Insurance edges slowly toward digital age

When Alan Atkins got into the life insurance business in 1983, writing things down on paper was the only way to conduct business. Now, nearly 25 years later, little has changed — Atkins is still using couriers, filling out applications by hand and doing almost everything else as he did when he entered the biz. “The insurance industry seems to be a decade behind,” says the senior financial advisor for Dundee Wealth Management.

Moving from paper to data processes has been an ongoing challenge for the life insurance industry, but on May 11, the Canadian Insurance Transaction Standardization (CITS) group, an organization set up by Canadian Life Insurance EDI Standards (CLIEDIS) to improve data flow, will outline its progress at CLIEDIS’ annual seminar.

According to the CLIEDIS website, attendees can expect to learn more about the “experiences companies are having when implementing the CITS Pending Case Transmittal data feed” and the “challenges the electronic information exchanges create in the world of privacy and compliance.”

This update should be good news for Atkins, who says he’s been hearing about a shift toward electronic systems for a decade now. “It’s obviously something that’s long overdue,” he says over the phone from his office in Barrie, Ont. “I would have thought long ago that the industry would have come up to speed.”

Jamie McGeachin, vice-president of operations at Hub Financial and a member of the CITS project, has been actively involved in bringing new technological standards to the industry.

McGeachin admits the insurance industry has been slow to adopt change, but things are moving forward. She says distributors now have the technology to allow them to accept data feeds, which is important for them to access information. However, many challenges remain, not the least of which is getting carriers to get on board. “It’s a little difficult to get carriers to prioritize this as something that’s critical to do now,” she says.

One reason for their hesitation is costs. While McGeachin can’t provide hard numbers, it’s safe to say that the price tag for upgrading systems and altering a company’s daily routine could be in the millions. And despite the obvious long-term gains — McGeachin says processing a paper application costs about $400, whereas an electronid one is about $50 — shareholders likely won’t want to see their investment take a financial hit. “No one wants to be the pioneer because it might impact their bottom line,” says Atkins.

Other financial industries, though, have spent the money to move their businesses online. The mutual fund industry gave up its paper processes nearly 14 years ago, and adopted XML — the markup language the insurance industry is set to use — in 2004. On the mutual fund side, FundSERV has helped advisors save money and time, says Atkins, two benefits he hopes to see in the insurance industry before he retires.

But costs and time savings aren’t the only reasons to go digital. Bob Ferguson, vice-president of strategic development for Toronto-based Walton International Group, says clients will be able to access their own information. He says that, now, people who want to look at their policies have to call their reps and ask for a copy, a process that could take days. A new system would allow a client to log on to a site or program and view his or her policy immediately.

Writing policies on a computer would also reduce errors. Ferguson says between 30% and 45% of data on a policy is incorrect. An updated system will verify postal codes and SINs, and red-flag any missing information.

Although McGeachin hopes to have more carriers on board by the end of 2007, a large number could continue transferring data by hand.

Ferguson says that in the short term, it won’t matter if a company hasn’t made the switch. “They’ll stay in paper and just carry on,” he says. However, he adds that businesses that stay in the technological dark ages will be working with “less time-sensitive and accurate” information. Eventually, it will be impossible to do anything without using a computer. “Someone who comes in and writes something longhand is limiting the length of their professional practice.”

Right now, only eight carriers and 11 distributors belong to CITS. The organization helps companies set up data feeds between carriers and distributors and offers a series of implementation guides. With more than 20 carriers and hundreds of distributors in Canada, CITS’ low membership numbers are concerning.

McGeachin’s not worried, though. She says the transition will come in stages. The first stage is for carriers to provide data in an electronic format, something she says has already started. She’s not sure yet what step two will look like but says distributors will need to send data back to the carriers. “We’ll be significantly more electronic than we are right now in three to five years.”

But Atkins isn’t so sure. “When all is said and done, there’s been more said than done,” he says. He has noticed some minor changes in the industry, but overall nothing noteworthy has happened. Where does he see the industry in five years? “There’s a good chance that when I retire, the business won’t have changed a lot.”

Filed by Bryan Borzykowski, Advisor.ca, Bryan.Borzykowski@advisor.rogers.com

(04/02/07)

Bryan Borzykowski