New insurance process would aid advisors

By Kanupriya Vashisht | January 27, 2010 | Last updated on January 27, 2010
4 min read

When most other industries have moved aggressively towards technological solutions to save time and money, the insurance sector is still beset with a 20-plus-page application process, and a cumbersome procedure that takes approximately 36 days from start to finish.

That’s if all goes well.

An unchecked box or a botched page could mean the application circles right back to where it started — a hapless client and an embarrassed advisor.

“There’s a significant gap in accuracy today,” says Scott Sinclair, chief operating officer of Transamerica Life.

But that might change soon. Senior executives and decision makers in the Canadian life insurance industry — under the aegis of Canadian Life Insurance Standards Association (CLIEDIS) — are making a strong case for e-applications and “straight-through processing” for new business. They say it will radically reduce paper forms and save customers, advisors and insurance companies time and money.

The Canadian insurance industry is admittedly behind the times when it comes to this type of technology. But there’s a growing consensus the life insurance industry can do something similar to what the Canadian investment fund industry did a few years ago.

While there have been fragmented efforts at using technology in the past, Dennis Craig, CLIEDIS co-Chair and VP of life and health underwriting at RBC Financial, says, “The difference this time is we’re committed to making this an industry initiative. It can’t be focused solely on any one quarter of the industry. Benefits have to be equally derived.”

To spearhead the process, CLIEDIS hosted a meeting of executives, advisors, distributors, industry suppliers and technology vendors to discuss the benefits of getting rid of paper and moving toward comprehensive electronic processes.

“Every sector we have identified has tangible benefits, right from the carrier to the consumer,” Craig added.

A Bridge Group — eight core members representing two carriers, two distributors, two tech partners, and a member each from ADVOCIS and CLIEDIS — is compiling information from the meeting and working on a game plan to get all the players in the industry involved.

The Group has a three-month window to approach various parties and gather business requirements to take the process into design and governance phase.

And if the industry does manage to get on the same page, Tim Fitzpatrick, president of Calgary-based VirtGroup, says the insurance process might finally get automated and compressed from 36 days to 24 hours, thanks to real-time straight-through processing.

Straight-through processing allows an advisor to complete the application electronically with the client; answers are checked for completeness and clarified on the spot. Key data from the application is then secured and made available almost immediately to all parties involved in the confidential process, including the advisor, the advisor’s distribution company, the insurance company, and industry partners that arrange medical tests directly with the client.

While it might seem like a miracle to an industry mired in paper and process, “We aren’t really creating any magic,” Fitzpatrick says. “Much of the technology already exists and is being used in different capacities by vendors, carriers, distributors and advisors. We are just focusing on consolidating these different bits of technology into a bigger solution that serves the whole industry,” he explains.

Based on results from a straw poll of 130 advisors, Byren Innes, senior VP and director with NewLink Group Inc., says, “Advisors see this change as resulting in a more satisfied customer. They also see a significant decrease in administrative workload resulting in increased resources available for client communication and servicing, as well as greater professionalism.”

Sinclair agrees: “Currently, 70% of an advisor’s time is spent on the administrative process. Straight through processing will allow advisors to experience a massive pickup in their productivity and client experience. They will be able to focus more on service and sales rather than the administrative process.

“Administrative benefits will also accrue to distributors and carriers. Technology partners stand to benefit as well. Standards will be enforced and development on a shared basis will give them the ability to maximize the value of their products and manage their costs,” he adds.

While most of advisors who participated in the straw poll are unanimous about the upside of technology, some did express concerns about maintaining privacy on an open network.

Craig says better architecture and more efficient reporting and data management will actually improve compliance. “Today you have a lot of paper floating around. There are hundreds of thousands of applications with confidential medical information. Electronically we can have that information better secured.”

While adopting new technology will spell additional costs, Sinclair says they could be dramatically offset by the reduced cost of duplication of services and administration.

“There won’t be a giant entry cost. In the end, he says, “it comes down to how you spend your money — do you spend it on an army of administrators or do you spend it on an optimized process?”

Kanupriya Vashisht