Life insurance industry to get own “FundServ”

By Daniela Cambone | November 20 2001 07:23PM

The life insurance industry may soon be dealing through a common platform of e-commerce! That is what six to eight major insurance companies have been studying behind closed doors since September. At last, a FundServ or an Interac-based system for the brokerage channel, say observers.

Richard Miles, Vice-President of Insurance Operations at Canada Life revealed the news to brokers gathered at 2001 Insurance and Financial Products Convention in Montreal this November. He stressed the importance of developing a system similar to FundServ for the life insurance industry.

“We are developing the concept of something like LifeServ or FundServ, an equivalent electronic of, or a common system electronic interface between suppliers of insurance products and their distributors,” said Mr. Miles during the conference entitled, When and How: e-commerce in the life insurance brokerage.

Mr. Miles attended a meeting on the eve of the conference that dealt with the idea of a pilot project that would test the application of a quasi-FundServ system to life insurance. The keynote speaker stressed that the project is only realizable if insurance companies make a financial commitment.

“A report was funded and we are now soliciting funds from each of the companies to make formal commitments of going forward with a proof of concept and a pilot project,” he noted.

The Insurance Operation Subgroup, a sub-committee of the financial accounting section of the Investment Dealers Association, approached IBM Canada in July. The Insurance Services and Solutions practice within the IBM Global Services division of IBM, was given the mandate of finding a common, technological-based method that would establish standard tools and forms that life companies, MGAs and brokers, could use.

Mr. Miles, a member of the committee, informed the audience during the conference that the pilot project should get underway in early 2002.

Life Companies Central (LCC) is the basis for the pilot project and the solution life insurance companies need. In essence, LCC provides a win-win situation for life companies since it is efficient and economical.

“The common ground is that LCC, which represents a central access point or portal, that electronically facilitates the flow of data for multiple companies and the companies’ products is desirable, both carriers and distributors agree on these things,” he added.

The pilot project is not a recent idea. Rather it is a plan that has been ongoing for two years. However, Mr. Miles explained that the issue is now being forced and commitments need to be made by insurance companies.

Companies working on the project include: Manulife, SunLife, National Life, Transamerica, Standard Life and Canada Life. There were also two new companies involved, but Mr. Miles did not disclose the names.

Panelists alongside Mr. Miles at the convention included: Yves Gosselin, President, Association des Cabinets Gestionnaires de Courtage en Assurance de Personnes du Québec, and Quebec director of Canadian Association of Independent Life Brokerage Agencies (CAILBA), Jean Morissette, President and CEO, Cartier Partners Financial Group, Michel Kirouac, Vice-President, Business Development, Cloutier Group and Steven Ross, General Manager for the LFS Network.

In order for companies to start achieving improved efficiency and expected cost-savings, all panelists agreed that finding a FundServ equivalent is necessary for the life insurance industry. When the project is launched in three months, Mr. Miles’ expectations are that carriers and distributors will have realizable cost-savings and other benefits.

Mr. Miles listed inefficient processing of new business, administrators needing to learn multiple carrier systems, multiple passwords and processes, unreliable pending information on websites, duplication of efforts due to re-keying of data into multiple systems and reconciling compensation as key challenges that operations are facing.

“All these problems lead to the conclusion that each of these companies having a different technology solution will never achieve the desired projected cost-savings, because we will have low update and a reluctance of distributors to use these various tools,” said Mr. Miles.

Despite supporting Mr. Miles’ vision, panelists such as Mr. Ross added the caveat that it will be quite a challenge to get the necessary financial backing. “I don’t want to be pessimistic and I wish you luck…but you need major investments on the part of distributors to make it work,” said Mr. Ross following Mr. Miles’ presentation. “What we found through the report is that we can make the project work and we can make it work to both the advantage of distributors and suppliers,” responded Mr. Miles optimistically.

Besides financial backing, compromise is another key component needed to make the project work. “It is agreed that a focus on providing timely and accurate information is simplistic, but to get an agreement is profound,” said Mr. Miles. As well, Mr. Miles cited CAILBA as a key organization that is needed to make the project work. Mr. Miles said that, it is important to receive feedback from CAILBA and to learn what the distributor’s expectations are.

Hurdles to cross

Findings of the IBM report illustrated that distributors are frustrated that there is a lack of progress of moving the concept of LCC forward. Mr. Miles pointed out that there is also skepticism of whether carriers will ever move the project along and if it will ever be realized.

“There was also a clear fear that as distributors you wouldn’t be able to grow the business as quickly as you would like, because there is way too much complexity and it would be impossible to do,” said Mr. Miles. “I am positively here to tell you, we are going to do something!” he added.

Mr. Miles said that both carriers and distributors are ready for online, consolidated, generic, commission statements. For companies to participate, there would need to be a basic standard of data. Mr. Miles emphasized that there already exists this common standard entitled, ACORD Financial Systems Data Transfer. The system evolved out of the United States and has existed for a few years. “ACORD Life Standard is called, XML. Everybody would need XML and everything would be done on the Internet, there would not need to be 10 terminals, there would be only one terminal and one Internet website to access all the information,” said Mr. Miles.

Mr. Miles explained that the amount of financial support received would be the determining factor of whether the pilot project will be successful. “To make it work, it needs to be funded through various companies. If they make a commitment, they are in, if they don’t, they are out!” he said.

A full-time consultant will be also be hired to insure project plans move along smoothly, “I actually have a paying job and I wouldn’t be able to commit to it and neither would the rest of us!” Mr. Miles stated.