The future of Group Insurance
could change drastically thank to C-Com
…for the better
In 2000, premiums of more than $15 billions were paid to the insurance companies in Canada. The direct cost of operation to the insurance carriers was on average 23% representing more than $3,5 billions. If we add to these figures the self-insured premiums and cost were are looking at some $20 billions in premiums and more than $4 billions in direct operating cost. Unfortunately, these 4$ billion do not take in consideration the indirect cost for the enterprises, government, unions, the group advisors or independent actuaries. Theses indirect costs could easily add $2 billions to the community. Considering the average 20% + increases in premium in year 2001 and probably another 10% for 2002 we are looking at expenses of over $7 billions.
Worst, even with these unacceptable costs of doing business Group benefits management is considered by most as necessary evil. It could easily be resumed by the following comments of Mrs. Ginette Godbout ex-CFO Guess? Jeans Canada:
« The present business model is in my opinion totally dysfunctional, time consuming and costly. (…) With some 1000 employees in 40 stores, 2 complementary group insurance contracts and a turn over rates of more than 50%, managing group insurance on a daily basis required the equivalent to 2 full time resources. Furthermore any special situations, such as renewal process, were painful and confusing.
The new C-surance technologies that are available, as well as the needs to better address the needs of the community, makes it highly probable that such a solution could be implemented nationally within the next 24 to 36 months.»
This situation is far from being unique, and we could have hundred of similar comments. In fact you, as a reader could be living equivalent frustrations.
The fact of the matter is that unfortunately the traditional processing structure makes it highly complex. In order to insure that each player’s are able to execute their professional services, the information is scattered in various databases that are most of the time totally independent from one another.
For instance the group insurance customer is dependent on:
- the insurance carrier, or carriers when the enterprise as multiple contracts, for the benefits coverage and premium,
- the group advisor or actuary to assist in the management the taxable benefits and employers/employees contributions as well as to insure that the group benefit manager will be fully protected against “Errors and Omissions” by providing professional guidance, as well this professional is needed to assist whenever there is a problem,
- the internal resources to record personnel movements as well as insure the follow up of enrollment, claims settlements, changes in status, etc.,
- most of the same information needs to be transmitted to the payroll or HR system
Problems:
• Same information in multiple-databases (4 +)
• + 150 formats
• Manual re-input of same data
• Poor productivity
• Legacy technology
• Exchange formats quality and multiplicity
• Difficulty to access the real information
Furthermore in some instance the other benefits need to be managed in other management systems depending on the actual benefit.
This does not take into consideration the direct communication between the group advisor and insurances companies or between external claims managers and health professionals. As well the various format being used for the exchange of information between the various players.
This situation involves a number of activities that do not add any value, including multiple inputting and checking. To all of these unproductive tasks, we must add a long list of manual or automatic intervention to take into account the contract specifics, union convention, punctual request from personnel for “what if” scenarios, actual operational situation including temporary or permanent leave of absence, etc. Furthermore, as each player has its own information sources, if a change occurs, communication has to be done piecemeal among all the players, increasing the risk of error and non-
transmission.
Fortunately there is hope and thanks to the advent of the Internet we could be looking at a totally new business model within the next few months. They are universal technologies available today that could address the pains and insure that the customer will be better served. Needless to say that although the solutions are available, we are looking at a management revolution and a major paradigm shifts, hereby it cannot happen overnight. We will face political resistances as well as fear of the unknown that will slow down the best efforts. However the need is so real, the ROI (Return On Investment) so major, the fear that the bankers (that have for a long time shared processes) could jump in this market as well as the globalization forces that we can almost fell the sweet smell of changes that will forever and radically improve group benefit management.
The new ideal solution
The ideal solution is obvious. First and foremost we need a single universal database as well as a sophisticated user interface that will allow standardize operations. This database needs to belong to the community as a whole and be accessible by each partner’s. This access needs to be controlled and fully secured. Secondly each participant must share and assume full responsibility for the tasks that they are assigned to insure data integrity at all time. Finally electronic links with payroll or HR system as well as with insurance carriers must exist.
To make this environment perfect the technologies needs to offers full integration: management, claim (adjudication), project management and automatic quote.
With the Internet explosion as well as the highly sophisticated technologies now available I am convinced that they are very solid platform on which we are able to build the ideal solution.
Since the most resistance will be politic, how can we convince this industry that the data could reside in a neutral and independent site? How can we change the perception that the ownership of information is not geographic or physical but really the added values offered to the customers?
