In a presentation to the Canadian Life Insurance Electronic Data Interchange Standards (CLIEDIS) group in Toronto on May 1, John Hamilton, president of the Kitchener, Ontario based Financial Horizons Group, had a clear message for insurance companies: "We're mad as hell and we don't want paper any more."
Despite all of the technological advances that have been made over the last three decades, Mr. Hamilton expressed disbelief that so little has changed in the life insurance industry.
When he came into the business in 1978, agents and brokers filled out paper applications. "The crazy thing is, we're still doing it," he said. "You couldn't read my handwriting then, and you can't read it today."
Mr. Hamilton told insurers that this continued reliance on paper, combined with a lack of standardization and an inability to share electronic data, is making life unnecessarily difficult for managing general agents (MGAs).
Manual data entry
Because MGAs offer a wide range of products and deal with a number of different carriers, Mr. Hamilton points out that a single client could easily require four or five files - one for a guaranteed investment certificate, one for a segregated fund account, another for critical illness insurance policy, and yet another for a life insurance contract.
Mr. Hamilton says that his MGA has over 70,000 client records, but if you were to add up all of the related transactions, his firm is actually responsible for tracking over a million separate items. "Right now we are forced to manually enter everything that is not [available through] FundServ," he said. "I have two and half people in my office in Kitchener and all they do, their primary function every day, is inputting commissions."
He says these employees go on to the insurance companies' web sites to retrieve commission information, sometimes they even have to print it out on paper, and then they have to type that information back into Financial Horizon's own system. "Just think about how stupid that is," he said, addressing himself to the insurance company representatives in the room. "You have the information on your computer, but you won't give it to us."
Mr. Hamilton is equally frustrated by the lack of information sharing when it comes to broker contracting. If an advisor were to leave one MGA and join his organization, he points out that he has to submit all new paperwork to the carriers, much of it hand written. "And you've already got it!" he says. "What are we going to tell you? You've had this person longer than we have."
There are also opportunities for MGAs to send data back the other way, if only insurers were equipped to accept it. An MGA may have a great deal of client information such as name, age, and address on file because he or she already owns a product with one insurer. But if that same client buys something from a different insurer, there's no mechanism that will allow MGAs to automatically populate an electronic application with the data they already have. All the client's information has to be resubmitted in a new form for each carrier.
"We'll give it to you, but you won't let us do it," he says. Mr. Hamilton went on to lament the fact that some insurers even require the MGA to print it off applications and submit them by fax or in hard copy. "We all have the data; how about sharing it?"
Mr. Hamilton expressed surprise at some of the survey results that were presented earlier in the CLEIDIS meeting, which indicated some insurers didn't think that data sharing was a priority. "Somehow the message is not getting through to you, because you obviously don't know what we're doing at our end," he said.
How much money does all this paperwork cost? Assuming that one hundred MGAs are each paying 2.5 employees a typical salary of $30,000 to deal with needless paperwork, Mr. Hamilton calculates that there is at least $7.5 million that could be saved each year by processing data more efficiently.
He is quick to add that MGAs would not simply eliminate these clerical positions and bank the savings, but would redeploy the staff to help brokers become more effective. As a result, insurers would ultimately see a significant increase in sales. He also suggests that resources freed from paperwork could be diverted to recruiting and new agent training. "We all know we have a problem, and that there are not enough people coming into our business," he comments. "This is what we would start doing. But you have to help us."
People from the insurance companies sometimes say that MGAs don't get along, and that they don't like each other. Mr. Hamilton believes that's not accurate when it comes to this issue. "Well, there are seventeen of us in a room here together today," he says. "We're here because we do believe it's time. Sure we're in competition, but we see a bigger picture."
He thinks part of the problem may be that there are more than three hundred MGAs in Canada. In surveys, many of these smaller firms say they're not interested in pursuing electronic applications and data sharing simply because they lack the resources to do so.
Mr. Hamilton suggests that life insurers should focus on meeting the needs of the larger MGAs who generate most of their business. "It's about time you stopped listening to them, and start listening to us," he concluded. "We're your future. We're the ones who are going to be here long term."