it more on the personal lines for the consumerand not necessarily for agents or brokers,” says Smallwood,pointing to areas such as self service, paying a premium, or firstnotice of loss. “Larger companies in the more complex lines arelooking at how they can leverage mobile for the brokers, but theyhaven't figured that one out yet.”

Many carriers are trying to determine what to do with mobiletechnology and, not to Petersmark's surprise, carriers are beingforced to do that by their customers and their employees. “If youthink of the next generation of insurance customers,” he says.“They have almost an expectation that mobile apps will happen. Thetechnology exists to do that, it's just more processes withincarriers and agencies in figuring out how to apply that stuff.”

Fitzgerald believes mobile technology is making in-roads,particularly in areas such as inquiry and notification.

“Carriers that have invested in more modern systems for otherreasons are now able to easily make the transition to mobilecomputing,” says Fitzgerald. “Even with the iPad, it is stillquestionable as to how much a general agent out there really wantsto do with automation and mobile.”

SOCIAL NETWORKING

Social networking has come a long way in a short time, but Yatesbelieves some agencies are using it more effectively thanothers.

“What we are finding is that agencies that are good at marketinghave been successful integrating this as an additional tool intheir marketing portfolio,” he says. “It's an additional way toestablish relationships. It does take the place of some traditionalmarketing, but not totally. Those agents that are really marketingoriented have really seized on this. There are a lot of positivesabout Facebook advertising because you can target it finitely andmeasure it.”

Over the years, Grange has built and hosts almost 650 agentWebsites at no cost to the agents, explains Fergang. Each site iscustomized for the individual agency. Grange also has built adigital-media guide that offers agencies the dos and don'ts on howto be successful with social-media sites.

“It's not unusual for agencies to call us for guidance,” saysFergang. “Even though we have a guide for them we will always taketheir calls.”

Grange is a supporter of ACT, which offers Webinars about socialmedia.

“We promote that to our agents so they know there is freeinformation out there,” says Rarey.

Grange has been working on mobile technology since 2009 andformed a group to do research and development.

“We feel strongly about our relationships with our agents,” saysRarey. “We wanted to see what we could do for our agents. Everyoneelse seems to want to focus on the consumer. We took a differentapproach and piloted a mobile view of our agency portal. We're notlooking at apps; it's much easier for us to give them a mobile viewof our Website.”

Grange has put together a strategy for the next two years andthe company expects to roll out something for its agents no laterthan the third quarter of this year.

“This was actually our call,” says Rarey. “In IT we understandthe business, but we're always thinking about the agent.”

WORKING TOGETHER

Any ideas Grange comes up with are introduced first to a groupof agents.

“We believe strongly that without their input our great idea maynot be successful,” says Rarey. “Our efforts are validated. Thefunctionality we provide is not forced upon the agents, but we'vemade it so easy that they voluntarily use it. Agents submit about98 percent of all our new business and policy changes. They don'thave to, but we've made it easy for them to do so.”

Fergang points out that virtually all ideas are vetted by Grangeand, if it is something that has some appeal for both sides, thecarrier pilots a program before rolling it out.

“We have sessions with CSRs and our own people and banter aboutthe best way to design something so agencies will use it,” he says.“We exhaust all different input levels.”

Fergang believes Grange is attuned to what its competitors inthe marketplace are doing.

“If you are price competitive and your moniker is ease of doingbusiness, you hopefully have built something that the agents areexcited about and will take advantage of,” he says. “We have a highpercentage of adoption. Some agencies are sophisticated, and otherswould rather pick up a phone or fax something. Those that are notadopting technology or new ways of doing business are the onesbeing gobbled up by their peers.”

“It's amazing the pace of change, isn't it?” asks Yates. “Evenpeople who are not technology leaders, a lot of them are usingtablets and getting good functionality from them. You know that'sgoing to continue to evolve.”