The Game Changer: What the LexisNexis Insurance Exchange Means for the Industry, Technology Partners

By | July 4, 2011

Technology providers to the insurance industry have good things to say about a new system that allows property/casualty agents, brokers and carriers to collaborate on commercial lines accounts.

The new system, the LexisNexis Insurance Exchange, simplifies the submission of small and mid-sized risks by agents and brokers to multiple markets. Agents and brokers need only enter account information once. The system lets carriers and wholesalers not only respond to submissions but also make producers aware of their current appetite for certain kinds of business.

This exchange is the result of an alliance formed through LexisNexis Risk Solutions, The Council of Insurance Agents & Brokers and Marketcore Inc.

On the heels of the industry-wide release of the LexisNexis Insurance Exchange, some tech providers say the new collaborative model might even be a game changer for how the industry does business in the future.

‘The industry has been looking for this solution for years.’

“I think it is the future,” says Steve Hauck, CEO of Sword Insurance, a provider of technology products for property/casualty insurance carriers. “The industry has been looking for this solution for years.”

“I hate to be cliché but it’s definitely a game changer,” adds Mike Cross, marketing director, EPIC-Premier Insurance Solutions, a provider of automation tools and services for managing general agencies, program administrators and insurance carriers.

Bob Juracka, CEO of XDimensional Technologies Inc., a provider of web-based applications and services for the insurance industry, is a strong believer in a collaborative model, like the LexisNexis Exchange. He believes the model’s concept is just a much better way to do business. He believes in that concept so much, his own firm tried its hand at a similar model a few years ago.

“I absolutely am a believer – since we almost embarked on this road ourselves – that it is just a fundamentally better way,” Juracka says. “I think it’s not radically changing any of the fundamentals” in a transaction, he adds. “Absolutely everything that the carrier underwriter is going to need still has to be done, and some of that still distills down to me painful labor that happens for the agent.”

Steven Finch, vice president of enterprise markets at Vertafore, an insurance industry software and agency management systems provider, says his firm – which produces management systems such as AMS360, Sagitta, InStar and more – is very supportive of the concept. While other similar initiatives have failed the past, he is hopeful the LexisNexis Insurance Exchange will be a success.

“We think anything that is successful and provides the industry with efficiency, especially around the commercialized commission process would be very helpful,” Finch says.

Why Now?

The idea of a collaborative exchange model to make the process of submitting business to multiple markets more efficient and effective is nothing new for the industry. Juracka says even his company, XDimensional, developed a similar technology to the LexisNexis Insurance Exchange, but admits the technology fell short due to lack of carrier collaboration, an essential component to making the concept work.

“You have to have both sides of the collaboration, subscribing to the virtues of it and willing to, at least initially, modify their normal means and mechanisms of doing business,” Juracka says. This is a key element to success for the LexisNexis Insurance Exchange, he says, and something the XDimensional platform didn’t achieve.

“We didn’t have the participation at the carrier level,” Juracka says.

Vertafore’s Finch says one problem with earlier initiatives had to do with requirements to become the exclusive channel. “Some initiatives required that in order to be successful it had to be an exclusive channel for the industry,” he says. Agents and carriers want to have options, he says. “In order for any platform to be successful, it will have to be respectful of other platforms operating in the same space. It cannot hold itself out to be the exclusive option, day one.”

He also says some other initiatives advertised efficiency and reduced costs for the distribution channel, but most were thinly-veiled attempts to intermediate the agents and commoditize the product. “Which, in my opinion, cannot be done with most of the commercial lines business that we’re talking about today,” he says.

Hauck says politics played a role in previous failures as well.

“Insurance companies by nature view their product definition as unique to them and how they underwrite, let’s say, their commercial property or the GL line of business. The Hartford views it one way. The Travelers views another way. They both view it as what makes them unique. So, the political obstacle that I think insurance companies face is that they don’t want to commoditize their product on a multi-company platform,” Hauck says.

Like XDimensional, Sword Insurance dabbled with a similar technology in the early 2000s. “I can remember the original Agency Port model back in 2001-2002, when we started our business … it was somewhat like the LexisNexis Exchange … We couldn’t get critical mass on both sides of the equation – the carriers on the platform and the agents as the users subscribing to the platform.” At that time, carriers didn’t want to “commoditize products” and “make products like all the other companies,” Hauck explained. “So, they (carriers) have obstacles that they need to overcome from a production definition, from an underwriting integrity standpoint that prevents them from just embracing a multi-company platform.”

Overcoming Obstacles

Despite such obstacles, the LexisNexis Insurance Exchange appears to have had some success since the launch of the program in the fall of 2010. According to LexisNexis, submissions have been sent to more than 730 underwriters registered on the Insurance Exchange, representing nearly 200 carriers and wholesalers. Early adopter of the system have seen efficiency gains by being able to enter information once and have it available for multiple markets as well.

To help win the trust of participants – carriers and agents alike – LexisNexis says its core competency is data security and privacy. “Because we place such a strong focus on privacy, security and compliance, and integrate each of these principles into our business model, you can trust that we are dedicated to protecting the interests of Insurance Exchange participants,” LexisNexis told Insurance Journal.

“We go to bed at night and wake up in the morning thinking about securing that data,” adds Clyde Owen, general manager for the LexisNexis Insurance Exchange.

The LexisNexis Exchange has also ceded governance of several aspects of its operation to an independent entity known as the Insurance Exchange Trust to further guard security for its participants’ data.

“So as participants use the Insurance Exchange – that data is protected,” LexisNexis said in a statement. “It still belongs to the participant, but we can collect it, aggregate it and then make something useful out of it.”

Another obstacle is the overcoming the idea that the Exchange, or other multi-carrier platforms, might threaten the role of the agent. But LexisNexis says that the complexities of segments such as mid to large commercial property/casualty are simply too complex to remove the role of agent expertise, regardless of the ease of communication afforded by technology (the Insurance Exchange or otherwise).

“The Insurance Exchange is focused on streamlining the process by giving tools and information to the participants to work together more efficiently, not create a new risk placement process or paradigm,” according to LexisNexis.

Hauck and several technology providers commend Lexis Nexis for apparently succeeding where others have failed.

“Sword Insurance and Agency Port completely endorse and support what LexisNexis is doing and give them a lot of credit for going after it because the industry does need a solution,” Hauck says.

Not all agency technology vendors are comfortable seeing LexisNexis invade their space. One major technology provider for the insurance industry wouldn’t comment for this story because it views the LexisNexis Exchange platform as a competitor. “Applied doesn’t comment on competitors, which we feel the Exchange is,” says Sheryl Feminis, marketing program manager for Applied Systems Inc., told Insurance Journal.

Hauck says it’s only a matter of time before the entire insurance market embraces multi-carrier platforms for commercial insurance. “There’s going to be critical mass into some exchange scenario for commercial insurance. … I think it is the future. I just think it’s going to take a long time to get there.”

Topics Carriers Mergers Agencies InsurTech Tech Market Property Casualty

About Andrea Wells

Andrea Wells is a veteran insurance editor and Editor-in-Chief of Insurance Journal Magazine. More from Andrea Wells

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