Short-term insurance data sharing like it was meant to be
The latest World Economic Forum Global Competitiveness Report ranks South Africa 4th among 142 countries in the financial markets category. What this means is that companies in the broad financial services sector can go about their business secure in the
As we power into the 21st Century the cheque is making way for debit cards, credit cards and internet payments. Visits to the bank branch have become a thing of the past too. Nowadays we handle both our banking and insurance business from our desktop computer, laptop or just about any mobile communications device imaginable. We live in a world where millions of financial transactions and reams of consumer data “flash” across copper and fibre-optic cable every second of every day.
South Africa’s world class payments infrastructure coupled with the internet and advances in mobile telecommunications makes it possible for financial institutions to process complex financial transactions in real time – any time – and totally electronic. Banks, through their inter-branch infrastructure, ATM networks and online transaction platforms are among the heaviest users of modern payment system technologies – and other financial institutions are not far behind.
Snatching opportunity from the jaws of insurance regulation
Insurance companies, like banks, process thousands of financial transactions each day. Both life and short-term insurers make use of the available technologies to ensure that critical payment processes (such as premium collection and claims payouts) run without a hitch. But there are areas where business processes lag technology by some way. The transfer of client and policy data between insurance broker, binder holders and the insurer leaves a great deal to be desired. Short-term industry stakeholders were forced to rethink how they transmit client data in the wake of the Insurance Laws Amendment Act (IILA).
One of the consequences of the bill, which is in force from 1 January 2013, is that insurers must have access to the client and policy data held by brokers and binder holders. This in turn requires that brokers regularly update insurers with their underwriting, policyholder and claims data. From January next year insurers will be unable to do business with brokers who are not in a position to supply them regular data updates. The IILA provided much needed impetus for the short-term insurance industry to consider and address the historical inefficiencies in communication between insurers and their binder holders.
The Short Term Insurance Data Exchange (STRIDE) project was initiated in 2009 as a joint venture between the Financial Intermediaries Association (FIA) and the South African Insurance Association (SAIA) to solve the communications impasse. The venture now includes a number of shareholders in the insurance product provider and financial advisory space. Although the company has a profit motive it does not expect super profits in the early stages and it is forecast that the initial revenue streams will be sufficient to cover operating expenses and service shareholder loans. “Shareholders will not benefit in any way through preferential pricing or any other mechanism, except through the repayment of their investments,” notes Jenny Theunissen, Marketing and Operations Manager at STRIDE.
Insurance companies cannot wait for seamless data transfer
STRIDE will deliver a solution for real time, efficient and cost effective communication across the short-term insurance sector, thereby satisfying STRIDE’s “we simplify insurance” purpose statement. In layman’s terms the joint venture will create an easy way of delivering data between insurers and their binder holders. STRIDE will make its money by levying a small fee each time this data crosses its data “switch” (more on that in a moment).
The solution is based on two components, namely a data standard and a data “switch”. STRIDE contracted technology partners to assist with each of these aspects. ACORD, an internationally recognised data standards organisation specialising in insurance data, was tasked with developing a data standard across the domestic short-term landscape. And ASTUTE, which already manages a data “switch” on behalf of the life insurance industry, was chosen to design and implement a similar solution in the short-term space. Various software solution providers will assist insurers and brokers to map their data to the ACORD standard and integrate it with STRIDE.
Chief executive, Deon Olckers, says that the STRIDE integration will follow a simple two-step process. The first, called technology integration, ensures that the insurer IT systems can “speak” to the broker system. The second – process mapping – will create a complete data translation for the insurance products offered by the binder holder in question. During the initial phases personal lines and general commercial lines covers will be mapped.
A preferred medium for transmitting data
A major concern among brokers is that STRIDE – and perhaps other parties – will gain access to confidential client information. The reality is that STRIDE is merely a data “switch” – it receives data, beats it into shape – and spits it out to the intended recipient. “This is a switch only – no data is stored – nor will any database be developed and populated with policyholder data,” says Olckers. As with most modern IT systems there is plenty of security built in too. Data is encoded and directory services will ensure that only valid senders and receivers are party to each transaction. Insurance consultancy Sensepost is currently conducting a security audit to ensure that the data is not vulnerable at any point of the process.
In a nutshell, STRIDE offers a secure and easy way of delivering data between insurers and binder holders. Brokers will benefit from single capture, seamless integration into the insurers’ system and two-way communication between broker and insurer among others. The joint venture partners believe STRIDE will become the preferred medium for transferring insurance data thanks to its wide acceptance as well as the direct involvement of a number of product providers in the project.
Editor’s thoughts: The life insurance “switch” developed by ASTUTE is incredibly popular, with more than 90% of financial advisers using the system to call up their clients’ policy information. There is no doubt a similar solution will prove invaluable in the short-term space. Are you aware of the STRIDE initiative and do you believe it will add value in your practise? Add your comment below, or send it to [email protected]
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