The quest to develop an online life insurance marketplace is backpar Daniela Cambone | June 19 2005 03:00PM
The Life Companies Central (LCC) initiative – the project that looked to create a common transactional platform between suppliers of insurance products and their distributors – has reincarnated.
Jack Brown, vice-president of information technology for the managing general agency PPI Financial, is the coordinator of the initiative looking to bring back the project. But whatever, you do, don’t call it LCC. “It leaves a bitter taste in people’s mouths,” says Mr. Brown about the original project, which didn’t end too pleasantly.
The new project is called Canadian Insurance Transaction Standardization (CITS).
So what is the main difference between CITS and LCC besides the acronym? Mr. Brown explains that this time he has MGAs at the table, one of the fundamentals that was missing from LCC.
There are seven insurers committed to CITS: Aegon, Sun Life Financial, Manulife Financial, Canada Life, Standard Life Canada, AIG Canada and RBC Insurance. There are also 10 MGAs: Equinox Financial Group, PPI Financial, Cloutier Group, Assante, Paradigm Group, Hub Financial, Dundee Financial, Barrington Wealth Partners, Berkshire Group and Worldsource Wealth Management. Mr. Brown says that the MGAs at the table were asked to join by invitation only.
Mr. Brown unveiled the plans for CITS this past May in Toronto at the Canadian Life Insurance Electronic Data Interchange Standards (CLIEDIS) annual general meeting.
“Over the past 30 to 60 days, the initiative has been gathering steam,” Mr. Brown told the crowd of roughly 50. “We are trying to push the implementation of standards,” adding jokingly, that his middle name should be “standards.”
“I feel I am one of the evangelists of standards, and I walked away from LCC disillusioned,” he says of the project he holds close to heart.
So why is having common data language standards imperative to the life insurance industry? Mr. Brown explains that the evolution of distribution channels make it essential. Whereas twenty years ago life products were sold by captive agents, distribution is increasingly shifting to MGAs and independent agents: 65% of all new business comes from the independent channel, he says.
“In the old days with the career agents, the insurance company applications went through their computer systems. It was all an internal process, but the minute you introduce the independent MGA, that picture changes.”
With the need for standards evident, Mr. Brown says CITS does not want to go down the same path as LCC. “LCC went on ad nauseaum,” he says. Besides inviting the distribution channel, Mr. Brown stresses that CITS is also ironing out the problem of egos. With LCC, insurers wanted to make a return on investment (ROI) and then realized that the ROI would be mostly going to the MGA community.
With CITS, egos have to be left at the door. Everyone at the table has to realize that no one will be getting a competitive advantage, explains Mr. Brown. “They will gain no edge by having an exchange of data; what they do with the data afterwards, that is a different story,” he remarks.
Mr. Brown adds that another major difference between CITS and LCC is the price tag. While LCC would have come at a hefty cost of close to $10 million to build, Mr. Brown says CITS is much more palatable. “We don’t want a million dollar process; we want something everyone can bite off and chew.”
He reveals that everyone at the table must be members of CLIEDIS to participate. Insurers must pay $4,000 above their CLIEDIS dues, bringing them to $10,000 each and MGAs must pay $1,500 on top of their CLIEDIS dues, bringing them to $2,500 each.
And what exactly is the CLIEDIS connection? “As a group it doesn’t make sense to duplicate. We are looking for a home, and we want CLIEDIS to be that home.” He further explains, “we want to create a subcommittee under CLIEDIS. We are proposing to create a business group. We realized that when we write a cheque and pay for a room, we need a bank account, we need a treasurer. If we role CITS into CLIEDIS we can leverage this.” CITS was scheduled to make a formal proposal to CLIEDIS on May 31.