Insurance: Screening tools

Most recently, Hamilton, Ont.-based Greengrass Group, which conducts advisor background checks, launched Insurance Contracting and Compliance Solutions (ICCS) – a new service that automates and simplifies the advisor-contracting process and provides ongoing, behind the scenes compliance monitoring.

“[ICCS] is helping people become compliant, and it’s cleaning up the contracting process,” says Ian Robinson, president of Greengrass Group.

Firms that sign up for ICCS will gain access to a profile on each agent with whom those firms have a contract, including information on licensing, regulatory standing, continuing education credits, errors and omissions insurance coverage and credit standing, among other details.

Greengrass Group continuously monitors for changes in advisor status in these areas, and insurance firms and MGAs can set criteria for the types of changes about which they’d like to be notified.

“We’re doing all the checks in the background, so that the firms don’t have to worry,” Robinson says. “The minute there’s a problem, we notify them.”

The launch of ICCS comes as Toronto-based insurance sector consulting and outsourcing firm LOGiQ3 Corp. continues to make progress on its own advisor contracting and compliance solution, two years after beginning its work on the initiative.

That project, which is being spearheaded by a newly formed subsidiary of LOGiQ3 called APEXA Corp., aims to create a centralized industrywide database of insurance advisors, aggregating all of the information that insurance firms and MGAs need to collect as part of their screening and compliance monitoring process.

“Currently, you have all of this information being maintained in multiple databases,” says Richard Sachs, senior project consultant with APEXA. “APEXA basically connects all the parties.”

The existing advisor-screening process tends to be redundant because each firm has to gather the same information on each advisor. With a growing number of advisors licensed in multiple provinces, the process of tracking down all of the necessary data has become even more onerous.

“It’s a very manual process, and organizations are doing the best they can, but there’s a lot of duplication in effort,” says Chris Murumets, CEO of LOGiQ3.

Insurers often outsource their advisor screening and supervision responsibilities to their MGA partners, which have a closer relationship with advisors and, therefore, are in a better position to monitor compliance. However, since the insurers are ultimately responsible for these functions under the regulatory framework, many insurers conduct their own due diligence as well.

The industry could benefit from tools that eliminate some of this duplicated effort, says John Dargie, vice president of Oakville, Ont.-based MGA Canada Loyal Financial and president and chairman of Mississauga, Ont.-based Independent Financial Brokers of Canada.

“MGAs are doing a lot of the due diligence and compliance work, and then it’s being redone yet again by some of the supplier companies,” says Dargie. “It’s crazy, very costly and it’s taking much longer.”

Compliance practices could become even more time-consuming – particularly for advisor screening and monitoring – under standardized MGA compliance guidelines recently issued by the Canadian Life and Health Insurance Association Inc.

“I need to know a lot more about the broker today,” Dargie says, “if I’m the MGA that is going to accept total responsibility for his or her actions.”

It’s crucial for the MGA channel to find more efficient ways of meeting these growing compliance responsibilities, says Richard Pyper, an independent insurance industry consultant in Toronto.

“The insurance industry is a little backwards when it comes to technology, [as insurers] still do a lot of things paper-based,” he says. “[Industry participants] need to look for ways in which they can automate and save money and time.”

In addition to easing the burden for MGAs and carriers, tools such as APEXA and ICCS could simplify the process for advisors. Rather than having to fill out multiple forms to convey the same information to each of their MGAs and carriers, advisors could submit the relevant information just once to an electronic database.

“When you update your profile with new information, it automatically notifies all of the relevant parties,” says Sachs. “For the advisor, [this process] eliminates a lot of extra work.”

To address privacy concerns associated with sharing an advisor’s information among firms, both ICCS and APEXA have privacy features that limit access to authorized parties and provide advisors with certain controls over their information.

Although Greengrass Group and LOGiQ3 have similar objectives, they have taken different approaches.

ICCS is flexible in nature, so firms can tailor the tool to their specific contracting and compliance monitoring needs. “It’s completely customizable,” says Robinson.

The cost of the ICCS solution also is flexible, depending upon the size of the firm and scope of services provided, starting at as little as $1 per advisor a month.

In contrast, APEXA takes a larger-scale, “one size fits all” approach, with a goal of eventually creating an industrywide advisor database with a unique identifier for every licensed life insurance agent in Canada. In order to do so, APEXA needs to get all insurance carriers and MGAs on board.

“It really only works and adds value for everybody if everybody uses it,” says Murumets.

Nine major life insurers and MGAs have signed on to work with APEXA. However, other companies have expressed concerns about the cost of that service. Firms would pay $75 per advisor a year (costs would be capped for larger firms) for access to the system.

Murumets says firms should view the expense as a strategic investment that will enable them to achieve a higher standard of compliance and contracting: “There is absolutely a cost to doing this, but we believe that with the APEXA service, we’ve levelled the playing field. Everybody will have the same control over their advisors; whereas, before, if you were a really small MGA or carrier, you may not have been able to afford the infrastructure that APEXA offers.”

Even with the help of third-party tools, Dargie says, many MGAs will struggle with the rising cost of compliance. “This is going to be an added cost to the MGA,” says Dargie, who anticipates more consolidation as the industry adapts. “Smaller MGAs, unfortunately, aren’t going to be able to bear that extra cost.”

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