The e-challenge

Commercial lines insurers have been slow to exploit the potential of e-commerce. While the banking and retail industries have revolutionised their businesses through technology and are reaping the benefits, the commercial insurance market has remained well behind the pace.

Only now has a supplier-driven portal - imarket - emerged, along with broker software systems that allow both back-office and electronic end-to-end trading. It is essential that this progress does not stall. Companies that do not embrace electronic trading will be unable to remain competitive.

In commercial lines, product complexity, uncertainty over fitting intermediaries into an electronic supply chain and disparate operational platforms have led to fairly piecemeal development across the sector. But attitudes are changing.
Acturis chief exectutive Theo Duchen says: "Physically the insurance e-commerce world hasn't really moved on in the past four years, but the mind-set has moved on dramatically."

Four to five years ago e-commerce was a marginal activity. Now the main insurers have development programmes in place. For instance, 25% of AXA's commercial business is now transacted electronically, and last year it processed over 30,000 policies by straight-through processing.

AXA commercial and intermediary lines director Mark Cliff says: "Before we had AXA Business Risk there were nine instances of rekeying per case, 35% of our time was used to do rework and average policy issue time was 45 days.

"Now, there is no rekeying, less than 10% of our time is spent on rework and policy documentation is instantaneous."
Cliff says that the business has now been reorganised around e-commerce. "All work is now done in the branches, we have closed two operations centres and we wrote 20% more business this quarter without increasing headcount."

Polaris imarket represents the next stage in the development of insurance e-commerce. But while the major insurers support the need for an industry-wide portal, some of the benefits remain unclear and its development has been slow.

There is no doubt that single sign-on, allowing brokers to access multiple quotes, and the creation of a set of industry standards are invaluable for the industry as a whole. But imarket will become a reality only when it allows access to a critical mass of products and services. Delivery of these products and services is the responsibility of the insurers, most of whom have struggled to deliver on their e-commerce promises to date.

Polaris marketing and strategy manager Phil Nunn remains confident that this year will see the carriers providing the number of products to make imarket a success.

"Although imarket is collaborative in nature, with all parties working to a common vision, competition between insurers is intense. They know business will migrate and stay with those insurers who are both accessible and easy to trade with online," says Nunn.

"As well as the traditional competitive parameters of price and cover, the availability of products and services online will improve the speed and quality of service and policy document production. These are the factors that drive usage of the imarket portal."

While all the software houses are supporting the portal and are very close to agreeing how information is transferred between their systems and imarket, they are still developing 'point-to-point' services. These provide direct carrier-to-broker connectivity and will be available to companies who see the benefits of e-commerce, but feel that imarket is not the right solution for them.

The software houses are certain that there will be a continued need for point-to-point connectivity, a view backed up by brokers. Peter Brown of broker Bland Bankart says: "Our business model relies on single keying into our own back-office/trading platform. As long as a point-to-point solution doesn't involve additional work such as rekeying, we would be happy to send the quotes out to companies, irrespective of whether they are on imarket or not."

Nonetheless, imarket and direct point-to-point solutions will co-exist. But the industry needs to speed up its development of these solutions. More brokers are aware of how e-commerce can change their businesses and are moving to platforms that allow end-to-end connectivity with the carriers.

Groupama distribution and customer services director Amanda Blanc says: "The industry cannot continue to transact business as inefficiently as we have until now. After previous failures, we have to get this [imarket] right otherwise we will end up back at square one with everyone developing their own solutions, causing huge amounts of duplication and waste."

It is widely agreed that insurers must be the driving force behind the future development of e-commerce. They have an excellent opportunity to deliver, through imarket, sets of products and services that can truly change the economics of insurance operations.

The industry needs bold ideas and large-scale investment to take full advantage of e-commerce. If the carriers fail to deliver on imarket, the probability of an industry portal ever coming to market must be remote.

While companies have survived and even prospered with antiquated paper-based systems, relying purely on underwriting, claims and customer management skills to compete, it is unlikely that these skills will be enough on their own in future. The ability to trade electronically will become a deciding factor. It is only then that their unique skill-sets will provide any form of competitive advantage.

Alasdair Stewart is a director of Innometric, a Danish innovation management company

Tips for carriers

- Do your research; find out how your key suppliers want to do business with you.

- Develop your simple products first.

- Consider to what extent you want to auto-rate.

- Complete auto-rating will provide enormous process cost savings and instant service to your distribution channels, but will also need a complex set of rules and will decrease your competitiveness on non-standard risks.

- Don't underestimate the scale of the exercise.

- Development is sexy and attracts your best people; testing is boring, but needs your best people.

- Your ultimate success is based on connectivity. Make sure your solution can be connected to those systems which provide the dominant electronic routes to your customers.

Tips for brokers

- If your back-office system doesn't allow you to trade electronically, ask your software house what it is doing about it.

- Work out where your process costs lie. This will give you an idea of the scale of benefits that could be achieved through e-commerce and therefore the size of any investment that you should make.

- Before developing any web facing technology, make sure that your customers will use it. What appears as a valuable service to you may be of no interest to your clients.

- Get involved in the various e-commerce pilot programmes, but if you make a commitment to a pilot programme, you have to support it.

- Press your carriers to deliver products and services in a way that suits you.

- Make sure your office is equipped to deal with large amounts of electronic data.