Internet & E-Commerce –

THE PATH in Insurance!

PIA National

Advocacy

• Agents are & will be a major marketing force
• Agents are & will use Internet/IP technologies
• Agents REQUIRE seamless business processing platforms for the portfolio in P&C, L&H, FS, Bkg., & others in retail & wholesale markets

Education

• Of: PIA, agents, carriers, regulators, vendors & others
• Market & business realities
• Required & evolving functionality
• Strategies, tactics, process, products
• REAL business processing & behaviors
• Benefits

PIA - as a trade business

• Demonstrating through applied use
• all of the previous
• diversity of service options
• medium progression
• joint planning

Technology 2000 Means

• AGENCY SUCCESS THROUGH:
• COMPETITIVE DIFFERENCIATION,
• COMPREHENSIVE PLANNING,
• SMART PURCHASES, and
• EFFECTIVE DEPLOYMENT.

Agencies MUST Evaluate

• Their insurance partners AND vendors
• based upon their contribution to or detraction from
• the integrated agency plan!

Agency Technology

• MORE than agency vendor system

Agency Technology MUST

• Provide a competitive platform
• Meet agency’s full business needs
• Accept/support multiple options
• Work for carrier & client requirements
• Full function

Agency Owner MUST

• Understand the function possibilities of THIS technology era,
• how those can serve the agency’s needs,
• and in a NON-Insurance centric way!

Technology Today

• Will not make you a success. But it IS the platform to success.
• Is the price to stay and play in the game.
• Is similarly challenging ALL your clients.
• Is bigger than the insurance industry’s definition of or experience with it.

Insurance Implications

• SEMCI - "S" is NOT SAME
• "S" = SINGLE
• The speed and variety of technology will be used in VARIOUS ways by insurance entities to manage the pressures of the insurance marketplace.
• Independent Agencies MUST be positioned to accept many approaches.

Y2K

The best competitive event for independent agents!

BECAUSE

It is unavoidable and demands new technology investment of agency!

AND

Agencies’ purchases to respond to Y2K include the foundations for broad Internet Protocols usage.

Recommending a Strategy

Ideas for Today and Tomorrow

• Internet/Web technology is the virtual extension of all your agency operations.
• You didn’t create current agency overnight, so neither will you do so with Internet/web initiative (1)

Recommending a Strategy

• Through "IP" agencies can:
• execute ANY kind of marketing method, service and/or expert advice strategy
• to ANY segment of consumers/clients
• for ALL types of products from many providers
• AND tailor method to the customer need and request.

Vision Statement

• Agency competitive difference for success
• Made real by deliverable agency value to clients & carriers.
• Detailed by the required agency operational behaviors & services.
• THEN translate how & what is supported &/or affected by Internet/web-based functions. (4)

Vision Statement

• HAS TO BE an integrated whole
• What you are (will be) & how you do that - as an agency.
• It is 1 vision
• executed in part by technology &
• compatible/integrated with ALL agency operational behaviors/procedures.(5)

PIA-CCEO

• In 1st quarter of 1997 PIA-CCEO surveyed 2000 PIA members on PL
• In January of 1998 PIA-CCEO surveyed 230 PIA Leadership
• Both results also compared to previous PIA survey results where appropriate.

Agency Earnings

• 1997 - past 3-year performance:
• 58% net earnings growth, but at lower rates than in previous surveys
• 29% holding steady
• both groups report:
  • growth in new and current client portfolios
  • increased expense
  • downward adjustments made to their bonus agreements

Agency Earnings

• In 1998 #1 challenge noted by agents was maintaining appropriate earnings margins.
• Expense to gross earnings ratios
• Gross earnings to premium dollars
• Capital outlays to gross earnings
• Future investments to gross earnings
• Net Profit to net earnings

Agency Earnings

• Contemporary data from various member sources indicate:
  • Potential improvement in net earnings across agencies.
  • Competition for agencies resulting in signing bonuses and improved profit sharing incentives.
• Writings are increasing, as well.

Agency Competitiveness

• 1998 - was the #2 challenge noted
  • stability of markets & offered products
  • product/pricing responsiveness
• 1997 - large majority of agents reported
  • growth in new & current clients
  • market stability of carriers as good
  • price/product of carriers as OK

Concerning Other Products: L&H and Financial Services

• 1985 = 15% sell it – 25% interest level
• 1995 = 25% sell it – 40% interest level
• 1997 = 38% sell it – 87% interest level
• 1997 = 97% report that more clients are asking them about these lines
• 1998 = 91% report will expand into these lines over the next 3-years.
  

