Best of Both Worlds

That technology would replace agents was yesterday's misguided prediction. Today, technology is an enabler and the carrier's challenge is twofold: offering the agency force access to proprietary systems while helping agents to work within their own management systems.

By Robert Regis Hyle

If there is a mantra for the insurance distribution channel today it would be ease of doing business. Selling pro- perty/casualty or life/health insurance through an agent is not the only way for insurance carriers to distribute their products, but it remains the best. The partnership between carriers and agents is as strong as it ever has been, so the challenge for both sides is how they can best serve each other and their policyholders.

For independent agents, choice and building a strong relationship with the carriers they do business with are important factors, according to Craig Weber, senior analyst with Celent Communi- cations. Agents will become loyal to a carrier if the agents find the right functionality, he says. Agents usually know which carrier they are going to place business with before they quote it to a customer, Weber adds. Agents may want the ability to quote business across several carriers, but very often they know which one they prefer to do business with.

That preference often has something to do with application-entry functionality, payment processing, or back-end service. They have questions such as: How well does the carrier service my client over time? Is it likely my client will renew? These are very important to the agents, Weber points out.

One area of focus for St. Paul Travelers has been for it to match the way agents want to do business, explains Patrick Gee, senior vice president of operations for personal lines and small commercial lines. Some carriers require agents to use the carriers own platforms. St. Paul Travelers aims to be a leader in building technology that will link the systems agents use in their offices to manage their customers with the carriers policy processing applications in real time, according to Gee.

Agents, without even leaving their management system, can access views of our policy, our bills, claims information, all with the click of a mouse, because weve been able to connect in real time all the capabilities we have as a company with the platform they have in their office, says Gee. One of the benefits for agents is the carrier offers them an option of how an agent can choose to do business with St. Paul Travelers. If they want to come to our Web portal, we have something called Agent HQ, which is our main Web portal for agents that has accumulated a tremendous amount of information and technology tools for agents to engage in ongoing service operations or look up information, reference materials, you name it, indicates Gee.
Builders Insurance Group, a regional workers comp writer in the Southeast, has connected to its agents by placing Internet front ends on its products. In less than two years, the carrier conducts greater than 95 percent of its business transactions through submissions conducted electronically. In turn, Builders is sending back its policy sets electronically to the agency force via e-mail along with a link to the Builders Web site so the agents can get to the data either way.

At the same time, Builders also began an imaging project to take its historical files, scan them, and get rid of its file rooms. Weve taken both of those proj-ectsone starting at the back end and one starting at the front endand met ourselves at the middle, says Ken Branham, senior vice president of operations. We felt we needed a final resting place for all our data in an imaging system, and now weve got one repository of documents anyone can look at. By doing that, we also are making that folder available to our agency force with a few security pieces we dont give themthings like detailed medical information or access to underwriting notes.

Bank on It

In the property/casualty industry, there is a growing number of independent broker/dealers that are being purchased by banks, according to Cynthia Saccocia, research director for TowerGroup. The involvement of banks in the distribution channel will have a substantial influence on the broker/dealer relationship with the insurance companies they are doing business with, she contends. I think it is going to be a combination of the banks and insurance companies becoming much more tightly aligned, with the insurance companies being strong manufacturers of products and the banks being substantial distributors of the products, she says.

A number of property/casualty in-surers have captive agency work forces, and that presents a completely different dynamic for carriers as opposed to servicing an agency that is independent. The trend has been toward more independence, Saccocia asserts. You dont have that strong paternalistic support that was once perceived as being necessary to retain the top distributors, she says. The top distributors now are closely aligned with banks. Where does that leave independent agents in terms of the paternalistic support they get from the insurance carriers? Insurers end up having to serve a lot of different distributors in a lot of different ways. She believes the key is for carriers to provide agents appropriate access to information, and that needs to be done through a strong portal that offers information, services, and advice to help the clients.

Merging Products

As a result of the St. Paul and Travelers merger, the new combined company was able to examine all its insurance products. This included the way the products were offered to agents and the automation the agency partners used. Gee describes it as a best-of-both-worlds-type approach in terms of product delivery and the automation tools supplied to the agents.

We looked very carefully at both our former products [in commercial lines], and we came up with a product we think took the best from both prior companies, says Gee. We focused on two complexions of the product. One is focused on Main Street businessa lot of the smaller, commercial-type risks. The other is what we call advantage business, and that is some of the larger, more complicated risks. We revamped a lot of the coverages and exposure definitions inherent in our product so we could have as broad a product offering with as much coverage as possible for those two groups of customers.

