Tech Offers Answers To Distribution Problems

Together, carriers and producers can improve the process

While independent distribution of life insurance products is clearly a success story, this channel does present unique challenges. From insurers’ point of view, independent distribution provides virtually limitless opportunities for increased revenue. But the costs of processing new business submissions and providing service can eat into profit margins. It is harder for insurers to deploy and enforce usage of efficient new business technology to these sellers.

From independent distributors’ perspective, insurer-provided technology and processes are often at odds with their customary way of doing business. This causes frustration, in addition to the tangible problems of prolonged sales cycles and fragmented information flow.

Is it possible to address the concerns of both insurers and independent distributors, and improve service to producers and customers? By combining business process improvements with available technology, the answer is yes.

Where We’ve Been

As insurers increasingly turned to independent distribution channels, they first looked to modify and expand the new business technology used by their career agents. While initially serving as a less expensive option, this path became unmanageable. The steep costs to customize and maintain legacy systems for the specialized needs of independent channels largely were unsustainable. Insurers had to develop multiple subsystems to ease the pain of legacy system limitations. And experienced legacy system resources are an ever-shrinking commodity.

To provide better service and ease independent distributor distress, insurers then developed specialized new business solutions using newer technology. Some were channel specific; others were product specific. To fill the gap, several front-end software packages emerged to cater to the needs of the independent distributor. This approach, while solving some problems, created others. Among the issues was the fact that redundant system solutions began to consume large percentages of IT dollars, and system integration costs increased.

Where We Are Today

Today, both insurers and independent distributors are experiencing the pain of success. As the volume of new business submissions increases, so do the inefficiencies and expense of supporting multiple systems and processes. Currently, insurers are evolving toward componentized hybrid systems, where manufacturing processes and distribution methods are truly separate. This sets the stage for insurers to meet independent distributors and producers halfway–and to make huge strides in distribution effectiveness and customer service.

But even with these new systems that incorporate rules engines beneath flexible and configurable data capture processes, challenges abound. The first is data quality. Not-in-good-order (NIGO) submissions slow sales cycle times and increase costs for the distributor and insurer alike. The second stumbling block is gaining wider adoption of electronic new business submissions. Producers need to experience new business submission as a flexible, accessible and simplified process.

One way to achieve high adoption of efficient electronic submissions is for the insurer to integrate with the independent broker’s order entry solution. However, in this scenario, distributors and insurers aren’t addressing NIGO concerns and administrative follow-up costs, because data quality controls are not carrier-specific enough. Carriers can build integration functions to perform data validations either by exposing the edits to the point of sale or automating follow-up. But when these point solutions exist alongside other new business systems, the carrier finds it expensive and unmanageable to maintain the customized solution and handle redundancy with other similar applications.

Aggregators are another alternative for independent producers. But NIGO still doesn’t go away: Ticket orders from aggregator submissions require data cleansing outside of the very basic validations they support. In fact, when carrier and aggregator systems don’t exchange data validations, NIGO actually can rise. Insurers need to push the right level of validation edits outward–in a quantity that both the aggregator and producer can live with.

Improving Electronic Application Usage and Data Quality