The author
TO THE POINT
The industry has indeed achieved the ability to customize products and services ... but many cannot envisage how technology can add anything to processes that are highly personalized and unique.
By Howard Green
When I was a young broker, a venerable Lloyd's underwriter explained to me that, "What we do here, young man, is tailor handmade suits." Ever since, I have constantly been reminded of his meaning--that the essence of our business is providing custom solutions to clients who have uniquely different risk management needs.
The "handmade suits" analogy also conveys another key point about our industry--the idea that customization can be achieved only by experienced people working within networks of trusted colleagues, and relying upon tried and tested paper methods. The industry has indeed achieved the ability to customize products and services, but at an enormous cost to our clients. Recent studies by Swiss Re and Goldman Sachs estimate that $40 billion or more is wasted on inefficient and duplicative processes. Many people in the industry see technology as the direct opposite of this "handmade suits" ideal. They cannot envisage how technology can add anything to processes that are highly personalized and unique. This is not surprising because most technology successes in financial services have focused on commodity products such as personal lines, mortgages or term life. As a result, technology has had little impact on the production and distribution of commercial insurance. Most interactions in this $600 billion industry continue to rely entirely on paper methods.
But what if there were technologies that could enhance customization, enabling the customer to be measured more accurately, fitted more closely and offered a greater selection of cloth than ever before possible? What if the customer could check on his tailor's progress, could make adjustments between fittings and could engage his far-flung advisors to help him select the most appropriate styles?
Collaborative commerce software is technology that enables greater efficiency and deeper customization. It works by enhancing the traditional skills of the industry as opposed to replacing them. As such, collaborative commerce software leverages the talents of key people by freeing them of paper work. It improves the service we provide to our clients, by promoting clients from spectators to full participants.
To see how this works, let's look at a familiar, though ficticious, scenario. Janet Smith is the risk manager of Vision, Inc., a rapidly growing middle market company with six manufacturing plants and a network of distributors. She has a small team at the head office and part-time risk coordinators in each of the plant locations. Janet feels that her existing broker treats her as a bystander. Yes, they have an extranet that enables Janet to access some policy detail and accounting information, but she has no access to the information that really matters, such as the status on renewals, work in progress, and major claims. In deciding to conduct a broker review, Janet is looking for a solution that will enable her and her team to be part of the process.
Progress Agency was one of the first brokerage firms to adopt collaborative e-business and this was a key reason why they won the account prior to the mid-year renewal of Vision's program.
Andy Stewart, the Progress account executive responsible for the Vision account, set up folders in the system mirroring the paper files that would have been kept tucked away in the rows of filing cabinets that used to monopolize the floor space. He selected an account team and appointed someone in each of the Progress offices to be involved in servicing the local needs of Vision. Then he set up a "property renewal" folder and started uploading into it the documents and information that would be needed to negotiate the renewal. Working with Janet, he also set up a collaboration process among all of the people at Vision locations who would provide information to facilitate the renewals. As a result, there is now a virtual community of everyone involved in the renewal, all collaborating with the same files and information. Access rights have been set for each collaborator depending on the role he or she plays.
When logging on to their computers, the Vision people see an invitation giving them access to the folder Andy has created. A message asks each of them to use the template located in the folder to provide up-to-date property and business interruption values for their location. Unlike
e-mail attachments, where dozens of different versions are created, team members access and work collaboratively with only one file.
Andy creates a draft manuscript policy and gives access to Janet and her core team, plus her internal and external lawyer. Any member of this group can make edits to the draft, which the rest of the team can see immediately. The system keeps track of every version of the document and who authors it. Previous versions can be recalled at any time.
Andy now begins to assemble an electronic submission using the completed exposure templates, draft manuscript wording and other key documents. He uses the system's structured, message-based workflow to select potential insurers. These are software tools that Web-enable key processes such as "quote request." They guide the user through a series of steps to create an electronic submission and select the insurers that are to be given access to it.
Andy and Janet plan to visit key underwriters and negotiate terms and conditions face to face. The electronic submission provides an audit trail that keeps track of exactly which documents, document versions and messages have been exchanged with each of the dozen insurers that will be approached before this transaction is completed. Janet considers this reliable audit trail to be a crucial feature in replacing the inefficiencies of paper.
In between the face-to-face sessions, Andy provides Janet with access to a placement status report so that she and her team can see the up-to-the-minute status at any time. Whenever an insurer provides a quote or has a question, this status report is updated. Janet doesn't need to see every interaction in the process. She leaves this to her broker and has agreed with Andy beforehand on the level of detail required.
As the insurer quotes come in, Andy and Janet see the detail simultaneously and can discuss the issues with the full file in front of them--even though both of them travel extensively and log in from remote locations. Andy is able to bind the insurers online and post a copy of the wording finally agreed upon in the folder.
Andy works with the lead insurer to create a new summary of coverages and incident reporting procedure that is posted in the client folder and instantly made available to all Vision representatives. Andy and Janet work together to create a separate, worldwide "community" of all Vision distributors, who are given access to a folder containing product liability incident procedures and a template for reporting incidents. In the background, the system automatically keeps a complete record of this interaction.
This example illustrates the power of collaborative commerce to modernize client services without reducing customization. Of course, this all sounds compelling, but hasn't insurance been littered with failed IT projects? Isn't it going to cost the earth, take forever and be awfully slow and risky to obtain these capabilities?
Actually, no. The second piece of news is that collaborative commerce software is fully compliant with the Internet and can be centrally hosted. Instead of dozens of industry participants, each building its own technology at great risk and expense, collaborative commerce software can be provided to multiple firms from a central server. In this way the burden of development is spread, greatly reducing the cost and eliminating the development risk to the user.
Central hosting also promotes interoperability. If everyone uses that same basic infrastructure, then clients, brokers and insurers can exchange information seamlessly without re-keying.
The author
Howard Green is the president of Riskclick (www.riskclick.com), a firm with offices in London and
New York City, that develops collabora-tive commerce software to help risk management and insurance markets become more efficient, reduce errors and provide certainty.