Insurers must cut out half-measures

In the early 1990's electronic data interchange trading of motor insurance took off in a big, but very fragmented way. Each connection between insurer and broker back office systems had to be individually built, leading to much duplicated effort and expensive ongoing maintenance.

Each participating insurer became beholden to the various software houses to get their rates updated and their new products to market. Software houses always took a fee for the privilege of providing these services, on top of a transaction charge - usually a percentage of the premium - and many became very wealthy as a result, at the expense of insurers and brokers alike. Polaris did eventually make inroads into reducing costs but it was, quite frankly, too little too late.

There was a real danger that history would repeat itself as the drive towards electronic trading for commercial started to take hold. The market did have an answer this time around, however, and imarket was born. No more was the industry going to be dictated to by a few self interested peddlers of IT systems. Instead we were going to set the standards to which the software houses would be required to adhere - a single gateway for all electronic trading.

The delivery has been less spectacular than the early rhetoric - not because the insurers have not invested, or indeed committed, because a significant number have. The real reason take up was initially slower than anticipated is twofold - on the one hand brokers do not yet perceive there is any real benefit to them in using the system and that will only change once integration with their own back office systems is achieved.

However, probably the single most significant reason for the limited take up of imarket is that there are still alternatives available to brokers. I can still log onto an imarket sponsor's extranet, without having to go through imarket. I can also still issue manual cover notes for motor insurance - and in the process create huge problems for insurers to be compliant with the Motor Insurance Database - when electronic cover notes are already a reality for most imarket sponsors. Why do they not bite the bullet, and fully commit to the imarket model, by scrapping the alternatives? Why continue to hedge? Such a bold and decisive action on behalf of the sponsoring insurers would send out a very positive message about the insurers' ultimate commitment to brokers.