A war is raging among providers of back-office life insurance administration software that are gaining and losing clients following the acquisition of MGAs. System transfers are frequent, and provider prices are rising.
Before being acquired by Financial Horizons Group in 2012, Force Financière Excel used an in-house life insurance administration system, while Financial Horizons used Virtgate. When the expanded MGA acquired Groupe CMA in 2015, it inherited AGEman Solutions. Faced with this Tower of Babel, Financial Horizons decided to transfer all its data from its existing systems to Bluesun’s WealthServ system. Other large Canadian MGAs, including PPI in 2012 and HUB Financial more recently, have also made the switch to Wealthserv.
IDC Worldsource Insurance Network (IDC WIN) is moving to WealthServ for both the life insurance and the investment sides of its business.
Bridgeforce Financial Group is currently working on this transfer for its life insurance business.
WealthServ’s ability to handle both business sectors is attracting other multidisciplinary players. The Insurance Investment Journal has learned from a reliable source that both SFL Partner of Desjardins Financial Security (SFL) and National Financial Insurance Agency (NFIA, a subsidiary of iA Financial Group) are also preparing to transfer their insurance data to WealthServ.
iA Financial Group declined to comment for this article, referring to the quiet period preceding its annual general meeting on May 11, and SFL was unable to put us in touch with a spokesperson before this issue went to press.
A sensitive issue
Data transfer is a sensitive issue and represents a vast undertaking for consolidators. James McMahon, president of Financial Horizons Group – Quebec Region, explained that the transition from three systems to WealthServ was difficult. “It took more than a year, but we’re pleased with our decision. The system works well,” he said.
IDC WIN also has its work cut out for it. “In our view, Univeris was not going to be the system of choice that could handle both our insurance and our investment platforms,” explained Ron Madzia, CEO of IDC WIN. “There are always challenges when making changes such as this. To minimize disruption, we will be transitioning our investment platform first, followed by our insurance platform at a later date.”
To explain his choice, Madzia added that WealthServ has become the software of choice for the major MGAs. “It will allow us to handle both sides of our business. Bluesun has been operating in the MGA marketplace for the last seven or eight years, and its offering is more in line with our long-term technology strategy.”
Jim Virtue, CEO of PPI Solutions, explained why his company chose to implement WealthServ in 2012: “We assessed user friendliness, connectivity with insurance companies, systems reporting capability, and the commitment and capacity of providers to further develop their system, and WealthServ came out on top.”
Michael Williams, CEO of Bridgeforce, also aims to transition to WealthServ to eliminate disparities between systems. “We have some offices on WealthServ and some on Winfund (W. Insurance), but we’re moving all our offices using Winfund to WealthServ. We’ve chosen a single back-office vendor since it’s not practical or efficient to have two back-office systems in the same organization.”
According to Williams, Bridgeforce will be using only Wealthserv by the third quarter of 2017. “I’ve heard that WealthServ will be the back-office vendor for the top 5 MGA’s in Canada,” he added. “With the on-going consolidation of MGAs across Canada, there’s only so much business available for the three or four main back-office vendors in the country. I don’t know if the industry can support that number of vendors in Canada.”
Virtue agrees: “MGA consolidation is impacting the back-office system suppliers. I know of four main systems available in Canada today: WealthServ, AGEman, VirtGate and W. Insurance, and it’s hard to say what the go-forward impact might be.”
Wind in its sails
Mike Donati
Right now, Bluesun seems to have the wind in its sails, employing 55 people in its Burlington, Ontario, office. Mike Donati, its CEO, told The Insurance Investment Journal that his company has been growing by 30% annually over the two last years and expects to increase its staff to 75 by 2018.
Bluesun’s WealthServ product suite, purchased in 2009, accounts for 50% of the company’s revenues. Consolidation is fuelling its growth. “In 2016, we carried out eight system conversions for our clients, with data coming from AGEman, Virtgate, and Winfund. We’re working on seven additional conversions this year,” Donati explained.
He acknowledges that the operation is complex. “With small MGAs, there’s not much to do, so we can go live with the system very quickly. But for larger MGAs such as NFIA, which we are installing right now, it means converting thousands of advisors with potentially different business processes for each financial centre. In their case, this involves simultaneously converting data from two AGEman and one Virtgate system to one WealthServ system.”
Bluesun has learned some valuable lessons from its more complicated installs. “In hindsight, it might have been beneficial to phase in the install, separating the insurance from the investment business into two releases, rather than installing both at once,” notes Donati. Between 2015 and 2016, the company added professional expertise to its management team to make WealthServ installation and conversion projects repeatable processes.
