Challenges

Surprisingly, the insurance industry's level of technological sophistication is far behind other financial industries. The question is why and who will ultimately drive the technological changes that are needed in the industry?

Some might say the insurance industry has made huge technological strides despite significant challenges. True, while banks and investment companies have figured out ways to open online accounts, collect relevant data, transfer money and offer multiple types of services, they don't have to address issues such as multipart insurance policies, claim filing, temporary coverage needs and endorsements that add layers of complexity to the insurance process. There is no doubt that insurance issuance has complexities that other financial products do not.

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Another factor for the technology lag is that every insurance company has differing levels of automation efficiency. One insurance company may not be capable of giving brokers a firm quote through its system -- only an indication. Another carrier may issue quotes online but cannot bind and issue. Without a common practice standard, brokers often must go from one insurance carrier to another, jumping through hoops to get the information needed for their customers. In general, insurance companies have focused on internal automation advancements to streamline their operations. This technology, although progressive, has not assisted significantly in helping brokers with their clients.

Meeting the clients' needs

As the Internet is used increasingly for comparison-shopping and buying, insurance customers expect brokers to have the same tools to find the best rates for the needed coverage -- and they expect fast answers. Brokers are feeling the pressure to speed up the insurance process from their customers. Even when the right policy is found and accepted by the customer, it is rare that an insurance carrier can quote, bind and issue the policy online.

Some online insurance models are built for consumers but similar models may work well for retail brokers who want to pick and choose coverage elements to create custom policies for their customers. Consumer-driven insurance company sites presently allow consumers to compare auto insurance rates of other insurance companies before buying. Retail brokers are under pressure from their customers to provide the same fast access to pricing and coverage. Customers are expecting their brokers and agents to return quotes within minutes, not in days or weeks as is so often the case.

Several online wholesalers are providing immediate quoting and binding services online and a few handle the entire underwriting process through to policy issuance entirely online. When brokers use these systems, they get a quote for several lines of coverage from more than one company. Brokers do not contact multiple insurance carriers, but instead submit one set of data that covers multiple policy types, and perhaps from more than one company.

Whether insurance companies offer these services directly to the consumer or to their agencies, or they partner with wholesalers or aggregators to reach other brokers and agents, the entire industry benefits with increased efficiency.

Push for change

Insurance companies have the option to leverage their internal legacy systems into new technology or choose to use third-party software and systems. Creating viable online systems is a daunting task. For many insurance companies, changing to an online purchasing system is costly, time consuming to create and difficult to maintain. In fact, several insurance companies have introduced online systems with much fanfare, only to pull the plug soon after because of maintenance and other issues.

Besides cost, another major concern for online transactions is security. This may be the largest deterrent to an insurance company's willingness to participate with the online broker development community. All entities (insurance carriers, retail brokers and online wholesalers) must work together to guarantee privacy, verify individual state licensing and broker and agent licenses, and ensure compliance with other statutes. Without a unified security and privacy process, many brokers and carriers will be hesitant to use online services.

Another primary reason the industry hasn't fully embraced one-stop-shop platforms is that many insurance carriers are not particularly interested in being part of head-to-head competition, which they will find themselves in if they participate in a multiple insurance online platform. But soon, it won't be their call. Ultimately, consumers will force the insurance industry to change. When customers expect brokers to quickly find them the best policy at the best price, brokers will force the issue with carriers.