The Life Company Central (LCC) initiative may have come to a halt, but the project may not be dead and buried yet. There are rumblings in the industry that the project may be resurrected thanks to a group of software vendors.
The software companies have not yet come together for formal discussions on how to move the project forward, but they say they will meet soon.
The LCC was an initiative by a team of life insurers to develop a common electronic interface system between insurance suppliers and distributors – something similar to FundServ, but for life insurance. The companies abandoned the project at the end of April.
However, software companies such as Novinsoft, are willing to collaborate with others to take-up the LCC torch. “It would make sense for us to cooperate and find a solution,” says Neil Menear, President of the software vendor. “Most of the vendors are not competitors since they all specialize in providing different technology solutions,” he adds. Mr. Menear stresses that he would be interested in collaborating with other technology companies to find a solution. One of the companies he names is CoVirt. When contacted, Tim Fitzpatrick, President of CoVirt, says he agrees about collaborating.
Software-vendor Illustrate Inc., headquartered in Toronto, is also thinking along the same wavelength. Lorne Brown a consultant with the company says, “If we can get a few vendors together that have various solutions then I think it can work,” he explains.
Microsoft a player?
There is even word that Microsoft Canada may have some interest in picking up the LCC project. When contacted, a spokesperson for the company confirmed that Microsoft met with the LCC committee, but it is not ready to comment on whether it will be involved or not.
However, others are not as enthusiastic about the idea. Stephen Brooks, Director of Marketing for New Brunswick-based Whitehill Technologies says it has no intentions to collaborate with others.
One of Mr. Brooks’ hesitations is that insurers are not keen on the solution. “As much as carriers say they would like to see this, it is not in their best interest to make it easy for an agent to get quotes from many different companies with one mouse-click,” he says.
Mr. Brooks states that Whitehill is taking a different approach. “The solution does not lie in trying to boil the ocean, but in trying to attack single points of communication until you have achieved the same result as LCC, and it will have been done one carrier agency relationship at a time.”
The challenges for the software vendors will be to overcome the political issues that LCC could not tackle. Experts close to the initiative explain that a lack of technology was never the culprit for its failure, rather, they say it was a combination of factors.
Mr. Menear says that one of the problems was the high-cost of the proposed initiative. “LCC was at a good stage, they just didn’t want to invest all the money to build the system from scratch.”
He says that the system would have charged users on a per-transaction basis. Instead, his alternative is to have an initiative that works on a subscription basis billing each user per month or per year.
Byren Innes, Senior Vice-President and Director for NewLink Group, a consulting firm for banks, insurers and security dealers, has been following the LCC saga from its infancy.
One of his main concerns from the get-go was the issue of insurer readiness and that most did not have the proper infrastructure to support such a project. He explains that most insurers are not ACORD (Association for Cooperative Operations Research and Development) ready, meaning that they are not prepared to use ACORD’s XMLife Standards, which is the technology language needed to run this type of initiative.
Mr. Innes also highlights that many insurers were not sold on the benefit of LCC. They were not prepared to spend money on a solution which would be shared by most insurers and that would put them on an equal footing.
“Companies could not see past the protectionism factor and it bothered them that competitors would get the same benefit,” he adds. Another problem that Mr. Innes cites is that LCC never had a clear economic model. He explains that in LCC’s last couple of presentations, the committee could never concretely say how much money the companies would save.
The question of transaction volume was another concern for Mr. Innes. “Volume drives the economic model and there is not that much volume. These exchanges work on hundreds of thousands of transactions per day and insurance companies do not write that many a year, the big guys only write 40,000 to 50,000 a year,” he says.
Mr. Innes also pinpoints that LCC was not addressing the real headaches of insurers and managing general agents (MGAs). “LCC was not solving the back-end commission problems. It was not solving the producer’s illustration problems. It was not solving a producer’s electronic application problems. So what was it solving? It was solving mechanical message junk from the insurance company, called licensing and in-force status. Not that it wasn’t important but it is not the big headaches of insurers,” he says.
Mr. Fitzpatrick agrees with Mr. Innes that LCC was not tackling the key issues. One issue he would like to see dealt with is the problem of commonality. “Everyone wants a common front and we were hoping they would add value to this, such as having identification [numbers] for all brokers in Canada,” says Mr. Fitzpatrick, adding that it is not complex to execute.
Jack Brown, Vice-President of Information Technology for PPI Financial Group and a member of the board of directors for CLIEDIS, recently gave a presentation on why the LCC initiative failed.
“A lot of energy was put into how we are going to handle the licensing and commissioning but the major problem is basic data exchange. They have to focus on policyholder service... it is an enormous problem for distribution,” he explains.
“When I asked the crowd (during the CLIEDIS presentation) what were some key issues they would like to see resolved, … most were concerned with policyholder service,” he says.
However, Mr. Brown is still confident about the initiative. He says that eventually insurance companies will get together again and discuss more cost-effective solutions.