5 reasons MGAs choose the wrong IT suppliers

In their vendor selection and management presentation, one of Gartner’s Research Directors, Dayla Sullivan, recognises that we now live in a world where we are ‘super-fast consumers’. She goes as far as to say that speed can trump SLAs, pricing, ROI measures and even the importance of strategic partnerships when choosing an IT provider.

For the growing insurance MGA market, selecting the right IT system can be time consuming. Especially when led by business or underwriter-side decision makers who may not have first-hand experience of a full, comprehensive RFP process.

The basics are obvious, what they all do, prioritising what you need (chances are you can’t have it all on the specific budget, timeframe and capabilities available) and making the best decision based on the future plans for your business.

So aside from following a checklist, like the resources detailed below, what else could you look out for?

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Useful supplier selection resources:

Nine steps to successful information technology vendor selection, TechWRITE, Inc. blog

The Successful Vendor Selection Process:  Five Steps, About.com – Operations / Technology. Authored by James Bucki, Director of Computing Technology, Genesee Community College

Gartner Vendor Selection – Latest Vendor Selection Trends‎ – Sourcing & strategic vendor relationships,  presented by Gayla Sullivan, Research Director, Gartner’s IT Asset Management, Vendor Management and Procurement team

Gartner report for members or purchase: Agenda Overview for IT Services Sourcing, 2014

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After discussing some of the main challenges of insurance technology selection with industry contacts, it appears there are some reasons people may choose the wrong supplier. They won’t affect all, but these have been highlighted as some of the uniquely insurance-related IT selection pitfalls:

  1. Short sightedness

Judgements based on only what a system can do now. Once it’s implemented what then? Can you control your operations and how quickly products get to market? Was the supplier product roadmap factored into selection? Was your business strategy for the next 5-10 years one of the key decision making factors? It may appear the ‘best’ decision at the time but if you are forking out additional funds next year to support a new distribution channel or scheme, what’s that term? Own goal.

  1. Blagging it

Are the people doing the selection process qualified enough? Do the selection panel know IT, your business and insurance well as a whole? Sometimes, especially in MGAs, only one or two people are truly leading the selection process and therefore may only have one or two areas of expertise – perhaps not enough to consider all of the selection implications.

  1. Image is everything

As a supplier we update our UIs, but in a technology forward world we are used to consuming good looking technology.

It’s very easy to show a simple, clean user interface quickly on a smaller device. Does ‘it looked just like a website’ during that demo take into account all of the functionality?

What lies beneath the technology? Is it built for the web instead of web enabled as an afterthought? Is the user interface stuck on top of lots of mashed together systems, (think putting lipstick on a pig), and what could that mean for future development, releases and support?

Don’t let how it looks in a flash on an iPad take priority over business benefits.

It sounds absurd but often people appear to put ‘brand’ and ‘image’ before features and functionality.  This is common of business-side decision makers who, rightly so, may be thinking of their staff, broker or end user customers at the time.

But once in the process should it not be centred on the top level basics?

Like:

o   What do the supplier’s clients say about the operational benefits?

o   Where are the suppliers investing their money, product R & D and functionality? Etc…

  1. Keeping up with the Joneses

Ahh the bandwagon, I jumped on several during my school years in the form of Doc Martins and a perm. There seems to be a wave of enthusiasm for certain systems at certain times, often following a big marketing push or people copying one another – thanks to the close proximity of the London Market in particular.

Some people feel that if your competitor has a system, you should select the same system. The word being ‘select’ not copy. You don’t copy their business strategy entirely, perhaps you want to differentiate yourself and could benefit even more so from different tools to achieve that.

Competitors may not even have made the best selection (the negatives likely not to be promoted).  Can your independent solution choice then make that difference to your operating ratio and profit next year, meaning you move up the Top 50 table ahead of them?

  1. The ‘experienced’ influencer

Somewhere along the way you may have recruited one:  A political, self-serving person masquerading as experienced.  Thought processes may include:

‘I know how to use this system, I’ve implemented it before, and I’ll push for it because it’ll be easiest’

‘If I don’t rock the boat and keep my head down I can leave in five years without having to change any systems’

‘My mate owns that company; I’ll give him my lead so we can go for beers together every week’

Some of these thought processes make sense – if you’ve implemented it before you are aware of the challenges. If you like someone within the supplier company, chances are you trust them and they’ll try and ensure a good job is done for you.

