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(June 13, 2005) Insurance company sales processes are notoriously behind the times relative to developments in the mutual fund industry. Where mutual fund companies regularly process transactions electronically, many insurance producers routinely file paper-based applications for their clients.
Although this part of the industry can be highly resistant to change, managing general agencies (MGAs) are being told that electronic data exchange is the way of the future, and many are beginning to respond. Issues related to consolidation are tied into the equation — many worry that the costs of providing electronic platforms will be prohibitive, and of course most advisors would be seriously at odds with their MGA if the company were to download those costs.
What MGAs are beginning to understand however is that the costs associated with filing paper applications — overnight courier services and document imaging for example — could instead be added to the bottom line. On top of this, working electronically can add value to the business by creating standardized and organized filing systems.
“Having the technology alone is not an advantage. Having the data exchange is not really an advantage, it’s what you do with that information once you have it and where you redeploy the resources that you save as the result of it,” says Jamie McGeachin, director of strategic management at Hub Financial. “I think that the time is right for the industry to have more data exchange.”
Advisors seem receptive to the changes. Delegates gathered at Changing Channels: Managing General Agencies at the Crossroads, an ADVISOR Group symposium held last week in Niagara-On-The-Lake, Ontario, heard from research presenters that advisors are likely more loyal to their MGAs than the MGAs realize.
Similarly, consumers more frequently expect to be able to see their transactions and business dealings online. Ron Dick, president of Dundee Insurance Agency and a member of the technology panel discussing the challenges MGAs and their producers face, pointed out that insurance industry technologies need to adapt in order to remain competitive. “We all think we’re in the insurance business but we’re really in the financial business,” he says.
The biggest roadblock to creating an electronic flow of data information, at least in the opinion of many MGA representatives gathered at the conference, lies in protectionist tendencies at the insurance company level.
“They feel that somehow, if they depart from their proprietary systems and they depart from their proprietary standards, that somehow that gives them a competitive disadvantage in the marketplace,” says Bob Fergusson, managing director at Partners in Planning Financial Services.
Eventually however, many predict insurance companies will have no choice but to come onside, especially considering the financial benefits associated with having a better organized business, for everyone involved.
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In talking with AIG president Peter McCarthy, Fergusson says he discovered that between 33% and 35% of the applications in that company’s new business area were either incorrect, incomplete, or the company could not read the agent’s handwriting. If the company required agents to file applications electronically however, he points out there could be automatic links in a pdf file to the international money laundering database, ways to cross reference and verify postal codes and other client information, and required fields that would make sure the form was filled out correctly.
“There are very broad numbers, and if varies from policy to policy, but if a paper based application costs $400 to process — $200 for the MGA and $200 for the carrier to put the whole thing through on paper, on a fully electronic basis that should drop to under $50,” he says.
Filed by Kate McCaffery, Advisor.ca, kate.mccaffery@advisor.rogers.com
(06/13/05)