Exchange place: two global technology initiatives are bringing together agents, brokers and carriers.

Even with technology constantly offering new ideas, the avenues communication are not always clear, and it takes a lot of effort to find systems that work well for all involved.

Of 1,500 business-to-business exchanges started, only 43% survived according to a 2003 report in California Management Review.

Similar reports also have pointed to B2B's demise. But when it comes to insurance, many in the industry believe B2B e-commerce has never been more alive.

Now B2B technology is reaching new heights by eliminating several administrative frustrations faced by agents and brokers. Not only is B2B e-commerce reducing manual processing and duplicate entry, it's also helping agents and brokers deal with carriers' proprietary systems and improving their abilities to communicate and do business with a multitude of insurers.

The road to achieving those efficiencies, however, hasn't been smooth. Now, two initiatives on either side of the globe are poised to eliminate roadblocks in the business-to-business marketplace.

National Insurance Exchange

An insurance exchange set to launch later this year will be a pathway to connect agents and brokers with carriers.

The Council of Insurance Agents & Brokers is supporting the creation of The National Insurance Exchange--a broker-driven exchange designed to move submission and quote processes to a single platform, allowing agents and brokers to enter all information once and send it to multiple carriers. In the 2006 ACORD Users Group (AUGIE) Technology Survey, respondents identified duplicate entry and proprietary systems as two of the primary administrative challenges they face.

"Currently, information has to be entered into multiple systems," said Frank Sentner, director of technology for CIAB, a Washington, D.C.-based association for commercial insurance and employee benefits intermediaries in the United States and abroad. "The exchange is designed to reduce expenses and allow our members to do a better, more effective job of placing risk. It will also improve the customer experience. With that comes improved retention, and improved retention means improved profitability."

Sentner defines the exchange as a "utility" because it can move and aggregate data among parties. "It's not a risk-bearing entity. It doesn't make a commission, nor write insurance. Rather it facilitates the movement and collection of that information for placement of business," Sentner explained. Once a risk is profiled in the exchange, users can select carrier partners they want to conduct business with.

"If carriers they don't represent have an appetite for the risk, they'll have an opportunity to use one of the wholesalers on the exchange as intermediaries for submitting business to the carrier," Sentner said. What the exchange doesn't do, he noted, is eliminate current relationships between agents and brokers and carriers.

Jeff Yates, executive director of the Agents Council for Technology, a forum affiliated with the Independent Insurance Agents and Brokers of America, believes the combination of new technology (Internet and real-time), standards (ACORD XML) and consumer demand for immediate response are driving agency and carrier systems from being "inside facing. "The focus now, he said, is moving those systems so they can communicate and interact with trading partners and ultimately, customers.

"One of the major developments now occurring in the industry is the introduction of real-time," Yates said. "Customers expect immediate responses to their issues. The big gorilla for agents is to have more real-time quoting with multiple carriers something that's become difficult because of all the unique company information and third-party information (credit, C.L.U.E. and MVR) that have to go into a rate."

The Independent Insurance Agents and Brokers of New York Inc. soon will begin vetting the exchange among its board and potentially its membership. "I think it's an exciting opportunity for independent agents because for a long time, agents and brokers needed to take back control from carriers. In today's world, the thing that provides control and value is information. The exchange will provide agents and brokers an incredible amount of information that will make them more effective to their clients," said Richard A. Poppa, president and chief executive officer of the De Witt, N.Y.-based association.

The idea of a B2B exchange between agents and brokers and multiple carriers is far from revolutionary. Numerous attempts have been made over the years, but most have failed.

Some of that demise came from technologies being risk-bearing aggregates, Sentner said. "Syndicated approaches to the placement of business where you are taking on risk work great when you have an open and fluid market. But when things begin to clamp down, they tend to become a dumping ground and nonviable. That's a risk The National Insurance Exchange is not going to take."

