Copyright © 2001 Business Insurance

Internet Enhances Brokers' Value to Insurance Buyers July 16, 2001

by JOANNE WOJCIK

When businesses began to embrace e-commerce and Internet tools in the late 1990s, brokers feared the result would be widespread disintermediation, with corporate insurance buyers bypassing intermediaries and dealing directly with insurers.

But that hasn't happened.

Instead, brokers are harnessing Internet technology to enhance the services they provide to insurance buyers.

In fact, independent agencies have undergone a communications revolution, with the proportion of agencies with Internet access growing to 93% in 2000 from just 8% in 1996, according to a recent survey by the Alexandria, Va.-based Independent Insurance Agents of America.

While large brokers have built their own online systems, small and midsize brokers are buying off-the-shelf software that many believe will enable them to compete head to head with their larger counterparts.

It is unlikely that corporate insurance buyers will ever use the Internet to buy directly from insurers, because ``risk management is more of an art than a science,'' said Peter Oppenheim, corporate claims manager for ARAMARK Corp. in Philadelphia and a past president of the Risk & Insurance Management Society Inc.

``It's very difficult to put a company's risk management needs into a format as objective as a computer interface needs to be,'' Mr. Oppenheim said. ``I don't think you can substitute a computer for relationships.''

``The human element is such a major component in the insurance procurement transaction,'' agreed Robert Meder, director in the new business department of New York-based broker Frank Crystal & Co.

``I don't envision the day when I would ever buy direct,'' said Troy Priesmeyer, director of risk management for The Wackenhut Corp., a security services firm based in Palm Beach Gardens, Fla.

``I have a very complex program. Not many insurers want to write security guards,'' he said. ``I need all the help I can get, and if I have to spend an additional $250,000 in brokerage fees to help me access all the markets, it's a no-brainer.''

Furthermore, ``I like to have someone else on my side,'' Mr. Priesmeyer said. ``When a dispute comes down in a claim, Aon's involvement has helped us get claims paid.''

``The direct efforts to sell insurance over the Internet have been less than stellar, because there was a lack of realization of how important and valuable a trusted relationship is,'' said Rick Morgan, executive editor of Boulder, Colo.-based TAAR, the Automated Agency Report.

But even though the Internet is no substitute for personal relationships, many insurance buyers appreciate-and expect-brokers' efforts to improve their technological capabilities.

``Ten years ago, e-mail wasn't acceptable (for business communications). But could you imagine living without your e-mail today? That's a huge shift in behavior,'' said Heidi Miller, vice chairwoman of Marsh Inc. in New York.

``Three years ago...we didn't have a coherent strategy'' for using the Internet for business communication, said Sean Smith, president of broker Keenan & Associates in Los Angeles. ``But now, you have to be tech savvy'' to compete in the insurance industry.

``If a broker isn't keeping up with the technology its clients are using, then it can't provide any real value-added service,'' said Mr. Oppenheim.

Indeed, technology is helping brokers enhance the services they provide.

``There's a lot of intellectual capital that's being distributed through the use of technology or in the very old, traditional face-to-face discussions. To me, they go hand in hand; they complement each other,'' said Eric Joust, managing director of Aon Risk Services in Chicago.

In addition, brokers are using Internet technology to make certain services-such as providing certificates of insurance and access to account information-more convenient for clients.

For example, in certain systems, a contractor preparing to bid on a project can go online and print a certificate of insurance without needing to call its broker.

``That's a big deal,'' said TAAR's Mr. Morgan, who also is executive vp for ConfirmNet, a Boulder, Colo.-based firm that produces electronic insurance certificates through its CertificatesNow service.

``Recently, the risk manager for a large public technology client expressed an interest in gaining online access to documentation related to her company's risk management program-policies, property schedules, claims, certificates, etc. Riskclick provided us with the ability to meet those needs immediately,'' said Jona-than Crystal, managing director of Frank Crystal.

Riskclick, an off-the-shelf software product developed by a London- and New York-based high-tech startup Riskclick Inc., lets brokers, insurers and insurance buyers communicate on one platform that manages and stores documents.

And because Riskclick operates as an application service pro-vider, or ASP, it costs less than an onsite system. That's because the ASP structure allows many brokers to, in essence, share the same software, which is housed and maintained off-site by information technology professionals (BI, Jan. 22).

The availability of off-the-shelf Internet technology is enabling small and midsize brokers to have virtually the same technology as larger brokers, said Richard Kerr, founder and chief executive officer of Dallas-based Market-Scout.com.

The growth of so-called ``insurance aggregator'' sites such as MarketScout, which acts as a kind of online managing general agent, also is helping small and midsize brokers compete by giving them access to the same markets as large brokers without needing to obtain appointments from insurers. MarketScout has already obtained those appointments and shares them with thousands of independent agents nationwide via the Internet, Mr. Kerr explained.

``For the independent agent, it's the great equalizer,'' he said.

The Internet also provides a low-cost way for agents and brokers of all sizes to market their products and services to a wider audience, Mr. Kerr noted.

``Say a broker has a program for day-care centers. With proper interactive marketing technology, it can distribute it to the masses,'' Mr. Kerr said.

Other off-the-shelf software products help make agents and brokers more efficient by automating their backroom operations.

For example, ProjectPlus, a workflow and imaging system developed by Valencia, Calif.-based QualCorp Inc., ``allows the agent to look at the job of the insurance transaction and break it down into manageable pieces,'' explained QualCorp President Allen Beggs.

The use of imaging software, which converts paper documents into computer files, helps reduce errors caused by retyping information, Mr. Beggs explained. And having all the pertinent client information stored electronically makes it easier to locate, he added.

``You don't have to run down the hall to find a file,'' Mr. Beggs said.

``You also don't have to lug files when you visit clients. You can connect via the Internet to all the client's information,'' said Tom Wimberly, manager of marketing communications for Atlanta-based RiskLabs Inc. RiskLabs, a risk management information system vendor, recently unveiled an Internet-based version of its RMIS, RiskConsole, an ASP designed specifically for the Web, that brokers can customize and provide to their clients.

``If you automate as much as possible, it shrinks clerical staff by 8% to 10%,'' Mr. Beggs estimated.

And using technology to improve underwriting and to mine and manage data will do even more to cut costs, he said.

``The deals are getting smaller in insurance, so brokers need to reduce the cost of doing business so they can stay in business,'' Mr. Beggs pointed out.

``Everybody's looking for ways to cut expenses and have people work smarter,'' Keenan's Mr. Smith agreed.

Technology also makes tracking the loss experience of an account easier, which can make renewals go more smoothly.

``Then the underwriter can see everything that happened on the account over the year, including loss mitigation,'' Mr. Wimberly said.

The use of technology to improve backroom efficiency also frees up agents' and brokers' time so they can tackle their clients' more-complex problems-or prospect for more business.

``If you take the stuff they did in person and over the phone and put it on the Internet, that takes less time and allows the broker time to go out and find new business,'' Mr. Wimberly said.

But even as brokers continue to invest in technology to provide better service to insurance buyers, some of those buyers would rather they just stick to what they're good at.

All brokers have to do is look at other industries that have tried to be all things to all people to see it's better to stick to their core business, said Wackenhut's Mr. Priesmeyer.

While he acknowledged that brokers need technology to maintain a competitive edge, Mr. Priesmeyer said, ``I would rather they spend their money on brokering.''

© Copyright Business Insurance 2001