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There’s a new level of communication and cooperation happening among managing general agencies and carriers on the technology front, an almost unheard of development in the sector, as the issue of data exchange moves out of IT back rooms and into MGA boardrooms.
After several years of investing in technology upgrades more business executives are grasping the impact improved flow of data could have on their businesses and the groups are cooperating to put their data requirements in writing and create a standard that will hopefully bring the goal of more effective data exchange between carriers and MGAs one step closer to reality.
“We’re in a pretty flat, mature insurance market in Canada,” says Jamie McGeachin, vice president of operations at Hub Financial. “There are, by my count, about six commercially available distribution back office systems operating in Canada, and all have the ability to accept data feeds,” she said at the Advisor Group’s Changing Channel MGA Symposium on Thursday in Collingwood, Ontario.
At the moment data feeds from carriers come in a number of different formats and each contains a different set of data. As well, the industry is one of the few that still clings to paper based processes – brokers fill out the application, send it to the MGA for data entry who then sends it on for manual input again, this time into the carrier’s system.
Under this arrangement transaction costs can reach nearly $400 for each application. The National Association of Independent Life Brokerage Agencies (NAILBA), a U.S. based association and advocacy group for the wholesale life and health brokerage community, estimates that electronic costs, by comparison, would average only $50 for each application. Cycle times under the existing system are also a problem for MGA executives. Paper based applications take 60 days from submission to commission. Estimates suggest this lag time could be reduced to 15 days using electronic transmission of data.
The working group formed to address the issue of data flow, dubbed the Canadian Insurance Transaction Standardization (CITS) project, includes 11 distributors and nine carriers working with the CLIEDIS Standards Review Committee. To form the group, each of the carriers were asked to identify the top three distributors they dealt with and MGAs were asked to identify their top three carriers. At her presentation, McGeachin encouraged other MGAs to join the initiative.
Interestingly, the working group found that despite the fact carriers for years complained that “you all want different information,” most data needs were remarkably similar at each company.
Over the past year the CITS group acknowledged that, although the technology exists for real time data exchange, both carriers and distributors agreed that batch updates of information was sufficient and easier to attain quickly. Since new business is most frequently administered on newer technology systems that allow for easier programming, the group logically decided to begin by mapping the standards for carrier pending feeds and started by creating a list of information that distributors need and use for administering new business cases. “It turns out that when we polled the group, we had very few areas where we needed to negotiate about data elements,” says McGeachin. “All distributors were looking for the same basic information.”
In November 2005 CITS published the first Transactional Implementation Guide that outlines a standard set of data points and the order they should be mapped so that MGAs and their technology vendors can easily import the feeds. “Cycle times are going to be shorter, you’re going to be able to consolidate data much more effectively for your brokers, servicing pending information and once in-force feeds become available, servicing in-force business becomes so much easier for everybody,” she says. “Your day to day business looks better. It’s much easier to manage.”
The guide is currently being review by carriers who are in the process of developing and beta testing the feeds. Once carriers clear beta testing hurdles, McGeachin says she expects the feeds to be ready and available for MGAs to use in their back office systems within a year. Before this can happen though, she says MGAs will likely need to brush up on their compliance practices and be prepared with up to date privacy guidelines and policies.
Carriers have requested a new compliance subcommittee be convened to address information security and data manipulation concerns. “It’s certainly a manageable issue. I think that concerns that are going to be raised can be fairly easily addressed,” says McGeachin. “Their biggest concern is security of data and security of data can be managed.”
The next CITS initiative will be to map similar standards for in-force business feeds. This time around the group plans to get vendors involved earlier in the process.
Filed by Kate McCaffery, Advisor.ca, kate.mccaffery@advisor.rogers.com
(06/09/06)