The platform on which the carrier is offering its products also is a combination of the former Travelers and the former St. Paul. St. Paul Travelers adjusted the platform to take into account all the demands of the new products, Gee claims. One of the neat things for the collective agency group is a super array of tools and options for agents to choose from in terms of how they want to do business with us, he says. Weve taken the best of both, and now all agentsformer St. Paul or former Travelers agency partnerswill be able to take advantage of that.

All else being equal, Weber believes most agents want to get the best deal for their clients. But seeing as products and prices are very similar now, [agents] may be quite willing to look at those secondary drivers of carrier choice: How well does [a carrier] support me, the agent? How quickly does it issue policies? How good is it about amendments? says Weber. There are a bunch of things agents think about driving their behavior. If you ask agents which is their favorite carrier, they all may have different answers to that question for different reasons. What that highlights is carriers never can appeal to all agents in the same way. Some agents love technology, and they will go with the carrier that provides the best automation. Others are more in touch with the underwriters. They want to call their underwriters and talk to them personally. If you want to appeal to both types of agents, you have to provide both of those things, suggests Weber. Thats the real home run.

Portals have morphed in different areas and in different ways, Saccocia believes. The distribution portals seem much more oriented toward pushing services into the field so agents can view information about policies, execute transactions, and supply some data about their policyholders. The next generation of portals will be more advice oriented, with the carrier able to push revenue-generating information onto the field and give producers flexibility to run campaigns against their blocks of business, she says.

That will open up capabilities the carrier can offer the producers inexpensively; create control and regulatory compliance; and give some value-added services back to the producers, whom carriers are asking to take on more responsibility, according to Saccocia. Many service-oriented portals have headed in the direction of pushing clerical work to the field force. However, she continues, if carriers would couple service with some revenue-generating tools, carriers might see greater adoption and stronger loyalty from those producers.

Electronic Model

Builders Insurance successfully has entered several new states thanks to its Internet connection. The electronic model is allowing us to begin processing immediately in another state very effectively, says Branham. Our niche is construction. We go into a state and find out which agents know the construction business and select the ones who rank pretty high in that niche. Once Builders has communicated with each new agent, Builders sends in its underwriters to explain the system. Weve been very successful with that, he adds.

Builders takes pride on its same-day service, states Branham. He points out the carrier has been hitting that service mark in the high 90 percentile. I call it my What did you have for lunch today? philosophy about customer service, he says. If I asked you what you had for lunch today, you could tell me. But what did you have for lunch Wednesday of last week? With underwriters and agents, its the same kind of thing. If you ask agents detailed questions about a risk within an hour after they submitted it, they can answer. If you ask them three weeks later, they have to go back and relearn the account. By us being quick, were getting quick response back. Without the electronic connections, we couldnt do it.

For commercial lines, the underwriter relationship is extremely important because there is some give and take in the underwriting process. If underwriters are good listeners, they sometimes can make a sale, understanding whats important in a deal and what isnt important, says Weber. Thats where the relationship comes in.

Management Systems

Agents have the option of coming straight to the St. Paul Travelers Web portal, but the carrier also has taken things such as bills, policies, and claims and made those available inside agents management systems. There are many different agency management vendors out there for different types or sizes of agencies. These systems are what drive an agents day-to-day business. We want to make certain we can extend our applications to the management system so, as much as possible, [agents] are keying in information once, and they are getting the correct information from us, the carrier, the first time, as opposed to having to question the validity of the data or having to do extra work to pull up information multiple times, says Gee. If many carriers were on board with this type of technology, it would allow agents to avoid a lot of redundant keying and to be able to drive most of [the agents] business from within their own management system.

Most agents would choose to do the work from inside their own management system, Gee believes, but some agents have expressed a preference to come to a company platform to do certain tasks or even most of the agency work. Whatever works for them, he adds. Its their office.

Many agents have a vendor tool they use to give them rates from different carriers, and St. Paul Travelers has bridged with all the comparative raters. If agents key in the data once to get a quote from a comparative rater, they dont have to key it in again to issue the policy with St. Paul Travelers. That information is translated automatically into the carriers application, and the agents just need to finish the databilling information, for instanceto issue the policy. It saves them extra keying that might have been required in the past, explains Gee.

St. Paul Travelers also has the capability of sending information about policy changes down to the agency management system. Any transaction that occurs we can update on their management system in real time, reports Gee.

St. Paul Travelers knows the importance agencies place on their management systems, Gee affirms. Although some agents get by without them, most medium to large agencies use some form of management system and rely on it to drive their business day in and day out. With that in mind, we make it as easy as we can for them to leave their system to look up information only when its absolutely necessary and there isnt some other means for us to communicate that to them electronically, he says.

