Digital Diligence

Commercial-lines automation and technology is taking on heightened importance. Perhaps the biggest challenge facing commercial brokers today is whether or not they can grow their book of business with their current technology and software set-up.

MANUAL APPROACH

Many brokerages across Canada manage their commercial lines by bridging a broker management system (BMS) with external applications, such as Microsoft Word or Excel. Some say this process works, and it does to a degree. But this approach hides inefficiencies and dangers that can negatively affect a broker’s commercial operation. For example, the manual approach of linking a BMS to Word or Excel:

• creates manual, repetitive tasks (e. g. multiple re-entry of data, copying and pasting, file naming, etc.) that wastes valuable employee time;

• opens up a potential lack of uniformity in procedures and can lead to sloppy document creation, file-saving and naming;

• exposes the brokerage to potentially serious errors and omissions (E&O) liability, since files are incorrectly saved, or not properly updated and locked down; and

• creates a web of unlinked commercial data between the BMS and other applications.

AUTOMATION

Competitive pressures in commercial lines, coupled with the inefficiencies mentioned above, are prompting brokers to look for automated solutions. A commercial management system (CMS), unlike a BMS, is specifically designed to manage the complexities of commercial insurance.

The benefits of a CMS, depending on the specific system, include:

• automated, standardized workflows resulting in an improved bottom-line;

• increased protection against E&O exposure;

• professional, complete submissions, proposals and binders;

• centralized commercial expertise and knowledge recorded in one electronic file;

• automated re-marketing, renewing and endorsing; and

• ability to build custom specialty insurance programs and packages.

These benefits are great, but how do you know which system to choose? Really, the decision-making process when looking to buy a CMS is influenced by a number of factors.

BUYING A CMS: FIVE CONSIDERATIONS

The benefits of a CMS are appealing, but brokers need to be aware that functionality is often specific to a particular system or vendor. There are different vendors, and each vendor’s marketing effort will attempt to win you over.

Successful customers, those who get the most out of their CMS system, will go through a comprehensive due diligence process when selecting a system for their brokerage. The following five key factors form the basis for this due diligence process.

Clearly state your business goals for the next one, five and 10 years

Brokerages come in all shapes and sizes in Canada, especially in commercial lines. They have different staffing requirements (CSRs, producers, etc.), play in unique niches and strive for their own growth and profit goals. One of the first steps for brokers should be to map out where exactly they want to be in commercial lines — not for the next quarter, but for the next five to 10 years.

Questions to consider include:

• What are your brokerage’s growth projections, both in terms of volume and dollar amounts?

• What increase in volume of commercial business can your brokerage reasonably handle?

• Where will this new business come from?

• What are the challenges standing in the way of those targets?

Be specific and honest when answering these questions. Use quantifiable numbers that are in keeping with your strategic plans.

Map out your brokerage’s entire commercial-lines workflow

Many brokers are acutely aware of whether or not they are making or losing money. But more progressive brokers drill down into the specifics of their firm’s dynamics and discover the relationships between productivity/efficiency and growth/profits.

For example, how long it takes to complete a commercial policy from quote to submission to bind has an effect on a broker’s top line (growth) and bottom line (profitability). If a brokerage is encountering workflow bottlenecks in areas such as manual data re-entry or bridging a BMS with external applications, more growth is only going to make these problems worse.

To understand how an automated solution like a CMS can help improve workflows, brokers must understand where their inefficiencies exist. Answering the following questions can help identify gaps and inefficiencies:

• What tools are currently used to manage commercial lines?

• Are these tools completely integrated? If staff members are re-typing or re-keying data, then no, the systems are not integrated.

• How much time is spent at each stage of the commercial policy workflow?

• Do individual staff members use their own processes to manage files or prepare submissions?

• Can you instantly create a snapshot of your brokerage’s key performance metrics?

Evaluate each CMS software application

Perform a due diligence check on each of the CMS products offered by vendors in the industry. Ask for a live demonstration and include key staff in the presentation. Some questions to ask the vendor representative include:

• Is the program easy to use and learn?

• Does the program’s workflow follow a standard commercial policy lifecycle, including both the marketing and in-force policy lifecycles?

• Can documentation, including submissions and proposals, be branded with your brokerage’s logo and identity?

• Does the system handle specific business sectors, such as commercial automobile or policy issuance for Lloyd’s?

• Does the CMS integrate with your BMS? What data actually flows through this integration?

• Does the CMS upload and download commercial lines data to various insurers?

• What is the vendor’s experience and understanding of commercial insurance?

• What is the vendor’s track record in Canada?

• Furthermore, ask each vendor representative for at least one customer with whom you can speak. Yes, the representatives are obviously going to refer you to a ‘friendly’ customer, but that’s okay. Ask the customer open-ended questions, and reassure them that candid responses will remain confidential.¹

Implementation and support services: What after-sales services are offered?

The purchase of a CMS is only the beginning of the process for you, the customer. The activities immediately following a sale will determine whether or not the CMS system you purchase is adopted into the daily workflow behaviour of your commercial staff. Management often overlook implementation, training and ongoing support, and yet these services are vital to ensuring the investment made in a system is realized as valuable.

Some questions to ask a vendor regarding their implementation, training and support services include:

• What is the implementation process used to transition brokerage staff from their current workflows to a CMS application?

• What time frame is applied to the implementation process?

• What kind of training resources does the vendor offer?

• What is the vendor’s support offering? That is, how can customers contact support?

• What is the vendors’ support request turn-around time?

• What is the vendor’s support response policy?

Price: you get what you pay for

Price is a very important; it is a crucial part of the due diligence process. However, you have to look at the price of a system in the proper context. The price of a system should be balanced against three factors:

• Improvements the CMS can make to your profits and expenses (i. e. you r bottom-line).

• The functionality you get from the system.

• The support and implementation services provided by the vendor.

Look at software as an investment, not an expense. Improving your commercial lines with software automation should yield increased profitability. Therefore, what you pay should really be a function of what you can expect to make, based on the system’s (and vendor’s) capabilities.

1. For a full CMS buyer’s evaluation kit, go to www.policyworks.com/kitto download the entire evaluation guideline.)