Another difference? "Agency management systems, comparative raters, insurers' Web sites are basically all process-oriented to accomplish a transaction or task," said Poppa. "The new dimension of the exchange is that it provides analytics--moving you from process-based technology to having technology that begins giving users information, feedback and analytics that allow them to do a better quality job for their clients. It brings the knowledge and demand level of information that no other current technology approach in the industry has."

Poppa believes the exchange has the potential to significantly change how business is conducted with producers. "It can be a very powerful tool that helps them be better counselors to their clients. However, there's so much clutter and white noise in the market; the key to the success of the exchange is that it has to first deliver what it promises."

Its potential to become a leading network solution for providers and carriers also depends on having a large number of transactions that become the basis of analytics, he said. "If you put a few large accounts through the exchange, it won't give you any kind of credible data to use. The real success is by working with multiple translations, so data coming out is then of the size and credibility to ensure you are getting good information," Poppa said.

Agents and brokers aren't the only ones to benefit. Carriers will be better able to track agent and broker performance, Sentner said, and they'll also be able to monitor business they didn't write.

The vision for the exchange was that it would be owned, and to some extent operated, by and for agents and brokers, said Sentner. "One of its key differentiators was that it wasn't intended to be exclusive. Rather, all agents and brokers can participate. It will be an initiative that would be controlled by the distribution side of the house, not by carriers or software vendors."

The industry has seen its share of B2B iterations over the years--from dedicated terminals in the '70s to ownership of agency management systems' vendors by carriers to carriers' proprietary Web sites. "However, none of them solved the problem," said Sentner. "Our hope is with the right technology and direction coming from agents and brokers, that a successful insurance exchange will be able to eliminate the overhead costs associated with transactional processing and provide very valuable sources of information about the marketplace--something that doesn't exist anywhere else today."

Today's market is much different than it was a decade ago, he said. "We now have transparency and regulatory issues and pressures on revenues to contend with. Agents and brokers have to take charge of their destiny to survive, and we believe the exchange is an important component of that survival strategy."

London G6

Across the ocean another B2B initiative is making waves.

In 2006, six leading Lloyd's underwriters came together to develop a system to transfer data and documents electronically to make trading more efficient, reduce manual processing and bring greater clarity to the placement of risk.

The G6 initiative followed on the heels of Lloyd's unsuccessful hub-centered electronic communications systems Kinnect, which suffered its demise in early 2006. With the loss of 70 million[pounds sterling] (about U.S. $137 million), the project disbanded after Lloyd's withdrew its support, saying the approach was no longer suited to the market.

Despite some accusations the G6 was trying to replace the failed platform, G6 Chair Sue Langley, who also is chief operating officer of Hiscox, said it's quite the contrary. "Even if Kinnect worked, we would have still done this," she said.

The G6 arose from frustrations about the pace of changes in the London market and in response to the insurance industry investigations launched by then New York state Attorney General Eliot Spitzer, she said. "Particular note was taken of Spitzer's call for greater transparency."

The G6 centers on two phases. The first, nearing completion, is a "peer-to-peer" electronic transfer project that defines common data standards and processes to allow brokers to send information electronically to Lloyd's insurers. The second phase is designed to see the standardization of endorsements. Information transfer is based on ACORD data standards. Focused on issues related to operations, the G6 initiative looks at policy wordings, contract certainty and electronic data transfer in risk placement and settlement.

"It's an informal structure where we agree on an objective," said Langley. "However, how each agency gets there is entirely up to them. That's one of the reasons why it works so well. We each share a common goal and vision but have different methods of achieving them."