Staffing

• 1998 - listed as the #3 leading challenge for agents
  • training, recruiting, compensation
• 1997 - all report staff expense is up
  • staff expense highest when adding new lines & technology

Technology

• In 1995:
  • 12% have E-mail among PIA leadership
• In 1997:
  • 12% experimenting with websites among membership.
  • 70% recognize Internet/WWW is a needed tool among membership.
• In 1998:
  • 86% have E-mail among PIA leadership.

PIA Year 2000 Agent Surveys, June 1998

• Only 60% have received Y2K information from of their companies.
• These agents have only heard from 2.5 of their 5-7 appointed carriers.
• 90% of that information is general in nature.
• Most agents have not received carrier notice of Y2K compliance deadlines.

PIA Members on Agent-Company Relations

• 1987 = 64% reported unsatisfactory
• 1992 = ALL report affected by 2 or more adverse company actions.
• 1997 = 77% overall rate carrier performance good to OK.
• 1998 = All report good opportunity to discuss and work out issues with their carriers.

Leading Carrier Concerns: 1998 PIA-CCEO Survey

• Competitiveness & growth.
• Sustaining needed earning levels.
• Internal expenses.
• Expertise ( to include agencies).
• Technology.
• View & measures of Wall Street.

ACORD and XML: The Guide & The Path

Agency-Company Organization for Research and Development

One Blue Hill Plaza, 15th Floor
P. O. Box 1529
Pearl River, NY 10965-8829
Phone: (914) 620-1700 or (800) 444-3341
Fax: (914) 620-0808

January 2000 issue – Professional Insurance Agent Magazine

Industry Watch Column – Carl Gaspar (NBD – CO) chairman PIA National Business Technology Committee and ACORD Board member.

Many carriers early on understood the benefits that Internet offered insurance processing. Internet protocols are more flexible and better able to interface with many more dissimilar systems and all at substantially reduced costs. Attention and resource commitment to ready for Y2K greatly tempered the full Internet launch efforts of these carriers.

As Y2K projects concluded agents began seeing more of their carriers moving towards some form of Internet transactional interface with them. Whether for the upload side of a new policy transaction or up-to-the-minute claims status, Internet/web-browser applications are here. Rather than have every company, once again, invent their own approaches with carrier-unique screens, ACORD has stepped in.

The new standard is called XML. Unlike previous standards efforts that took a three-year or more time frames to come to market, there are a number of important differences to this latest effort. XML is proceeding much faster, addressing more transaction types than we now have in any current insurance technology standard. It will be, at the same time, global and insurance-financial services in nature.

The ACORD XML standards have not started from scratch. Instead they are using the existing standard developed by IBM, MS and Intuit called IFX. This standard is already being used in the financial community. ACORD has formalized a working relationship with IFXForum, manger of these standards. This cooperative venture will extend the experience and expertise that the financial community already has with Internet standards and provide insurance–specific influence into this process.

The global nature of the financial community and that in many other countries banks are already engaged in insurance had already moved IFX/XML standards into the worldwide insurance community. This is most apparent in initial London market efforts in cargo insurance and reinsurance efforts.

As carriers began implementing their own Internet protocols, they did so for many more lines and types of transactions than pre-existing standards had addressed. Therefore, from its inception, the XML Internet effort (new standard) will be more comprehensive and include far more backroom functions (such as the full scope of claims activities), and lines of business, (such as life and specialty lines), than does the current widely used industry AL3 (old) standard.

The benefit is a more comprehensive automation of the full scope of functions necessary to transact insurance services across a larger number of line types. However, to meet the pace of the Internet evolution and manage costs, ACORD has made the decision that the extended line and transactional capabilities developed in XML will not be engineered in the older AL3 standard.

The challenge for some vendors will be to blend standards or convert all their software to XML standards or offer systems that only execute AL3 insurance transactions with carriers’ XML companion interfaces completing the picture.

Therefore it is very important that agents be very aware of these changes and plays an active part in shaping them.

Pete Wilson, co-chair of the ACORD Agents Advisory Committee and member of PIA BTC, staff and myself are part of the process. We will ask for and need the involvement of PIA affiliates and members so that ACORD crafts a uniform XML standard that can be applied in any number of options and accepted by the insurance partners with which PIA members do business.