According Gartner a number of players may therefore be tempted by a solution that centralizes information in a single location, thereby eliminating the risk of multiple inputting and oversights and also reducing the major costs associated with these weaknesses.
The « c-com »
Current technologies present a problem. The obsolete and costly legacy systems are a barrier to implementation of E-commerce, considering the difficulty in upgrading them.
Gartner predicts that « c-com » or « collaborative commerce » will be the major trend over the next few years. This “C” vision is directly in line with this trend and will allow its users not only to save dollars but also to realize efficiency gains.
Future trends: from E to C
à E-commerce
E-commerce can be one solution for automating the transmission of information between players. However, the problem with such a solution lies in its own structure. E-commerce is a virtual link between a predefined community of trading partners. Content is generally confined to collaboration mechanisms that center on exchanging messages. As soon as a broken link occurs, the transmission chain is broken.
à C-commerce
C-commerce, on the other hand, provides a much deeper and richer form of B2B interaction designed to allow trading partners to serve as virtual collaborators across a wide array of business processes. Thus, a c-commerce framework acts as a virtual conduit for connecting information repositories, such as employee data, allowing companies to exploit opportunities more easily. Furthermore, while e-commerce implies compatible systems and uses of the same application, c-commerce provides loosely coupled application interoperability rather than trying to achieve the elusive dream of homogenous applications among the players. Some predict that by 2004, c-commerce will eclipse e-commerce as the dominant mission-critical e-business model.
Players are either customers or suppliers. Accordingly, they become veritable partners that collaborate in the market by means of the “C” solution.
From a technological perspective, the “C” solution has the answer to the problems caused by legacy systems. Its ASP (application services providing) architecture enables the end user to save on hardware investment and always get the newest version of the application.
Even though they require an initial investment, new technologies can generate a number of savings. According to our view, the proposed system will make it possible to save on paper, personnel time as well as software and hardware.
To insure the success of such a project a national implementation as well as full access 24/7/365 must be made available through a major hosting and communication partner. The mission will need to comply with the needs and wills of customer as well as each partner’s.
Hereby the customer, could directly or via their payroll, HR manager or group advisor insure daily update of information at every levels. One single operation would replace the present minimum of four. The fiscal impact of such a process would be substantial. Furthermore, since the group advisor could have access to the same information he would be in a position to insure new and improved professional services. Those services could insure proper employees/employers contributions taking full advantage of fiscal optimization as well as a proper implementation of the union convention. The group advisor and/or the insurance carrier could directly insure that the contract information (including benefits) are in effect and would be able to address instantly the individual request. Under such a “C” solution the employee could at anytime inquire about the status of is benefits as well as have instant response to “What if” scenarios.
As an added bonus, full history of events could be accessible by the customer with no lost of information link to a change of insurance company over the years. The sharing of this information with the insurance companies during the “project management” or “renewals” period could insure proper underwriting by any insurance companies hereby protecting the industry against fraud and abuse. This would allow the group advisor to present quickly and more efficiently new or improved solutions to the customer in a standard format that would make it easier to make good business decisions.
A professional and highly secured “Claims Adjudication” integrated option could be made available with the management system allowing for easier claims management. This module could be accessible within the enterprise, the group advisor, the insurance carriers as well as directly by health professionals allowing for sharing the responsibilities. The direct impact of such an access would be to reduce delays and improve the level of satisfaction. This module needs to insure a very high level of control (adjudication) insuring easy table driven tools to adapt each contract, division, classes or individuals. This control module should be accessible by the insurance companies or their authorized representatives.
We can expect human resistance; this will be a major paradigm shift. Each player’s will try to protect the methods in place. This will happen the same way it happened with Interac, credit cards, E-route and Procurion. What needs to be done is identify the major elephant that will have the vision and dedication to accelerate the implementation. In the mean time, we can individually make small steps. Each new individual partner’s that will adopt this solution will prove the value of the vision. The greatest benefits will arrive when all player’s will share the vision and work on the solution, but in the meantime there will be smaller but still very important gains for each new implementation.
This is my opinion today and I respect it. What about yours?
Please do not hesitate in sharing those with me.:
Richard Sirois
Tél : (450) 629-6158, Fax : (450) 629-1874
E-mail : rs@mdibls.qc.ca
Richard Sirois is president of MDI, a software firm specialized in electronic tools for the insurance and financial services. Certified ISO-9001 and in operation since 1983. MDI create ‘Allégroupe’ a software solution addressing employees benefits and group insurance. Visit MDI Internet site at : www.mdibls.qc.ca