The G6 identified five small projects as part of the overall initiative. "Around the table for each project there's an owner that sponsors the project and beneath them is an action group of broker and agent representatives," she said. "We have no project plan and no requirements document. We just have very simple goals and objectives"

The initiative's initial objective wasn't to replace face-to-face contact, although that may occur over time, Langley said. "With electronic trading and peer-to-peer work, there's no technology involved. It's an ACORD standard way to transmit a message and the security around it. Brokers and agents don't have to implement technology because it works with their existing technology. When one of our agencies receives a message, a broker generates some information from their system including the piece of information from an ACORD standard. They then hit 'send,' and it hits each of our agencies." Some agencies feed the information directly into their systems and can populate a quote from the information that appears on the underwriter's desktop, while other agencies key the information into their system, she added.

"When it comes to processing in the London market, often the same page of information can be entered five times by an exchange or broker. The exchange eliminates that, along with the degree of error," she said. "By sending it electronically, brokers can make an appointment to see an underwriter, who can have already reviewed the information in advance and be ready to underwrite it during the meeting."

The six founding members of G6 included Amlin, Beazley, Catlin, Hiscox, Kiln and Wellington (which was acquired by Catlin in December 2006). Brit joined the G6 at the end of 2006. Each member brought a demonstrated interest in technology. Collectively, they control a large share of the Lloyd's market. Langley said while the G6 doesn't want to force change on the market, it hopes it can create a consensus that others will join.

Aon and Benfield were two brokers that jumped on board early in the process by creating electronic links with G6. "We've been very conscious that the cost of placing business in the London market was increasing for many years, which made the market less competitive than other markets," said Ian Summers, director of change strategy for Aon. "The market was constantly talking about working with us in an electronic way without much progress. The (36 acted as a catalyst for change, and we jointly developed a standard process between Aon, a number of other brokers and the G6 members. We have built something in London that we can leverage worldwide.

"We knew we didn't want the duplication associated with paper files walked or e-mailed around the market anymore. Technology has grown up. It's more intuitive, and people are used to working with the Web and e-mail. Culturally that's made life much easier," said Summers.

He said one of the key benefits of the initiative is that there's no degradation of data between clients and the markets. "We have a full audit trail detailing who said what, where and when. It allows data that supports placement to be moved from a broker to an underwriter without having to rekey. It also enables us to advise signed lines much earlier in the process. All this provides an end-to-end process from placement through claims and provides a much faster service for clients."

While Langley said the initiative is now running smoothly, it hasn't been without a few hiccups along the way. The cultural change in the market resulted in some reluctance. "Some placing agents became nervous that it would impact their jobs," she said.

Langley believes G6 will help bolster market reform in London, thus providing a competitive edge over other insurance markets. She's also excited about the growing interest by other insurers and brokers. "Our goal is to highlight the fantastic strengths, huge history and good underwriting diversity found in the London market, and G6 will help meet those objectives," she said.

Learn More

Hiscox Insurance Co. Ltd, A.M. Best Company #86912 Distribution: Regional offices, professional institutions, banks, direct

For ratings and other financial strength information about this company, visit wvvw.ambest.com.

Key Points

* Business-to-business e-commerce has gotten a boost by two initiatives designed to improve efficiency for agents and brokers, carriers and ultimately, customers.

* The development of the National Insurance Exchange will move the submission and quote process to a single platform.

* A London initiative called G6 is under way to improve the market's troubled relationship with technology.

National Insurance Exchange

Purpose: To move the submission and quote process to a single platform, allowing agents and brokers to enter all information once and send it to a number of carriers.

Opening Date: End of 2007

Software: Based on ACORD standards. ACORD provides independent certification to the international insurance and reinsurance industries.

Exchange Developers: Several, including Superior Access and venture capital firm Pequot Ventures.

Security Management: ChoicePoint in charge of the exchange's security, data center infrastructure and the aggregated risk submission information.

G6

Purpose: To transfer data and documents electronically to make trading more efficient and to bring clarity to the placement of risk.

Opening Date: 2006

Software: Information transfer is based on ACORD standards.

Founding Members: Amlin, Beazley, Catlin, Hiscox, Kiln and Wellington. Brit joined the end of 2006.