In talking about software and services for independent agents on the P&C side, the conversation usually migrates toward agency management systems, Weber indicates. The major point of discussion involves how well a carrier supports upload/download functionality so the agent can work within the agency management system but still communicate back with multiple carriers. Such functionality clearly is a good thing for most independent agents. Agents like to avoid rekeying, he says.

SEMCI Discussion

Single-entry, multiple-company interface (SEMCI) has been discussed for a while, Gee points out. The term by itself was a little obsolete as soon as it was coined just in terms of the fact it was related only to the quoting of new business, he says. Weve found many of the higher-volume search transactions are where the industry has been able to solve a lot of the agency issues the last few years. You see a lot more bills and policy changes than you do new business.

With small commercial lines, as more carriers get up to speed and face their applications with XML technology to allow quoting through a gateway into their system, new-business issues will be solved. Two years ago, agents had to get all their billing, claims, and policy information straight from our corporate Web site, Gee says. Now, in small commercial lines, 35 to 40 percent of all inquiries we get relative to agents wanting to see billing or policy information are acquired from an agency management system. If you think about the last 20 years of SEMCI conversation, in two years to go from zero to 40 percent for all service transactions is a huge feat. Its a terrific adoption rate as well on the part of the agents.

The wrinkle I would throw at you is independent agents are very willing to use proprietary [carrier] systems for certain types of things, says Weber. That goes across property/casualty and life/ health. What the agents are looking for is the right functionality, and they dont care where they find it. For a quote, the SEMCI issue is alive and well. For all other service issueslooking up policy values, changing billing information, changing beneficiaries on the life side, looking for commission informationagents are surprisingly willing to use a proprietary system as long as it does exactly what they want it to do.
On the property/casualty side, Weber believes there are some powerful voices that talk about SEMCI as the be all and end all. [SEMCI] is important, but from the carrier perspective, it is equally important to think of how I can differentiate myself, how I can avoid being commoditized as just another [carrier] that plays nicely with an agency management system, he says. If agents are willing to go to a proprietary site, wouldnt that be better for the carrier overall? You build a stronger relationship with them and serve their needs.

If the focus for agents is purely on new-business quoting and issuing, SEMCI is a major driver of the agents behavior. Agents want the ability to quote business across multiple carriers, according to Weber. For virtually everything else, agents understand even if they can do some tasks through their agency management system, they probably will have more robust functionality in a carriers proprietary system. Many agents are willing go to the carriers system, particularly if the carrier is making it easy to click through to the proprietary system out of an agency management system. If you put a link to the carriers agent portal for certain functions, the agents are going to go to that link because they know that is the place where the rich functionality lives, says Weber. Thats the point people miss. To be successful, carriers absolutely need to do both things. They need to support agency management systems, but they also need to provide robust functionality on proprietary systems.
Coming from the life and annuity industry, Saccocia finds the whole argument for SEMCI almost preposterous. [SEMCI] works really well on a one-to-one preferred relationship structure, but the reality is the largest insurance companies are doing business with so many distributors [SEMCI] becomes quite a challenge, she contends.

New Breed

Builders has given all its agencies an online log-in to what the carrier calls its insurance services center. Through Internet access, agents can see their entire book of business and details about any policy or claim. Each agency has an agency number, so when producers log in, Builders has a cross-reference system that identifies who the agents are before they go any further. If we dont know them, we dont let them get anywhere, says Branham. If we know them, we know what agency they work for. Anything the agents try to look at, if its not that agencys book of business, they cant access it. The harder security for Builders comes into play when visitors get ready to see the actual file and there is a need to limit access to certain documents. If there is any doubt, we dont authorize that document to be viewed, he says.

Agents will continue to be the chief distribution channel, affirms Saccocia, because at the end of the day, people like to talk to other people about the decisions they are making.

Commoditized products people arent afraid to buy without any advisory services make sense, she says. But life/annuity never has demonstrated these sales are going to take place on the Internet, and quite frankly, property/casualty offers complicated products, as well, when you go through the process of determining how much coverage, for what price, and what other auxiliary coverages you really need. If done well, [insurance] is a very complicated process to get you as protected as you need to be. You cant change easily an ingrained consumer process.

Top three issues cited as business drivers for 2005 (in order)

Large Property/Casualty Insurers

Growth
Distribution issues
Cost Reduction

Large Life/Health Insurers

Profitability
Growth
Distribution issues