Agency Web Backup Crucial

Agency Web Backup Crucial

It was encouraging to learn recently that a majority of independent agencies access the Web with a business-grade, high-speed, broadband connection. But it was discouraging and alarming to hear that many of these wired agencies are not equipped with a backup connection if their primary provider goes down–as it inevitably will.

Progressive Corp. in Mayfield Village, Ohio, announced these findings based on a recent online poll of some 1,300 independent agencies.

Progressive's survey found that two-thirds of all agencies are using a business-grade Web connection (it should be a lot higher than that, we believe). Only about 9 percent are using consumer-grade connections. The remaining 25 percent said they were unsure. (Also not a good sign.)

More than a third of the agencies with broadband access said they do not have any kind of backup service, while about half rely on a dial-up modem, Progressive reported. Only 11 percent said they have a secondary high-speed connection to use if an interruption occurs with their primary provider.

The Web is critical to communication with carriers and customers–as crucial as the telephone in conducting insurance agency business. Agents, as good risk managers, must have backup systems in place if their primary Web connection fails. Otherwise, if service disruptions occur, they might find their clients seeking more risk management-conscious intermediaries.

Let The Buyers Beware

Commercial insurance buyers and their agents and brokers experiencing sticker shock at the premium rates being charged in this hard market might be tempted to tell primary insurers to take a hike and take their business elsewhere–to the alternative risk-transfer market, to be exact.

Unfortunately, this is easier said than done, as many risk managers and intermediaries might be learning the hard way. The unfortunate fact for buyers and brokers is that they can never be completely free of the traditional insurance mechanism.

Those deciding to self-insure through a captive, for example, might still need a domestic primary insurer as a “front” to clear local regulatory hurdles. These days, fewer carriers are out there fronting because of the potential liabilities involved, and those that remain are charging more for their services and the use of their paper.

In addition, even if an insured goes the captive route, they still need reinsurance to cap their exposure. Reinsurance is not cheap these days, and reinsurers are not always easy to find. Risk managers, with relatively few premium dollars to leverage as individual buyers, are likely to have a tough time getting a better deal than their primary insurers would.

Then there are the administrative costs and hassles involved. Buyers who take insurers for granted will gain respect for their carriers in a hurry when they realize how much goes into running a self-insured operation.

Does this mean buyers should dismiss the alternative market out of hand? Of course not. But these are factors that buyers, and their brokers, cannot afford to overlook as they consider their coverage options.

Reproduced from National Underwriter Edition, July 14, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.