However, if persuasive, these types may lead you to a supplier decision, not based on company centric, future profit based reasoning.

Your experiences

What are your experiences of supplier selection challenges within the insurance MGA market?

And what have suppliers done, or not done, to help or hinder the process?

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Want to find out about eInsurance system RiskWrite to see if it qualifies for your RFP process?

Then book a meeting or ask a question today 01923 312366 / marketing@sabrefish.com

Sabrefish’s RiskWrite solution is a line of business neutral, full life-cycle underwriting system with accounts, claims and an intuitive, multi-section product builder. An integrated broker portal and optional web front ends mean you can distribute your products in the way you choose, from one point of origin. Clients benefit from quote & bind, workflow referrals, auto-documents, bordereau management, auto-rating, multiple languages, currencies and taxes, product build and subscription business features; so they can process more business with less resource for a scalable future.

Infographic; 12 RiskWrite facts you may not know

What really goes on behind the scenes in insurance technology

What really goes on behind the scenes in insurance technology

Sabrefish’s RiskWrite solution is a line of business neutral, full life-cycle underwriting system with accounts, claims and an intuitive, multi-section product builder. RiskWrite enables you to distribute your products, how you choose, from one point of origin due to an integrated broker portal and optional B2C and B2B web front ends.

Clients include; DUAL Group, Novae Group, Nexus Underwriting Management and W.R.Berkley Europe.

Enquiries: marketing@sabrefish.com, 01923 31236601923 312366

Sabrefish sponsor the first London Market Group Forum of 2014

Sabrefish were proud to sponsor the first London Market Group Forum of the year, promoting our full life-cycle, multichannel underwriting system, RiskWrite.

The London Market Group (LMG), supported by the Lloyd’s Market Association (LMA), is a senior market wide body with the primary function to act as champion of the modernisation agenda in the London Market.  Monthly informative LMG Forums take place for insurers, brokers, suppliers and influencers in London’s Willis building, welcoming speakers from influential organisations, which this month included; Willis, Marsh and Catlin.

Christopher Croft, Head of LMG Secretariat, opened 2014’s first LMG Forum with his usual wit. And as this month’s sponsor, I was on the receiving end (but wouldn’t expect any less!).

Click here to download the LMG Forum presentation slides.

The forum began with the usual round up of eAccounting and Non Bureau Accounting volumes and accuracy.

eAccounts accuracy is still 15% more accurate first time in comparison to IMR A&S submissions. This is true of both the Lloyd’s and companies market, as it was throughout 2013.

Non Bureau Accounting numbers are increasing year-on-year; it’s conceivable we may see a 100% adoption increase in 2014, judging by last year’s 80% increase.

Year

Average

Year-on-year % increase

2011 – 12

400

2012 – 13

1600

25%

2013 – 14 so far

2000

80%

The Board of Placing Platform Ltd (PPL) has defined their ‘workstreams’ for progress which include ‘Planning, review and governance’ through to ‘Market commitment and roll out’. Placing resources can be found here on the LMG website.

And the LMA, International Underwriting Association (IUA) and London & International Insurance Brokers’ Association (Liiba) continue to work together as the ‘Central Services Refresh Programme’, to make Central Services easier and more attractive to use by moving London market specific administration tasks, or “Londonisms”, away from the broker. Their agenda is as follows:

  • Defining a number of potential deliverables for 2014
  • Working with LIIBA to validate the operation of EBOT and ECOT in a subscription market
  • Developing metrics with carriers for how Market Submission can improve service performance

As the sponsor it was a pleasure providing the prizes for this month’s winners, congratulations to:

Richard Hayes, Head of ITAscot Underwriting

Charles Brown, PMOJLT

Event speakers & topics for the session included:

Shirine Khoury-Haq of Catlin; who chairs the TMEL Board and also represents the International Underwriting Association (IUA). Shirine presented on:

 “Delivering the foundation of the future: The Message Exchange Limited in 2014 and beyond”

Simon Harker, Global Chairman and CEO, Aviation and Aerospace Practice of Marsh Ltd presented on:

“Electronic Support for Endorsements – Aviation Initiative” – Sharing the work to increase usage for Aviation endorsements.

And…

Richard Brame, Director of Accounting and Settlement at Willis presented on:

“E-Accounting Expansion 2014 and Beyond” – Including a look at non bureau accounting from the broker perspective and how they will build on the 23 new business partnerships that went live in 2013.

