Agency Management Systems: Still Waiting for True Integration with Carriers

The true integration of agency management systems with carrier systems may be on the horizon—but current market dynamics make it a very distant horizon. In the meantime, more of the policy transaction process and document storage burden falls on the independent agent. All of this makes for added costs along the distribution channel with the ultimate effect of slower service and higher costs to the consumer.

The initial hope was that agents and brokers could enter client information once into their own agency management systems. Then they could upload it easily to carriers, compare prices and policy terms and make the best choice for the client. Needless to say, this hasn’t happened. Multiple entries are still a necessity.

The current Web-based portals such as Transformation Station, widely used by Applied Systems agency management system, and Transact-Now, will let a broker easily move from one carrier’s Web site to another. While interfaces such as these make it easier to do rating online, rating comparisons across multiple carriers still are not possible. The need for multiple data entry is compounded by having to re-enter data separately on every carrier’s Web site, in the case of multiple quotes.

This is a major frustration for information technology executives across the nation—these issues exist at virtually every agency and brokerage firm across the country.

Why have the promised efficiencies of integrating agency management systems with carriers failed to materialize?

“It’s all a matter of market dynamics,” according to Al McDowell, president of Rebsamen Insurance in Little Rock, Ark. “There are no agency management software vendors strong enough to go to the carriers and tell them that they have to standardize so that we can enter the information once and send it to any company we wish. Instead, if brokers want productivity, we have to interface to the best of our abilities with what the insurance companies offer. The carriers apparently believe that if they have the Web site that’s easiest to use, brokers won’t be as likely to look at competitive offerings.”

The cost to brokers is often overlooked, as was pointed out by Jeff Golas, systems administrator at Johnson, Kendall & Johnson Inc. in Langhorne, Penn. “We have to maintain a bigger Internet connection, spend more time printing and use more paper,” he said. “It makes the carriers’ lives easier. But we’re not seeing any kind of benefit or getting larger commissions. Instead they’re telling us to enter the data in our internal system, enter it again on the carrier’s Web site, and then print it out ourselves.”

The landscape has become a mix of different solutions. Some RiskProNet members streamline the data entry process by entering information into the carrier’s Web site, and then wait for the carrier to download it back to them. But the lag of 48 hours or longer makes our brokers nervous. What if something happens—or the customer has a question—in the meantime? Because of this, our members say it’s still necessary to enter at least some of the data in the broker’s agency management system so that there is a record that a transaction has begun.

Electronic passwords are another issue. Most carriers change passwords frequently for obvious security reasons. It’s then up to each agency to go onto all the desktops and update each one individually.

Add to these issues the decisions of many major carriers to “turn off the paper.” It’s not that any of our brokers actually want paper, but most view it as a necessity for commercial lines. For personal lines, where policies typically are standardized, it’s been easier for our members to decide to go paperless.

Some members report that carriers are using a carrot rather than a stick: If you insist on paper, the carriers say, we’ll cut your commissions. Or you’ll go to the bottom of the line and it will be 60 or 90 days rather than 30 days before we get a policy back to you. The end result is usually the same. In other cases, our brokers are simply informed by carriers that they will no longer send paper policies. In any event, the onus is on the broker to solve the problem, and the solutions vary.

Debra Hoffman, information technologies manager at Watson Insurance Agency Inc., in Gastonia, N.C., told me that they took the initiative to get rid of paper by turning it off in personal lines and imaging in commercial lines. “We were just receiving the paper and then shredding it,” she said. “We talked to our lawyers, and they said that if we turn the paper off for one policy type, we have to turn it off for all similar policies. Otherwise, we could face problems with our errors and omissions coverage.”

If there are no more paper copies of policies, who saves the electronic copies? So far not one of our members relies solely on carriers’ Web sites. “We may change carriers, or carriers may disappear or merge,” Nancy Lawson, business analyst at Brady, Chapman, Holland & Associates Inc. in Houston, explained at a recent RiskProNet group discussion. “Because of that, we still image all of our policies and put them into a document management system.”

“We’ve had clients come to us and ask us to go back five or even 10 years as claims come in,” added Bobbie Dougherty, director of information technology and systems at Mortenson, Matzelle & Meldrum Inc., in Madison, Wis. “If they don’t have a copy of the policy and we don’t have a copy of the policy, what happens? It’s a little scary, so we are still scanning all the polices we get into our system in full.”

McDowell said that they maintain copies of policies for their clients for seven years. “It’s a big expense, and we’ve had to develop a very elaborate storage system,” he said. “But we’ve been unable to figure out any other method with which we feel safe.”

So what is the current situation, and what do we see brokers doing now?

• Brokers are still looking for an agency management system that will eliminate multiple entry and solve the storage problem.

• While members have successfully made the transition to paperless in personal lines, commercial has a long way to go. Agencies continue to store paper.

• When information is uploaded to the carrier’s Web sites, it’s imperative to make a notation in the broker’s agency management system, even if all the data is not entered. If there’s a question before the download from the carrier comes back, at least there’s a record.

In at least one case, a RiskProNet member has stopped doing business with a carrier because its requirements for electronic communication were too onerous.

And what should be done?
Carriers should allow standardized interfaces with their Web sites, so that data only has to be entered once.

Carriers and regulatory bodies should set uniform policies on who is responsible for maintaining copies of polices—and for how long.

If these two things were to happen, they would go a long way toward bringing agents and consumers the promised efficiencies and cost savings of the Internet age.

Gary Normington is executive director of Menlo Park, Calif.-based RiskProNet International Inc., a network of 28 leading independent insurance brokers in the United States and Canada. RPNI’s 28 partners last year had combined revenues of $497 million, giving the organization significant market strength. Each of the 28 partners is an equal owner in the association. Total written premiums in 2003 were $4.8 billion. For more information, visit www.riskpronet.com or call (650) 323-1929.