THE ROLE OF E-TRADING IN THE INSURANCE INDUSTRY

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1 THE ROLE OF E-TRADING IN THE INSURANCE INDUSTRY

2 More and more, e-trading is the preferred way insurance is transacted. It s revolutionary, yet an everyday essential tool, and often taken for granted. To get to where we are now has been an incredible journey and the challenge now, is where next? 2

3 INSURERS ARE SUPPLYING SPECIALIST AND COMPLEX DIGITAL PRODUCTS WHAT IS E-TRADING? E-trading is the term predominantly used for electronic data interchange (EDI), meaning insurers and brokers can exchange information and do business remotely via technology. Full cycle EDI means brokers can do all the tasks they had previous done manually such as making mid-term adjustments and renewals. Providing the insurer accepts the risk, the broker can then bind, meaning they confirm the cover is in place. They can print documents, or more often, them to the client. It is about automating time-consuming tasks resulting in straight-through processes with optimal efficiency for brokers and insurers. As well as these efficiencies, users get reassurance for compliance purposes that information is accurate and safely stored. What s not to like being able to transact in realtime, far fewer errors than with paper proposal forms and an audit trail that is safely stored? Indeed, a risk can be placed in minutes an incredible advance on the old post and faxbased methods that were part and parcel of the insurer/broker relationship. IT S BECOME THE NORM Whether using an insurer s extranet or using a software house, e-trading is now the standard way of doing business for both personal and commercial lines. Sometimes, a more complex case may need human intervention and indicate refer via the system, meaning brokers need to speak directly to an underwriter. However, along with the technological developments, quality commercial insurers now have well-resourced teams in place to deal with the query. The broker should be quickly put through to an empowered underwriter who will deal with the query, obtain a decision and proceed with placing the risk. Allianz Insurance plc (Allianz) was an early adopter of e-trading and the first to offer brokers full cycle on commercial lines, via its extranet. Julie Tongue, digital trading manager at Allianz, switched from an underwriting role to work in e-trading and has found it an exciting environment. My background was useful as I was dealing with brokers in the SME sector and I could see the efficiencies e-trading would bring to both brokers and insurers. The vast majority of brokers want to trade with us digitally and they are increasingly wanting to access more specialist and complex products and insurers are meeting this need. It is about automating time-consuming tasks resulting in straight-through processes with optimal efficiency for brokers and insurers. So, are all brokers finding e-trading straightforward to use? Ms Tongue admits that there remains a small resistance to this technology out there. I ve spoken to brokers who are still using paper they tell me, they want to know where everything is, such as stored away in files, but they are in the minority. Our emphasis is on making sure brokers understand the benefits and don t find using technology difficult. There is online training or brokers can attend one of our Breakfast Clubs and see how it works there is plenty of support. I would encourage any broker to ask us as many questions as they want and as they start to e-trade more, they will find the technology is intuitive. 3

4 AVERAGE FREE MEETS E-TRADING A further key reason is that most of our e-traded products are Average Free. In 2016, we were the first insurer to remove the Average clause from our core SME product range. This was in response to the FCA s findings that an estimated 40% of SMEs were underinsured. The result is that Allianz s claims settlements will not be reduced by Average being applied. IT IS ESTIMATED THAT 40% OF SMES WERE UNDERINSURED 4 A BROAD RANGE OF PRODUCTS Allianz have 10 products available via their e-trading extranet, QuoteSME. While there is a perception that products are typically aimed at smaller SMEs, the depth is surprisingly wide. Brokers will find that the scope is widening all the time, but if there is a referral, we want to make it as easy as possible for the brokers, which is why we have a dedicated e-trading support team in excess of 200 underwriters who can be contacted by phone, or webchat, she explains. The benefit of QuoteSME is that our underwriters can see the information entered by a broker in real time, and respond to queries and referrals immediately. In the 2017 Insurance Times e-trading survey, Allianz s QuoteSME was voted the best extranet, based on a survey of 606 brokers. Ms Tongue believes Allianz s commitment to e-trading is an important factor. We were thrilled to win, and we moved up from fourth place in In 2018 the score improved further, demonstrating Allianz s ability to integrate QuoteSME with their people and underwriting arms. Our emphasis is on making sure brokers understand the benefits and don t find using technology difficult. Julie Tongue, digital trading manager, Allianz Insurance plc SOFTWARE HOUSE OR EXTRANET? E-trading takes place in a number of ways. Brokers have the option of either going direct to the insurer via an extranet, or accessing it from their software house platform, which will offer products from a range of insurers. There is no overarching solution that offers access to all products via a single system and while there may be broad similarities, a mix and match approach is typically employed. Software house platforms may offer products more suited to smaller risks, while brokers may be able to obtain a better deal for their client by using an extranet in some cases, these are also the right choice for more niche products. It is very much down to the type of risk and the broker gauging which route they believe will be most appropriate. In most cases, brokers will select a software house to use for a range of business purposes including: back office processes, compliance, marketing and also use a number of extranets. Much is made of the need to eliminate re-keying when information has to be submitted into different systems. E-trading has certainly helped reduce this, but it still exists. Brokers placing business via an extranet will need to rekey data into their back-office systems it s not overly time consuming and brokers generally accept this is a necessary part of ensuring they have used an adequately wide range of markets to meet the client s needs.

