The rapidly growing managing generally agency sector of the Canadian insurance industry has fuelled the growth of a young outsourcing company that offers back-office administration services.
FasTrac Back Office Man-agement Systems Inc., based in Concord, Ont., has grown its application-processing volume by about 50% since May 2009. The company, founded in January 2008, expects to expand by another 50% by the end of this year, says its president, Steve Dilts.
“Our core model is based on the transaction model,” says Dilts, who manages a staff of about 30 and is looking to hire more staff.
The firm manages adminis-tra-tion for Performins Inc., Day-star Financial Group Inc. and Ray-mond James Ltd., among other MGAs. Insurance distributors’s fees to FasTrac are paid based on the volume of either the in-force insurance the distributors have filed through FasTrac or of new insurance applications, or a combination of the two measures.
The development of the outsourced administrative back-office side of the insurance industry coincides with greater scrutiny by provincial regulators of insurance distributors. It is also a response to the insurance industry’s efforts to improve processing time by using digital processing technology. FasTrac aims to capitalize on both those developments.
The processing of insurance policy applications is a massive-volume business, and a large portion is handled through the MGA channel, according to data from Investor Economics Inc., a Toronto-based consultancy that serves the wealth-management industry.
For example, at the end of June 2009, 32% — $22.4 billion — of segregated fund assets were sold through insurance advisors doing business through the MGA channel. That’s slightly less than the volume of seg fund assets sold through captive-agency networks owned by companies such as Great-West Lifeco Inc. and Sun Life Financial Inc.
“The game plan is to make the transaction easier for the end-client and easier for the advisor to do — and to shorten the process time and cycle for the whole process,” says Dilts. “The benefit to us is that, over time, we can lower costs for our clients and make some margin from the activity.”
FasTrac client Rene Pereux, president of Winnipeg-based Daystar, says sending back-office business to FasTrac allows him to concentrate more on the parts of the business that generates more profit for his company — recruiting, servicing and training advisors, who then send their insurance business through Daystar, which has offices and branches in Ontario, Alberta, Manitoba and British Columbia.
“It gets harder and harder to find the people for the back office,” says Pereux, who engaged FasTrac in January 2010.
Pereux says most MGAs don’t have the time to manage technology. He adds that he likes some of FasTrac’s plans, such as those to develop electronic and digital tools for processing policy applications more quickly.
“We were looking at the future when we [became a FasTrac client],” Pereux says. “And we think many MGAs are going to need an efficient, compliant back office. We think it’s the right strategic move.”
A representative from Daystar has been named to FasTrac’s board of directors, Pereux adds.
FasTrac’s technology is contracted with Winfund Software Corp., a wholly owned subsidiary of Mackenzie Financial Corp. Winfund provides account processing software for both the mutual fund and insurance industries. FasTrac has added some of its own software, which allows advisors to track the progress of their clients’ applications throughout the underwriting process.
“We try to give advisors a single view to all the insurance details they need,” Dilts says. “It’s an uptick for [MGAs] because it improves the ability of advisors to become more productive.”
FasTrac counts itself as part of an overall effort in the insurance industry to shorten all insurance application-processing times — from more than 30 days to a few days, which would be more palatable for consumers.
The Canadian Life Insurance EDI Standards Association (known as CLIEDIS) led a meeting in January that concluded with a commitment to achieve this goal. Participants in the CLIEDIS meeting also struck a so-called “bridge group” of industry representatives, composed of manufacturers and distributors as well as advisors, to help implement the proposal.
Part of the impetus for electronic data transfer and management in the industry is related to the perceived need for better regulatory compliance in the insurance industry, especially in distribution.
@page_break@The Canadian Council of Insurance Regulators, an umbrella group of provincial and territorial bodies, is reviewing the activities of MGAs, a process that could carry through to 2011. So far, regulators are simply trying to determine which oversight responsibilities may or may not fall to MGAs.
Says Dilts: “We’re focused on ensuring files are compliant, that communications and disclosure forms are part of those compliant policies’ files and that the information is available to the parties that need access to it.
“At the end of the day,” he continues, “from a liability perspective, when something does go off the rails, everybody will be named in the legal action. So, it’s sort of a necessary evil in the environment in which we work today that we need to provide our clients — the distributors — with the information to back up their position.”
FasTrac is owned privately, along with a minority venture-capital position held by VentureLink Financial Services Innovation Fund Inc., a Toronto-based labour-sponsored fund. That vencap fund also owns a position in Performins, which is also based in Concord.
FasTrac currently operates from the same offices as Performins, but is planning to move. Moreover, the brother of Performins CEO Bruce Hammond had developed some of FasTrac’s technology. Dilts recognizes that some potential clients may see a possible conflict of interest but, he insists, none exists.
“Performins is a client. It is no different from others,” Dilts says. “[The relationship] creates question marks that shouldn’t be in anyone’s head around conflicts. The MGAs are rightly protective.”
Dilts acknowledges that MGAs are very protective of the business they do with financial advisors, and would not want any information shared about their business via the back offices — or through any other means. IE
Back-office service firm targets MGAs
FasTrac aims to capitalize on increased regulatory scrutiny and a push for faster processing
- By: Gavin Adamson
- March 8, 2010 February 2, 2019
- 11:03