The LMG is set to take on an even more influential role in London’s place on the global stage. Sabrefish look forward to observing and being a part of its progress.  

To view the full presentation, click here.

Commercial brokers; adapt or die?

The 2012 Datamonitor UK Commercial Distribution report stated brokers still held 83% of the distribution of commercial insurance in the marketplace.  In modern, competitive insurance new intermediaries are fighting for capital and commission as sales distribution channels become more varied. The result is brokers have to consider ways to stay stable amidst a flexible, soft market. The wider adoptions of digital and online technologies, too, pose a challenge for brokers that don’t adapt.

“58% of brokers said the level of commercial insurance they trade electronically had increased”
Insurance Times, 16/10/2013 edition

Is there really a threat to the very people who currently own relationships with the end customer? And are the changes personal lines a sign post for changes to be expected within commercial lines? With Insurance Times recently highlighting the ‘broker squeeze’ on commissions, innovative ways of increasing profit margins are fast becoming brokers’ priorities. With this in mind I’ve laid out some of the potential broker threats and opportunities to arise from them:


MGAs

MGAs are one of the (no longer ‘new’) intermediaries in the insurance chain. There are no hard rules on who this affects and how as it is on a case by case basis – some carriers profit share with MGAs as they take on the work, other brokers may feel a pinch on their commissions.

X Can be a threat to brokers who handle high volume, low value commercial business as a possible commission reducer

Could be an opportunity to start an MGA or bring coverholders in house, especially niche area brokers:

Brokers are increasingly bringing coverholder or MGA business in house; Lockton/ Mapledown and Arthur J Gallagher/ OIM Underwriting etc.  MGAs are able to quickly make rate changes, be entrepreneurial and take on new lines and books and retain control further along the customer chain – it is easy to see why the trend is not subsiding. Coverholders/MGAs grew by 275 in total from 2007 – 2012, now we are seeing ‘steady growth’ with 31 new MGAs from 2010 – 2012 according to Lloyd’s. However some of these new MGAs do fail and Saxon East of Insurance Times warns “Broker MGAs need a unique selling point”.


BINDING AUTHORITY

Binding is proving to be a revenue differentiator for medium to larger brokers. I.T is key for brokers and insurers to work together to process large volumes of policies in this way. Passing one document around 8 people before approval and labouring on spread sheets doesn’t add to anyone’s bottom line. Efficient processes free up manpower, meaning your staff could process double the amount instead of you having to cut costs, jobs and endure the subsequent negative PR.

X Is binding a threat if you don’t have a dedicated team? Ask your carrier partners.

Lack of binding or ‘account handling’ capabilities may or may not be an immediate threat to you take the lead from the insurers you work with. Do other broking companies they work with have dedicated binder/account handler teams to serve some of their schemes, or binding authority/coverholders to process books of business? How much business are they planning on processing this way in the future?

Binding is an opportunity for medium to large brokers to become or remain the preferred broker.

WHITE LABELLING

White labelling in personal lines is established; eliminating some personal lines brokers and enabling carriers to increase margins and undercut brokers. A recent example of the trust in white labelling is Brightside – turning to big brands ASDA and Debenhams in times of need.

X Threat to SME commercial insurance  

Is the diversity of white label adoption into bigger brands and niche markets a sign it will slowly become more widely used for other types of commercial insurance? Big or niche brands come the benefits of up and cross selling to a mass or targeted audience, so it is easy to see how this may grow in an ever brand dominated world.

Opportunity to get in there first for SME insurance and others?

You could offer white labelling as part of your broking service to retain some business and increase sales whilst taking away the leg work from not only carriers, but yourselves.

 

E-TRADING/ ONLINE

Retail/ B2C has officially sold direct since 1985, thanks to the infamous, Direct Line. Direct selling was, of course, then catapulted by the birth of the internet and now we see the influx of the likes of ‘cover4mobilephones.co.uk’ and ‘cover4travel.com’ from UK and Ireland Insurance Services for example.

Direct online and intermediary aggregator sites have been used for high volume, low value business for some time. The squeeze comes now as wholesale B2B start to look at online as a sales tool, will e-trading cut out brokers and how can you gain more inclusivity to these channels?