5 INSURERS AND SOFTWARE HOUSES WORK CLOSELY TOGETHER IN TERMS OF PROVIDING PANEL PRODUCTS SOFTWARE HOUSES IMPORTANT ENABLERS The software house sector has a long and complicated history. Who remembers names such as Misys, Penta, Insurecom, North Park, New Millennium Technologies and PolicyMaster? Many were sold, bought, merged and were subject to management buy-outs. But a core remains, including SSP, OpenGI and Acturis, and certainly for brokers, they provide a range of facilities that allow brokers to operate more effectively. Is a software house essential? Broker Bryan Banbury, managing director for Nottingham-based Russell Scanlan, is a firm believer in the power of e-trading and says it has boosted business growth. It s the first route we would take with smaller clients and we use both extranets and software houses. We changed fairly recently to Acturis, because we liked the system and it was so focused on commercial lines, as well as being fully integrated. We have also noted that insurers too have improved what they are doing. So, is there room for improvement? No system is perfect. We still find we need to refer even a small risk at times, for what might appear a relatively minor issue such as a query on an alarm, but that s how it is and I remain comfortable with how the technology mostly works. There are some good products, offering wide cover, and if we go via an extranet, then the minor amount of rekeying into the back office is not much of an issue. But, do software houses see it as a case of being in competition with extranets? In a competitive marketplace, there may be a grain of truth in this, but the role of the broker is to both work with the software house to find a quote that is most appropriate for their business and to use extranets if this is a better option. Overall, insurers and software houses work closely together in terms of providing panel products. Adrian Coupland, customer and marketing managing director with SSP, comments: With the pace of broking having changed in recent years, back office interaction, compliance and the ability to issue documents immediately are now essential to brokers success. As a result, e-trading is coming to the fore as a fast way of transacting business and a single point of access to multiple insurers. 5

6 E-TRADING Simply by keying in information once, brokers using an integrated e-trading solution can receive quotes from a whole panel of insurers. This provides a full comparison of the price, cover and benefits of insurers products in real-time, enabling brokers to demonstrate compliance with the FCA s principle of treating customers fairly through conducting a comprehensive and conclusive review of the market. He continues that as both the insurer and broker have visibility of the same data, it is possible for documents, surveys and pictures to be attached as part of the risk details submission. These electronic documents are instant and traceable, and can be ed on to clients immediately and even if these complex risks can t be fully e-traded, automation will improve the exchange of risk data and documentation, as well as the final bind process. The ability to issue documents immediately are now essential to brokers success. As a result, e-trading is coming to the fore as a fast way of transacting business and a single point of access to multiple insurers. Adrian Coupland, customer and marketing managing director, SSP Mr Coupland says: In the future, it is likely we will get to a point where a high number of commercial combined and fleet policies under several thousand pounds are not manually written. This increased automation will enable insurers to look at more of the risks they currently don t quote for due to the sheer volume of business, which will in turn benefit brokers. INSURERS AND SOFTWARE HOUSES WORK CLOSELY TOGETHER IN TERMS OF PROVIDING PANEL PRODUCTS 6 Further, Nick Giddings, chief marketing officer with OpenGI, says he is convinced that e-trading is critical to brokers success. Efficiency is critical in particular at the smaller end where premiums are low and the market is so competitive. Plus, the end consumer at this smaller end often has demands that are aligned to personal lines and therefore brokers need the ability to obtain multiple policy premiums quickly and control issuing of documentation.

