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October 28, 2001 at 07:00 PM
Outsourcing IT Saves Money, But Life Insurance Agents Arent Buying It
For all the controversy that has surrounded the application service provider model of software delivery, most would agree at least that the model is a money-saver.
An ASP, or application service provider, manages and delivers software applications to multiple entities from data centers across a wide area network, according to the ASP Industry Consortium, an advocacy group based in Wakefield, Mass.
The advantages for software users are many. The software doesnt take up space on a hard drive or network; all updates are done automatically by the ASP; theres no installation procedure to worry about, and it just costs less to get software via the Internet than it does to buy a disk and install and maintain it yourself.
Despite those advantages and an obviously ailing economy, however, life insurance agents and brokers are not rushing to convert to the ASP model or to take advantage of other types of information technology outsourcing savings.
The reason, according to observers and agents, is that its just more comfortable to get IT services from a primary carrier.
“The biggest outsourcer for a broker is the carrier,” states Chuck Johnston, program director, insurance information strategies, for the Stamford, Conn.-based analyst organization, the Meta Group.
As companies, many brokerages and agencies are “too small for EDS and IBM to go after them” to sell software and services, Johnston explains. Carriers, however, are looking to create bonds with such agencies, and to create “exit barriers.”
According to Johnston, carriers ask themselves: “How can I give [agents] technologies that will increase my wallet share?”
It is only among the largest brokers that Meta sees interest in outsourcing alternatives, says Johnston. “Were starting to see large brokers interested in online processing components. It allows brokers to get into the submissions and communications business at a relatively low cost.” Johnston refers to such technology as “SEMCI for financial services,” in that it reduces the cost of managing multiple insurer interfaces.
For mid-size and smaller brokers, however, the options may be more limited. “Most agents have one major carrier theyre using, and they get their technology from that company,” states John Davidson, owner of Davidson Insurance Services, Thousand Oaks, Calif.
Davidson, who describes his agency as a “small boutique shop,” says he outsources some technology for his benefits business, but his primary source for technology is his primary carrier, Guardian.
According to Ann Purr, second vice president at Atlanta-based LOMA, agents and carriers “have a relationship thats tried and true. If anything goes wrong [the agents] know exactly who to call.”
With an ASP, however, “its a different story,” says Purr. “You are one of many customers. With a carrier, youre one of their own.”
She points out that in many cases, agents may not even be aware of their options for outsourced IT services or for accessing software via the ASP model.