PaperClip Incorporated

    Independent Brokerage Technology Outlook 2012. I’ve watched the independent distribution channel grow around technology for the last 17 years—we have accomplished a lot. The brokerage community has secured their data and communications, adopted standards, and invested in agency management systems, document management systems (like the ones from, and sales tools. Today, supporting carriers receive the majority of their applications electronically. The largest hurdle has been jumped, taking paper out of people’s hands; and the stage is now set for the evolution of electronic business documents.

    The current focus on new electronic business documents is the Smart fillable form. Carrier applications created in a fillable Adobe PDF document allows the content to be validated and extracted for a standardized data feed. Five or so years ago several vendors extended their fillable PDF solutions, offering electronic signature (e-sign) options.

    In a recent Life Brokerage Technology Committee (formerly the NAILBA technology committee) survey, 90 percent of respondents use Smart fillable forms, and e-sign was the highest priority (47 percent) of the top ten technology solutions, followed by integrated status (43 percent). E-sign is leveraged by about half (48 percent) of the BGAs selling term insurance and universal life, while other lines of business are under review. The clear BGA concern was on the expansion of e-sign centers for the agent. BGAs believe that agents have not been properly educated about the benefits of e-sign. Thus, agents feel it is impersonal, which is counter to their selling culture and contradicts their training.

    The new electronic business document is moving in the market, and acceptance and adoption will continue to grow. Training programs at all levels on the e-sign process would go a long way to get agents involved. New selling strategies need to be developed where agents and consumers participate together in the signing event. Remember, the consumer has the final choice—paper or digital.

    Other areas the independent distribution channel would like to see progress are the 1035 exchange, Check 21 processing, and support of vendor solutions. These areas all have one thing in common—the lack of carrier adoption. These subjects remain at the top of the discussion at many industry conferences.

    Carriers receive more than 27 different document types in the new business application process and delivery of an electronic policy (e-policy) to the insured, yet refuse to accept a digitized 1035 exchange document. In 2007, John Felton, then chairman of NAILBA, sent out 38 letters to insurance carriers requesting their support in adopting the electronic process for replacements. Entering 2012, the stalemate continues; it’s not about technology, it’s about change.

    Check 21 is a growing banking technology designed to stop processing of paper checks. The Check Clearing for the 21st Century Act (2003) opened the door for depositing funds from the image of a paper check, which is called truncation. Traditional Check 21 processing vendors combine special check scanning hardware and software to produce images and associated electronic data files with the required information to transact a NACHA Automated Clearing House (ACH) debit. The benefit is that BGAs (and others) stop paper check handling and logging, and eliminate overnight fees.

    The BGA community routinely scans checks for reference and sends them on to carriers today. The pioneer here is Legal & General America, being first to accept scanned check images, directly processing into the NACHA network. LGA will share this process with interested parties because they believe this process will strengthen the independent channel like a rising tide.

    The industry continues to suffer from a mixed bag of technology solutions provided by the vendor and carrier camps. The burden of this continues to fall on the BGA community with 16 different ways to process the same thing; case status, document capture, standards and email to name a few.

    Carriers should focus their precious resources on internal technology, and when it comes to connecting to their producers, work with the vendor community. The vendor community has the advantage with their inherent independence, economy of scale, and the ability to deploy “many-to-many” solutions.

    As mentioned earlier, the forum for this collaboration is the Life Brokerage Technology Committee. Every organization concerned with the technology of the independent distribution channel should participate because decisions are made by those who show up.

    Compliance is a challenge we all face with increasing regulations on how we conduct business. The nature of life insurance touches virtually every federal, state and local law. Securing customer information is a real concern because the threat is just as real; if the supply chain is breached, carriers will share the heaviest of burdens. Education about the threat and best practices to protect yourself should be a never-ending campaign. Compliance is another reason the community should embrace vendor solutions. Carriers routinely evaluate vendor solution security and accept the risks or not. The time is coming when regulations will motivate carriers to evaluate all homegrown and sub-contracted third party vendors (Cloud). Someone doing business with a carrier-reviewed vendor (a company with skin in the game) along with a practiced internal security program would not be accused of “willful neglect” but probably would find themselves in a safe harbor position.

    More adoption of electronic processing will occur in 2012—that’s a fact. However, some desired efficiencies have nothing to do with technology, just the commitment to change. The industry has matured enough to provide state-of-the-art processing, yet instead of adopting these processes, many organizations continue to build external facing solutions, falsely believing that in the end they will have a competitive advantage. In effect, all they’ve done is pushed their process on to someone else.

    Remember, every piece of paper we touch costs us net one dollar. When you look around your organization, imagine every page of paper is a dollar bill; it’s never too late to win the lottery. [DMB]

    Michael Bridges has served the life insurance industry with technology and thinking that challenges change within the industry. As a respected thought leader among his peers, Bridges has participated and helped shape our industry’s progress over the last 20 years.

    Bridges has received several US and foreign technology patents related to data security and compliance benefiting and protecting industry processing.

    Bridges currently leads PaperClip Inc as their President and COO.