Improved cost savings and greater efficiency means adopting e-business practices should be top of all advisers' agendas. Stephen Wynne-Jones explains
Despite pressure from shareholders to reduce costs and improve returns, the protection industry still has a lot to do to if it is to change some of the perceptions held about technology. Particularly as it is widely believed that the benefits of new technology and working practices are more in the interests of the provider than the adviser.
The challenge for the industry is not only to change this perception, but to also realise the enormous value technology brings by adopting a true exchange of data between advisers, providers and, of course, their customers.
Indeed, the absence of the customer in this technology debate is slightly puzzling. With technology now widely accepted in most areas of customer service, where is the pressure from consumers on financial advisers to use e-techniques and e-resources in client meetings or sales situations?
The problem it seems, is that many advisers still believe e-commerce is simply about securing quotes. But as the industry moves increasingly towards online valuations, policy enquiries, new business tracking, data download, end-to-end processing and online underwriting, it is only a matter of time before all advisers buy fully into the technology proposition.
Quite simply, the cost and efficiency savings are irresistible. Technology can and does have the potential to radically affect the efficiency and profitability of any business, large or small. But if that is the case, why is there still a reluctance from a minority of IFAs towards adopting new technology and working practices within their businesses?
Integration
There are those, of course, who are committed technology users, and it is these advisers who have benefited from providers such as Legal & General, Friends Provident and Norwich Union trailblazing new technology and e-commerce in recent years.
The growth in e-business has been even more rapid over the last two years, with one major provider seeing growth of over 70% through its extranet and 110% through portals. The incentives are there for providers - premium rates are continually under threat from competition, expense ratios need to be improved and profits need to be returned to shareholders - not forgetting the need to improve policyholder values.
Advisers that have been converted to new ways of working have benefited from improved efficiencies, more accurate administration and, in many cases, improved margins through higher commission and lower costs. However, the only way this can be maintained is through the widespread integration of e-commerce and while progress has been made, much remains to be done.
One barrier to embracing technology, particularly with some of the smaller IFA firms is inertia. Training is sometimes considered to be a paid-for benefit, and therefore an expense that a small business may have to forego. There is also a perception that training can be difficult to arrange. Crucially for smaller companies, support and mentoring is seen to be sorely lacking, with some IFAs claiming they feel isolated, particularly if they have problems using the technology in the first place.
Despite this, the benefits are certainly there for the taking. Consider the experience of one leading national IFA. It discovered that 40% of the cases it submitted to providers were sent back to them because of errors or because more information was required. However, since adopting electronic application forms, the firm has reduced this return rate to 9%, and as those that administer this business become more comfortable with the new technology, they can expect this figure to fall even further.
There are still fundamental problems with some advisers' ability to use and feel comfortable with new technology however. Because of a fear they will be embarrassed by the technology, it is still common for advisers to carry out manual fact finds, return to the office and re-key all the information into their system. So the technology is not seen as complimentary to the sales process - it is seen as a barrier.
There are signs however, that product providers are beginning to up the ante by forcing through change. Because of the inertia, most product providers have had to offer extra commission for advisers to conduct their business electronically either through extranets or through industry portals. Of course the cost savings provide the margins to sustain this additional commission as it remains infinitely more profitable if paper is kept to a minimum.
Commission incentives are not new in the industry and while previously, they may have been seen as more of a device to try and secure distribution, these additional margins are assisting the migration from paper to e-practice. As a result, there appears to be a gradual acceptance by many advisers that sooner or later they will need to complete the majority of their business electronically, but appreciation remains low and it is here that incentives can play an important role.
Positive signs
Those behind the use of incentives are not naïve enough to accept their use as anything other than a short to medium-term tactical device. Indeed there have been mutterings about the use of incentives coinciding with the advent of multi-ties. Could we see a return to providers offering sizeable financial inducements to secure distribution? With technology expected to play a major part in that process, there are fears that a genuine attempt to encourage a more efficient way of working could be stifled by an over zealous reaction to preserve pure independence.
Despite some comments to the contrary, there is much to be done to incentivise advisers to use new technology. Until this is rectified, some will remain reluctant to change the way they conduct their business. While there have been some positive signs, such as the introduction of electronic-only products from Legal & General, together with commission incentives, there is still huge potential for exciting e-product development.
But is it likely that providers will begin to draw in their incentives? While it would be a brave provider that takes the first step to reduce commission for paper business, it is unlikely that any of the major companies will refuse to accept business other than if it is submitted electronically, at least in the foreseeable future.
However, the leading providers are committed to making further improvements by making the use of technology more advantageous. Most providers are also working closely with advisers on devices that will assist the more widespread adoption of new technology.
It is in the best interests of advisers to adopt and integrate the use of technology into their everyday business practices. It helps both distributors and providers reduce administration costs, enhance customer service and improve pipeline management. And as e-business practices become more sophisticated, transacting business in this way will become the norm.
For those advisers looking for an endorsement on the benefits of electronic working - be assured that those that have made the switch could not countenance a return to the old customs and practices - their businesses simply wouldn't survive the increased workload and reduced margins.
Stephen Wynne-Jones is portal product manager at Assureweb
COVER notes
• Technology can and does have the potential to radically affect the efficiency and profitability of any business, be it large or small.
• One major provider has seen growth of over 70% through its extranet and 110% through portals in the last two years.
• Advisers that have been converted to new ways of working have benefited from improved efficiencies, more accurate administration and improved margins through higher commissions and lower costs.
