The value of collaboration: Online information-collaboration approaches can help insurers to improve and streamline specific business processes. (Technology Insight: Technology).

Straight-through business processing between agents and insurers is now prevalent and expanding for many insurers as a means to lower costs, enhance quality and improve timeliness. Most of the simpler insurance transactions are now electronically processed between insurance agents/producers and insurance carriers. Estimates are that more than 80% of personal lines and more than 60% of small-business commercial lines packages are processed electronically via the Internet or proprietary systems between producers and insurers.

However, more complex business processes are more difficult to process directly online and require information sharing to succeed. Larger risks are still processed via traditional mail and fax as they require significantly more information sharing between the insureds, brokers and carriers that cannot be easily standardized into consistent formats.

The ability to manage customized insurance products from development through sales, underwriting and claims also has proven to be a challenge. Many insurers have spent significant sums to integrate their disparate internal systems and have created large data warehouses to share product information among functional areas without much success or return on investment to date.

Online information-collaboration approaches can enable insurers, brokers/producers, insureds, regulators and other industry participants to more efficiently gain access to information and achieve a high return on their investment. This collaboration allows parties to securely submit and access data through an online warehouse.

Information collaboration can have many functional applications within the insurance industry, but three core insurance business processes are very attractive:

* complex commercial lines, health and life insurance sales;

* product management for middle-to-large commercial lines and health plans; and

* catastrophic claims requiring the involvement of multiple parties.

For complex sales functions, typically the broker or insurer will establish the collaboration capability that enables the insured and broker to submit the application and additional required information electronically (scanned if necessary) to a collaboration site. The broker and insured can provide access to selected insurers, minimizing the resubmission process. The underwriter can access this information and request more as necessary and provide approval process status via the collaboration site.

Collaboration is not an exchange where various insurers bid for business, but rather provides an information-sharing mechanism that saves interested parties time and effort.

Information collaboration can also be leveraged to help with the internal product-management function between product developers, sales, marketing, underwriting and claims functions.

Complex insurance products have customized features that make it difficult for the underwriters to know what the sales and marketing function has committed to the broker and insured. In addition, the claims function often finds it difficult to obtain the product specifics necessary to pay claims appropriately as well as provide feedback for underwriters. In the claims arena, a catastrophic claims information collaboration service could provide significant value for industry participants. This reporting generally involves a number of claims being processed directly by the primary insurer, by the reinsurance broker to the reinsurer, and then by the reinsurer to the retrocessionaires. A centralized catastrophe claims reporting service that industry participants would use to report and review (not process) claims could serve these relatively simple needs more effectively.

Information-collaboration software applications are numerous and can serve as a starting point for customization. The cost of the technology is relatively low compared to the change in business processes that are necessary to take advantage of collaboration approaches. Many fear information sharing as a risk to their control over information, but the security for accessing online information is even better than for paper transfers.

Collaboration technology and business approaches are not a panacea. However, they can provide specific solutions to some key needs of insurance players. The key is to limit the scope and investment to a dedicated purpose that will provide an attractive payback. The time is now right for collaboration approaches to be pursued by forward-thinking executives.

Steven Landberg, a Best's Review columnist, is a managing director of Alpha Financial Services Consulting LLC and a general partner of Prometheus Venture Partners LP. He can be reached at [e-mail].