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Risky Business A U.S. and Bermuda Under 40s (Re)Insurance Collaboration Winter 2010 |
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Broker and Customer Portals for the Reinsurance Industry – Let’s Transact! By Han Pieter Duyverman
In this article I would like to follow up on Alycia Kiley’s excellent contribution to the Re Under 40s newsletter of this spring (Let’s Connect). Alicia rightfully mentioned that the reinsurance industry is starting to embrace social networking as a means of exchanging ideas and information. (Did you know that Munich and Swiss Re even have their own twitter accounts?) Whereas Alicia has focused on social networking as a great source of exchanging ideas and sharing information, I will focus on the impact of the internet on core reinsurance processes; submission, quoting and binding of risks and the subsequent servicing of bound contracts. The recent announcement of Aon Benfield’s Online Facultative Trading Platform is just the latest in a series of announcements by reinsurance brokers and reinsurers alike. Transactional broker and customer portals have been a top priority in the insurance industry. The reinsurance industry is following this trend and offering online services, which has become a key initiative for reinsurers to fuel growth and drive down operational costs. Transactional web portals will be changing the dynamics of the entire reinsurance industry over the next years and this is the time to start developing and implementing your online strategy. Online reinsurance services Online services can be loosely defined as services that are offered to cedants and brokers using the internet as an enabler. The maturity of the online services as provided by reinsurers to their cedants can roughly be classified in the following maturity levels: Level 1: Use your corporate website as a marketing brochure Inform you customers about the corporate vision, present annual reports, indicate what classes of business are welcomed, and provide the contact details of key staff contacts. At this level, the organization requires a website, email and some basic internal procedures to handle requests and keep information current. Level 2: Provide transactional capabilities to your cedants At this maturity level, reinsurance companies start providing transactional online services to their cedants. Examples include online submission of risks, providing online quotes and offer the ability to bind risks. Also, the provision of a real time, online bordereaux and other relevant information to cedants are part of the services offered. From a technical point of view, this is a critical step in the evolution of the online service offerings of a reinsurer / broker. Core business processes are exposed to individual stakeholders outside the organization. The underlying technology requires workflow driven process execution, solid security measures and cross browser compatibility to ensure a consistent and professional user experience across different web browsers. Last but not least, the selected technology should be easily integrated with existing core systems to avoid duplicate data entry and allow for straight through processing. Level 3: Integrate processes and systems The highest maturity level is reached when stakeholders have established integrated processes with all parties in the value chain. Using system to system integration, the need for duplicate data entry is eliminated and straight through processing can be achieved wherever possible/desirable. In the US, the ACORD organization provides industry data standards for the reinsurance industry (www.acord.org/Standards/reinsurancemain.aspx). In addition to the technical requirements in phase 2, this level requires the ability to exchange data using XML based data exchange and the ability to expose and consume core functionalities through (web-) services.
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Winter 2010 Articles: · Bermuda Under 40s – 2009 Year in Review · U.S. Re Under 40s Group – What’s happening? · Lloyd’s Non-Marine Under 30’s Group: 2009 Bermuda and US Study Tour · Broker and Customer Portals for the Reinsurance Industry – Let’s Transact! · Disputes between insurers in London, the US and Bermuda · House of Lords considers 'back to back' reinsurance |
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Current state of affairs Compared with other industries, the reinsurance industry has been slow recognizing the strategic value of the internet on their operations, and some reinsurers still insist on using fax, email and face to face contacts to interact with their customers. More forward looking organizations are recognizing the impact of online services on the reinsurance industry. Many of those organizations recognize that the reinsurance industry is a highly data / process driven industry that offers great opportunity for process automation using the internet. A survey, across 53 US and Bermuda based reinsurers, shows that the maturity levels for online services widely varies. Virtually all reinsurers offer a corporate website where information about the company and key contact details can be obtained. About 40% of the reinsurers offer online services – the level of usability and sophistication varies widely – from sending in a submission by email – to state of the art online systems that allow cedants to submit risks, obtain quotes, bind, and endorse risks through user friendly online portals. Many reinsurers that have made an initial investment in establishing an online channel are recognizing the strategic value and are stepping up their investments to upgrade their online services to the next level. Business Impact Technological advancements make the implementation of an online strategy within reach of all reinsurance companies. Online services provide reinsurance companies with the opportunity to simultaneously drive growth and reduce operational costs. Especially in the facultative business – which is more transactional in nature – cedants increasingly demand online capabilities from their reinsurer to transact business in a more efficient manner. From a cedants’ perspective, online services allow them to submit new risks if and when required, instantly obtain a quote and bind a risk if they meet predefined requirements, and get access to real time bordereaux. Any risks that cannot be bound automatically can be processed using a web-based workflow mechanism that provides transparency to all parties involved in the transaction. The real time nature of online services reduces the cycle times of risk placements and subsequent billing and payment. From the reinsurers perspective, online services provide the opportunity to reduce operational costs. An online service allows for efficient data entry and automatic pricing and binding of risks. As a result, underwriters can focus their attention on more complex – higher value added risks. The lower underwriting cost allows reinsurers to offer a more competitive reinsurance premium to their customers. Modern platforms for online services offer the ability to leverage business rules as part of the underwriting process, therefore ensuring compliance with internal underwriting guidelines. The workflow capabilities ensure a transparency and control, as well as the establishment of a complete audit trail. Last but not least, a structured reinsurance process ensures compliance with regulatory requirements like the Sarbanes Oxley Act. Conclusions Any reinsurance company that is looking to develop and maintain their competitive position in the marketplace should develop and implement an online strategy sooner rather than later. The opportunity to simultaneously improve service levels, drive down operational cost and improve regulatory compliance are simply too large to ignore. Cedants will increasingly look at the technological capabilities of their reinsurance carrier when deciding who will be taking care of their reinsurance needs. Technological advancements allow reinsurers of all sizes to design and implement online solutions that will improve their competitive position and ultimately their bottom line.
About the Author: Han Pieter Duyverman is in charge of the Reinsurance practice of Mendix, a leading provider of online services for the reinsurance industry. He can be reached for further information at han.pieter.duyverman@mendix.com or 617-230-8425.
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