Choosing the right technology can bring competitive gains

For the small to mid-sized insurance firm, technology spending is perceived as a major expense with nominal return on investment or competitive advantage. Typical hardware lifecycles are short, software licensing and staff training is time-consuming, and creating a modern network for sharing electronic data information between agents and agencies requires cost prohibitive IT overhauls. It may seem like the only people deriving “value” from small business IT are those vendors who sell it.

However, a strategic investment in the right technology can, in fact, offer cost savings and competitive gains.Technological advances in frequently overlooked areas such as middleware are offering small and mid-sized insurance firms a low-cost advantage while vastly improving the overall functionality of their information systems.

Disparate data sources

A big technology challenge for small agencies is that historically, back-end IT was comprised of mismatched systems. Agencies purchased a database or an entry-level server to address a particular need. As business expanded or the way of conducting business evolved, a new appliance was added to the mix.

While this transition was well-intentioned, over time the system became an intricate weave of hardware and software that was difficult to maintain and costly to troubleshoot. Gaps in functionality produced isolated islands of policy data that hindered sharing amongst internal agency staff, not to mention mobile agents. As a result, the recent demand for online policy transactions was next to impossible to fulfill.

Without the benefit of an integrated system, paper remains the default business communications tool for insurers. Paper-based records are entrenched in the insurance agency culture, but they can be quite easily misplaced, damaged or lost. Manually distributing policies or ACORD forms is slow, as staff is relegated to hours of copying or scanning files. Also consider that peering into someone’s detailed personal history can be as easy as rummaging through a file on a desk. In an age where the protection of personal information is a paramount concern, it is clear that new processes are necessary.

So, the question remains: Is it possible for a small agency to patch together a collection of incompatible systems, reduce its paper reliance, protect policyholder information and gain a competitive advantage over larger competitors without shattering IT budgets? It’s a very tall order but, for many, the answer may lie in middleware software.

What is middleware?

Middleware is a form of software technology designed to help manage the complexity of IT systems. Acting as the “glue” or a bridge between disparate applications, middleware solves many connectivity and interoperability problems that typically impede the seamless exchange of information. Think of it as a universal translator that lets IT systems such as databases and servers communicate better with one another.

First appearing on the software scene in the late 1980s, middleware was described as “network connection management” and was developed to make it easier for systems integrators to program and network legacy systems. But with network computing only gaining widespread acceptance in the mid-1990s, middleware’s value was rarely recognized beyond IT departments.

As middleware evolved through the 1990s, organizations running on networked systems, such as those in banks and governments, began to understand and embrace its value. By reducing time spent on programming and lowering integration costs, middleware emerged as a boardroom discussion topic. Nevertheless, implementing a middleware solution was still an expensive undertaking, causing many businesses to stay the course until costs came down and more compelling reasons to link disparate systems were identified.

The benefit to small agencies

Small to mid-sized insurance firms are beginning to recognize that middleware solutions today offer a lower cost of integrating disparate information sources and increased ROI. In addition to reducing overhead costs, a middleware solution can help agencies overcome several hurdles.

System consolidation. Integrating IT systems is a critical step toward the free flow of electronic information. Middleware provides a much-needed link between isolated databases and offers lower total cost of ownership by improving storage utilization and eliminating unnecessary duplication. A simplified system also enables IT staff to troubleshoot more easily and complete routine information management, such as ACORD form updates, more quickly.

Web-enabled policy generation. Sales agents are the lifeblood of insurance agencies. Large companies have agents that market their product exclusively, while smaller firms rely on independent agents who have the luxury of selecting the companies with whom they prefer to do business. Quite simply, companies that offer an easy and streamlined way to deliver queries, quotes and process policies in real time, without having to leave a customer’s side, will attract a more productive and loyal sales force.

Preserving legacy systems. Middleware is non-invasive. It is designed to integrate seamlessly with legacy systems without radical customization and easily can evolve in response to new legislation, internal policies or new infrastructure upgrades. As a major benefit, IT departments can use familiar programming languages such as COBOL, C++ or Java, which saves a small agency the time and expense of retraining staff on new systems.

Administrative time and supplies. Traditionally, printed policies existed in triplicate. One copy resided with the independent agent, a second was given to the insured and a third was kept by the issuing firm. Considering that some policies can consist of hundreds of printed pages, the volume of paper agents manage is often overwhelming. The ability to access files instantly over the Web dramatically reduces the overall dependence on printed forms. Rather than sitting in a filing cabinet, a policy could be securely stored in a remote database. Overall, fewer printed pages means money saved on administrative costs for items such as toner, manual archiving and paper shredding.

Privacy and information access. Electronic versions of client forms and data records ensure tighter privacy standards by restricting access to authorized personnel. These new levels of privacy will go a long way toward satisfying customer protection demands and boosting customer confidence that their medical histories are not being read by the wrong person. An additional benefit is the reduction of problems associated with document legibility. The fewer times a document is handled, photocopied or manipulated, the smaller the risk of it being rendered illegible. A policy or form that is saved in a secure database and printed only when necessary will remain true to its original state.

Costly service agreements. The complexity of many data system integration tools requires service teams to not only build them but also maintain them. This is an expensive and risky proposition. In the case of a typical middleware installation, once it is in place, it requires little monitoring or troubleshooting and negates the need for a services team outside of annual upgrades.

Today’s middleware solutions are challenging the misconception that IT as a competitive advantage is an exorbitant expense with minimal potential for return. Small to mid-sized agencies across the U.S. can use middleware solutions to improve client service, enhance efficiencies for independent agents and save costs through truly integrated IT systems. While staying ahead of the curve is much easier said than done, middleware offers many and more creative means for gaining a leg up on the competition.

Stuart Butts is a founding member and chairman of the board of Xenos Group Inc., headquartered in Toronto, Canada.

The answer may lie in middleware, which is a form of software technology designed to help manage the complexity of IT systems