'Heard' mentality: an agent-broker trade group pushes for a common language to make it easier to communicate, but finds that the task is still not easy. A common idiom is still at least two years off

Insurance agent Mark Wilson, an agent at Scottsdale Insurance Company, remembers the paradox facing wholesale property and casualty agents and companies as far back as two years ago.

The large insurance carriers were transferring less and less information on paper as they invested more money in data imaging, policy ratings systems and policy issuance software.

As a result, the world where insurers, managing general agents, and brokers each had their own imaging systems and data forms reflecting their own individual touches was dying. The new standards imposed by the carriers made for a more efficient world, but also a less creative and service-oriented one as well.

Managing general agents have underwriting authority from carriers and the carriers were adamant that their managing general agents follow the appropriate underwriting standards, particular with new compliance rules governing the marketplace. In addition, there was the thorny question of data transfer between the carrier and the managing general agent when it came time to find and issue a policy.

Wilson, who is also co-chairman of the American Association of Managing General Agents' automation committee, saw that managing general agents, particularly in the excess and surplus lines, needed an answer to the question of how to transfer information.

But that answer seemed far off, leaving wholesalers and managing general agents wandering through a hall of automation and technology mirrors. The technology vendors wouldn't talk to each other, and the bulk of managing general agents and brokers were not ready to go paperless.

It was a question, Wilson and others say, of establishing standards of communication and data transfer for companies working in the excess and surplus lines--a question of finding a common language.

"To totally withdraw and to have your own custom everything as general agents used to have in a simpler world, I think you won't see that as much anymore," Wilson says. "It's almost like Word and Excel. You couldn't buy them that cheap if everyone had to have their own custom version of that."

The urgency to find that common language was multifaceted, say members of AAMGA's automation committee. On one hand, says AAMGA board liaison Ed Levy, managing general agents and wholesalers needed to keep up with what had become an increasingly automated and tech-savvy industry. Companies investing in quicker and more reliable systems will have a competitive advantage over their peers, he says.

Matt Letson, who co-chairs AAMGA's automation committee along with Wilson, also stresses the need for managing general agents to operate as efficiently as possible as the industry progresses.

"The margins are constantly getting thinner. Commissions are getting lower. Expenses are higher. And so you've got to find a way to work efficiently," says Letson of Hanover Excess and Surplus in Wilmington, N.C. "And for the membership of the AAMGA to survive and thrive, they're going to have to be smart and they're going to have to invest."

Like many general agents' desire to establish standards by which to share and transfer data, the language barriers dividing managing general agents, wholesalers, brokers and vendors are varied.

Levy, who works at Delaware Valley Underwriting Agency in Hatboro, Pa., says the issues are two-fold. Keeping both vendors and insurance professionals up to date, he says, is the most problematic part of the effort to get standards in place in the insurance industry.

"The problem is an age-old problem," he says. "When do the retailers have to update their systems? Some of them will stay on top of it, but some of them don't and don't make the upgrade until they're forced into it because the system is no longer going to be supported. Personally I think that's a big problem to overcome."

And on a very basic level, Levy says, the number of vendors hitting the marketplace has increased and insurance companies have continued to develop more customized systems. The result is a verbal traffic jam, with the discussion dogged with too many perspectives and too many voices. "Everybody wants to do it their own way," Levy says. "I think those are the things that have to be overcome."

Wilson estimates, for example, that six vendors displayed imaging systems at the AAMGA's annual automation meeting this year, up from a lone vendor just two years ago.

PUSHING FOR STANDARDS

The turnaround--the movement away from the skepticism of general agents and wholesalers that stymied efforts at standardization--began when the AAMGA suggested moving toward more efficient data transfer and communication, Wilson says.

According to Wilson, the AAMGA joined the National Association of Surplus Lines Offices (NAPSLO) in recommending movements towards standardization, as well as efforts to keep members educated and informed about technology and automation trends. Meanwhile, Letson adds, the association is also a member of the Independent Insurance Agents and Brokers of America's ACT partnership, which works to help independent agents leverage technology to improve efficiency and workflows.

As a result, Wilson says, agencies have invested more money in developing efficient systems that meet certain increasingly industry-wide standards--consequences he says are at least partially attributable to the AAMGA's efforts.

"I think they're [AAMGA members] spending more money on it. And they're also now hiring IT staffs that they hadn't done before," Wilson says. "So the agents upfront are making significant investments. I think the association has helped them justify in their minds that it's a good deal."

According to Letson, it is an issue of education and awareness. Now that AAMGA members more readily understand the need for efficient data transfer, the role of the association itself is to make those members attentive to what investments will benefit their company.

"We need to be the path of least resistance or at least with as little resistance as possible when compared to standard carriers," Letson says. "So we think being involved and having a seat at that ACT table is a big deal and we want AAMGA membership companies to, in theory, be included or listen to the standardization of standard carriers."

Once this level of standardization is reached, Levy predicts that the role of the managing general agent will change. The movement toward more efficient automation will be accompanied by less manual underwriting and less time spent physically finding the business, he says.

"I think when you get to the highest level, the most efficient standardization so that the data can transfer back and forth, managing general agents become that much more of a marketing arm for the companies and suppliers," Levy says.

"I think we're closer than further away. But if you want my definite time frame, I think from an industry standpoint, it's not within one or two years. But it's not ten years either."

JOHN McDONALD is an editorial intern and freelance writer. He can be reached at [email protected].

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