According to Donati, WealthServ administers 60% to 80% of the independent channel life business in Canada. He says he doesn’t have the exact figures for the investment business going through WealthServ, but adds, “We support the majority of seg funds business on WealthServ, but we have a smaller footprint in mutual funds.”
Fighting back
AGEman Solutions is not throwing in the towel, although it admits to feeling the impact of the SFL and NFIA transfers. According to Daniel Brisson, the company’s founder and senior agent, AGEman plans to focus on the national accounts market – brokerage firms that distribute insurance products.
Last year, AGEman, known for offering the solution of choice to smaller MGAs, formed a strategic alliance with VieFUND to serve the needs of mutual fund dealers.
“We work a lot with national accounts, which make up more than half of our clientele and 80% of our sales. We’re also mounting an offensive in the Ontario market. We receive calls from large groups in Vancouver and Calgary. We have a few irons in the fire,” Brisson explained.
The back-office war has nevertheless hurt AGEman, and this has been noticed by clients. Christian Laroche, CEO of Aurrea Signature, bemoans the rate increase imposed by AGEman earlier this year. “AGEman’s rates jumped 30% this year. I got the impression it was losing customers because of consolidation. In attempting to make sense of this increase, I observed there was a back-office war and that Bluesun was taking market share from competitors,” he said.
Brisson didn’t deny the cause. “MGA consolidation is one of my worst nightmares. When there’s an acquisition, the buyer’s system takes over,” he said. Still, he’s encouraged that people aren’t leaving because they’re dissatisfied with his system, despite the pressure these departures create for its company.
Rate increases
As for the rate increase, Brisson explained he had to raise them to remain competitive. “Our development expenditures tripled this year, compared to 2016,” he said. The company’s rates are based on performance. The costs of firms sending in a large number of insurance applications (new sales) per number of representatives connected to the system are reduced. “AGEman administers some 100,000 policies a year,” he adds.
Jim Virtue of PPI Solutions, a WealthServ user, also stresses the importance of maximizing usage. “The cost of a back-office system is significant, but it’s a crucial piece of our day-to-day operations. If we can maximize the full potential of the system, we can recover some of those costs through savings,” he explained.
Tim Fitzpatrick
VirtGate, another system often replaced following consolidation, remains unfazed. Tim Fitzpatrick, creator of the system and the company’s CEO, notes that his system is present across Canada and that he is supported by the independent channel, which sells one third of all policies in Canada but collects two- thirds of the premiums. His market: MGAs and national accounts.
Fitzpatrick mentions a major client, Qualified Financial Services (QFS), an MGA that processes all its individual life insurance policies through his system. “A significant number of Canadian distributors have engaged VirtGroup to provide data management services,” he said.
Fitzpatrick also observed that current trends support the back-office systems market, including the explosion of electronic applications and greater life insurance compliance (see article on page 14). “Distributors and selling agents are rapidly embracing electronic applications (except possibly some older agents close to retirement),” he said.
Fitzpatrick hesitated to provide statistics on his market share or number of users, claiming that such statistics can be misleading. A figure could represent new business or business in force, for example. Of the 100,000 policies that pass through his system, a minority might be life insurance policies and the majority segregated fund policies forwarded by the Fundserv transaction system to VirtGate.
The number of connections can also be misleading. An MGA might have 2,000 advisors connected to VirtGate but have placed only 100 policies through its system in the preceding twelve months, with advisors connecting for other reasons, he said.
In-house solutions
QFS says that it contributed to the development of VirtGate. “We have our own version of VirtGate,” explained Kevin Cott, CEO of QFS. “We were one of the first MGAs to have this software, and we helped develop it. We had three years of exclusivity with VirtGate before we developed our own version. We left the core of the system in place and added a number of things specific to QFS, such as calculation tools.”
QFS’s acquisitions have actually worked in Virtgate’s favour. “We’ve done acquisitions of firms that were using VirtGate, and of others that weren’t. It was easier for us to convert their data to VirtGate. We’ve been using this system for sixteen years now, and we’re happy with it since it provides our advisors with valuable tools they can use in their day-to-day business and communications,” added Cott.
Other companies have chosen to develop their own life insurance data administration systems. One of the best known is the Group Cloutier’s Maestro. MSA Financial, a smaller MGA, also created its own system. “Our on-line system is available to advisors 24/7. It was inspired by AGEman and its Repman software. In March, we made it interactive for our advisors, who thus have access to front office services such as a customer management system, explained David Benamron, Senior Sales Director, MSA Financial.
Why opt for an in-house system? “It’s a matter of cost. We choose what we need in terms of our front-office system, and since we already had an integrated back-office system, it would have been inefficient for them not to be able to speak to each other. This way, we can adapt the system and make the necessary adjustments as compliance requirements change,” Benamron says.