7 IT S NOT UNUSUAL TO SEE COMMERCIAL RISKS OF UP TO AROUND 20,000 BEING TRANSACTED He points out that at the micro end of SME, OpenGI is providing websites for its brokers, since many of their customers looking for their landlord or self-employed liability insurance, act in the same way as when looking for van, motor or home insurance. They not only start online they are also looking to make their own decisions and to buy online. In terms of mainstream SME, Mr Giddings says adoption has made good progress over the last three years. However, he adds: There will always be exceptions on combined policies, in particular for risks where the trade type is a descriptive sentence. Additionally, withheld cases that are not always re-broked via e-trade, these can remain on the legacy method, by which they were originally placed. He says in personal lines, insurers insisted all cases were moved to EDI, but this did not occur in the SME space and as such, there can be more re-keying required. On progress, he says there is growing ability to transact more complex business digitally, commenting: Commercial e-trading now can provide brokers with the ability to do e-referrals or talk to underwriters via online chat, which means more complex cases can be referred but still placed via e-trade. For the more niche lines of business, provided an insurer or Managing General Agent (MGA) is able to build a rating method for a risk, the capability now exists (in our rating hub) for a bespoke question set to be built alongside the rating, with portal access for brokers to the then e-trade. Mr Giddings concludes that in terms of software house wish list, brokers are looking for: A good user experience that is easy to navigate and speed is the key for brokers. So ideally a short question set. Also, the widest footprint and ability to still refer nothing more frustrating that spending time keying a case into your software house platform or insurer portal to then find you cannot get a quote of cover via referral and therefore subsequently have to submit via other methods. Software house Acturis specialises in SME and more complex commercial and co-founder and co-ceo Theo Duchen, agrees that e-trading is absolutely critical to brokers success, whether they are small or large businesses. He adds that it is important for brokers to get to know software houses and pick which is right for their business model and to make sure they are accessible via all relevant channels. Brokers must be able to reach customers and market, having access to products quickly and being able to react as necessary. That means using a software house, insurers extranets, the solution from any schemes provider being used and if they are a big enough schemes provider themselves, then having their own quote and buy system they will also want to be on the aggregators if they have the right product. So that is as many as five key channels all being used for e-trading, which suggests a dynamic and diverse broking model is emerging. Brokers are looking for a good user experience that is easy to navigate and speed is the key for brokers. Nick Giddings, chief marketing officer, OpenGI But, it is far from being all plain sailing. Mr Duchen points out that the trend towards consolidation continues and this can throw a spanner in how e-trading works. If one broking firms take over another you may have different software houses in place and migration issues and one firm may not want to move off its system. It can be a shame to see some of the independents go, as they are the backbone of the broking market, but the consolidators remain very influential. Mr Duchen says that as a Software as a Service (SaaS) system, Acturis is able to roll out products fast and provide the flexibility brokers need. Recently, we re seeing more MGAs become active and they are taking on the tougher risks that the mainstream insurers can tend to avoid. If brokers can e-trade these then it s great news, because they can service a wide range of customers and not have to turn people away. He adds that it is now not unusual to see commercial risks of up to around 20,000 being transacted, increasingly now using web chat. It s a real step forward and referrals generally aren t a problem, particularly if there is web chat, which is something many brokers like rather than a telephone call, this can be much more convenient because it can be stored as an audit trail. Acturis was the first to deploy live chat developed by standards organisation Polaris with other stakeholders. 7