X The Broker Market in UK has been transformed by consolidation and the advent of disruptive ‘Online’ Models”Lloyd’s Market Review Presentation, 2012

Opportunity to all brokers

Create an online channel for your customers to engage with you, or join a B2B aggregator. Commercial lines aggregators already exist (iprism) and there are many ways to utilise online. ‘Marketplaces’ for products are another ‘channel’ increasing competition however – therefore pushing brokerage down in an already soft market; judging which ones will increase your product’s profit is vital.

We would recommend building products with the channels they are going to be sold via in mind. When opting for an online traded solution for example, minimising referrals should be a priority. This allows you to keep the cost of sale as low as possible and in turn, make pricing attractive.

Brokers are starting to view carriers more as customers –are you making the most of your carriers multi channel offering (if they have one)? Do your brokers make full use of their web-based portals or preferred channels to remain favourable, and in some instances get preferential rates?

Online is ever growing and can’t be ignored. Next it will be mobile and iPads, so web-based systems will facilitate what will be an even more an even more tech-savvy workforce– here is some research evidence of demand courtesy of IBM: The successful insurer will be digital – IBM Infographic.


CONCLUSION

Commercial insurance is now an ‘offline’ and ‘online’ market place.

There are many options to automate; messaging, policy admin and bordereaux systems. Or a multi channel system so you can open new distribution channels from one core system –  opening and closing channels for different schemes offers flexibility and is strategically (and financially) safer for medium-large, growing organisations.

If you lack a niche offering or strong enough relationships you could move more into carrier territory as Vantage have done – for whom broking now only accounts for 10% of their business. But realistically threats are not happening at the speed of light. Commercial brokers still hold power and relationships with end customers.

The threat, for now, is more about being competitive, strategically diversifying, automation and knowing BOTH your audiences, carriers and customers.

“Automation is still a choice in the current market but soon it will be a necessity, as technology is becoming part of the decision making process when people select a broker, MGA or underwriter as a partner.” Peter Montenaro, Head of Delegated Authority, Lloyd’s – 2012

After speaking with senior executives at both broking and carrier companies I’ve heard of a mutual respect – both seeing one another as a customer – this can only pave the way for collaboration on the best ways to stay competitive for one another.

 

Top 10 insurance stories of 2013

It’s official, Christmas adverts are upon us! The year is not done yet but I still found myself looking back over 2013 at what could be deemed UK Insurance’s top stories. Here is my pick:

  • Guess whose back? The newly appointed Chairman and CEO of Endurance, the renowned John Charman has already increased the share price simply by showing up! A market scholar says; “Their support [for him] is causing other multi-billion players to say: ‘Maybe we haven’t articulated a ballsy enough agenda’.”
    –Source Insurance Insider
  • “Amazing that even in a bumper year like 2012, 27 out of 92 Lloyd’s syndicates didn’t make any underwriting profit. Most were small…”
    –Source Mark Geoghegan, Editor, Insurance Insider
  • Dubbed ‘controversial’ by the insurance media, Berkshire Hathaway has struck deals to access Lloyd’s via facility – so far agreements are held with Willis and Aon – a trend that threatens free competition?… watch this space…
  • AJG continue to take over the world. Well, Giles, Belmont International and Barbon Insurance Commercial & Property in 2013, following 6 acquisitions in 2012.
    –Source AJG press releases
  • With so much M&A activity it’s no wonder that the value of European insurer mergers and acquisitions over the first half of 2013 were 1.6bn, the highest for 2 years
    Source Insurance Times, October edition
  • Ageas, AXA and RSA continued to produce Core Operating Ratios above 100% for commercial lines. Is commercial the new motor?
    –Source Insurance Age, March 2013 edition
  • There have been 33,445 complaints against top insurers to the Financial Ombudsman Service about general insurance since the start of 2011…
    – Source Insurance Times, September 2013 edition
  • The FSA became the FCA which was, at the time, anticlimactic. Despite 95% of the staff remaining the same they’ve insisted they will act differently and their publicity supports this (assessing staff bonus schemes, enforcing fines etc). The regulation panel at the Xchanging London Market conference seemed impressed to date with the FCA and PRA … another tbc?
  • Complaints about terms in insurance policies have risen by three quarters over the past five years. Nearly half of all complaints about unfair contract terms (UCTs) relate to insurance policies, according to data released from the FCA
    – Source Insurance Times, September
  • Three of the top UK broker networks bring in around 500 million pounds EACH in revenue; Brokerbility, Broker Network and Willis Networks
    –  Source Insurance Times, July edition

Any I’ve missed?