8 STANDARDS MATTER Polaris has played a vital role within e-trading. The organisation was founded in 1993 and is an insurer and broker owned body, which develops e-trading standards used by insurers, broker and software houses along with products and services that support the implementation of these through its ProductWriter and imarket initiatives. Standards matter because there must be a common meaning to the data and processes used in the industry to include business process models, messaging standards and code lists, technical specifications, best practice guides and documentation. As Mr Duchen says: There are always some who will say e-trading is not moving as fast as it should be and says Polaris is not doing enough, but you have multiple parties involved and I know for a fact that a lot of hard work goes on. Those who complain should compare the UK to countries such as France and Germany, which don t have standards, and they will see that our insurance sector and distribution is much better. Meanwhile, ProductWriter allows insurers the means to deliver products across multiple channels and contains a product definition toolset, a high-performance rating engine and a set of market dictionaries. And, imarket is a commercial e-trading solution that connects broker and insurer systems, with permits insurers to provide brokers with secure access to products, generating real-time risk assessment and pricing for comparative quotes across a range of commercial policies. Polaris managing director Martin McLachlan says the industry working together was a crucial factor in ensuring brokers survival and continued dominance within the commercial lines space, in addition to operating as some top notch personal lines specialists. Brokers are both more knowledgeable and demanding now in terms of what they expect from insurers and their software house. Whereas once it was their back-office system, now e-trading capability is an overriding factor. He adds that suggestions that brokers were once technological dinosaurs is unfounded. They did take to EDI and remained part of the market when the direct writers took off and also adapted to appear on the aggregators, which caused major disruption. 8

9 Mr McLachlan believes e-trading also offers regulatory benefits and says Polaris is focused on Good Customer Outcome reviews, something on the FCA s radar. He explains that while insurers and software houses test products to make sure they work, Polaris reviews products from the broker and customer s perspective to make sure they have good outcomes. We look at how insurer products perform together in a comparison environment and how the broker system presents these products to the broker user or end customer. And if we see something we think could be improved we ask the brokers on our Broker Review Panel what they think should be done about it. If necessary, and then, if they agree with them, we track their resolution. He says Polaris has developed generic review scripts for use across all business classes, SWHs and insurer products. We have also developed a library of real-life risk data that allows us to model different scenarios. We constantly update our scripts and risk-data scenarios in response to new observations or changes made by software houses or insurers and because products are constantly changing and so, need to be constantly reviewed. PRICE IS NOT THE ONLY VARIABLE On the topic of regulation, it is positive to hear that Polaris is focused on compliance issues something that is of enormous concern for brokers in the highly regulated financial services industry. Philip Nunn, sales and marketing director for Polaris, says he believes while price and costs savings were a core driver, the emphasis with e-trading is now on quality as well as cost. He comments: The flight to e-trading and efficiency for personal lines and the competition between broker and direct channels resulted in the rapid commoditisation of private car insurance and price became the overwhelming focus. In commercial lines, there is now a strong desire within both broker and insurer communities to ensure e-trading creates a flight toward quality and compliance where product suitability and good customer outcomes are as important, if not more so, than price. So, this is a win-win, if ever there was one. IN CONCLUSION DO YOU KNOW WHERE YOU RE GOING TO? So, e-trading is here now and it will be a part of the future. But, are insurers and brokers ready to expand and adapt certainly they have shown this ability in the past. As an overall trend, we can expect to see insurers continue to grow their product ranges that can be e-traded. Ms Tongue says no one can rest on their laurels, even if they are currently thriving. There is still a lot of potential for insurers to do more with the MI they hold within their systems from e-traded business. Big data is becoming more accessible and will offer opportunities to cross sell more effectively and offer a more personalised approach. The way online purchases are being made is changing as technology continues to evolve. Both insurers and brokers will need to continually adapt to cater for their customers needs, whilst remaining compliant. Big data is becoming more accessible and will offer opportunities to cross sell more effectively and offer a more personalised approach. Julie Tongue, digital trading manager, Allianz Insurance plc Potentially, brokers will move into the InsurTech space, offering niche products, and of course, utilising e-trading. Part of this is under discussion currently in BIBA s new innovation working group, which is aimed at keeping brokers up to speed with the market trends and ensuring they become innovators in their own right. Meanwhile, it will certainly not be a free for all, the FCA is keeping a watchful eye as ever and the General Data Protection Regulation, which arrived in May, poses its own compliance challenges, requiring brokers to ensure they store and use customers data to meet the new rules something which will impact on cross-selling and marketing. But, given where we are now, there is also plenty to celebrate in what has been achieved so far. Greater functionality, wider parameters and wholesale adoption of e-trading has created a leaner and slicker marketplace brokers and insurers working in partnership have every reason to look forward with positivity. 9

10 allianz.co.uk Allianz Insurance plc. Registered in England number Registered office: 57 Ladymead, Guildford, Surrey GU1 1DB, United Kingdom. Allianz Insurance plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number ACOM8072