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Something stinks in the insurance industry, according to New York Attorney General Eliot Spitzer. Insurance brokers, charged with the task of providing competing bids to their customers, have been taking kickbacks from insurance companies. Spitzer hopes to uncover–and eliminate—widespread corruption in the industry.
Lets say youre the human resources executive in charge of putting together employee benefits for your company. Typically, youd evaluate your existing benefits, which could include medical insurance, life and disability insurance, and vision and dental care plans, and then find out if theres a way you can keep your company costs down while continuing to serve your employees interests.
Youd contact an insurance broker, who would help you craft a request for proposals from insurance carriers. Then, youd get out of the way and wait for the broker to research the state of the market and present you with the best packages available.
What Spitzer uncovered had cost corporations an unknown amount of money. Brokers were steering their corporate clients to insurers who were providing payoffs, under long-standing agreement, to the brokers. Spitzer has accused one large broker, Marsh and McLennan, of soliciting rigged bids for insurance contracts.
A number of other insurance carriers, including American International Group, ACE Insurance Co. of North America, Hartford Financial Services Group and Munich-American Risk Partners are accused in Spitzers suit of rigging bids and steering contracts based on kickbacks. Other insurance companies are also being investigated.
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“If the practices identified in our suit are as widespread as they appear to be, then the industrys fundamental business model needs major corrective action and reform,” said Spitzer, who has forced Wall Street to adopt measures against conflicts of interest among stock analysts. “There is simply no responsible argument for a system that rigs bids, stifles competition and cheats customers.”
To the rescue comes technology. Aptus, a portal provided by BenefitPoint, is changing the model for how the trillion-dollar employee benefits insurance industry operates.
The Aptus portal has already been accepted into the industry since its inception in 1999, with more than 310 broker and consultant offices using the product, managing more than 40,000 employer clients with 22 million employees and about $90 billion in premium. More than 420 carrier organizations use Aptus to access broker and consultant RFPs (requests for proposals) and renewal requests.
The prior generation of employee benefits procurement, on the employer side, started with employer representatives disseminating RFPs on Excel spreadsheets. These RFPs would be distributed via e-mail, and the carriers would respond either by filling in the spreadsheets or by generating their own version of a proposal.
Employers would have multiple versions of a proposal, some in spreadsheet format and some in word processing files, and then face the task of putting the data into a format so that the proposals could be compared in meaningful ways. Brokers would spend a lot of time going through all of the proposals in different formats to pull relevant data out of them, then assemble a report that allowed their customers to compare and choose.
Next Page: Bringing transparency to the process.
Bringing Transparency
Given the hodgepodge of formats, it was relatively easy for some under-the-table wheeling and dealing to occur. BenefitPoints Aptus makes the process much more transparent and eliminates the difficulty of e-mailing files around–which has the added benefit of eliminating the possibility of e-mail virus transmission.
According to Kurt de Grosz, BenefitPoints founder and senior vice president of sales, Aptus is a CRM (customer relationship management) and procurement system. It takes what CRM does and what Web-based procurement does and ties them together. “Theres a lot of CRM out there, but BenefitPoint is the first one designed for employee benefits,” De Grosz says.
There have been agency management systems (by companies such as AMS and Applied) that provide software to insurance brokers and accounting professionals, but those applications have been focused on property and casualty insurance. Other applications did not effectively addressed employee benefits, de Grosz says, adding that Aptus addresses a significant need for brokers.
Andrea Robinson, a broker with San Francisco-based Woodruff-Sawyer, has been using the BenefitPoint product for more than four years. When she starts putting together a package for a new client, she first sits down and evaluates the clients existing employee benefits.
That package, along with basic client data, is then entered into the BenefitPoint platform, which helps Woodruff-Sawyer track history with a customer. Robinson also specifies the package she wants the carriers to fulfill and puts that into the platform.
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Then Robinson goes to market, picking carriers she wants to respond to her RFP and telling them which options must be included. “With the Web-based application, we dont have to send around a lot of e-mails with attachments,” Robinson says. “We are also automatically in compliance with HIPAA. We can track when the RFP went out, and carriers can immediately respond, We intend to quote.” Robinson said she can see when a carrier has viewed an RFP even if they havent responded.
Carriers then respond online, either by entering rates into the BenefitPoint system or by sending a hard copy or an e-mail with attachments. Then Robinson and her crew decide what to show their customers by entering the rates and associated benefits. “Now, we can compare benefits side by side and see what the differences are,” Robinson says.
Once a winner is picked, BenefitPoint populates the history file with the newly adopted plan. The system also can capture discussions with carriers automatically, such as, “We heard you say you were going to cut your rates on this product,” and get a carrier response. The communication is permanently stored in the system and cannot be edited, providing a clear audit trail of the process the broker went through to fulfill their clients requirements.
Next Page: Getting up to speed on client history.
Client History
Aptus provides brokers, consultants and carriers tools for CRM, marketing and procurement, and is customizable at the organization, office and user level. Features include automated marketing and renewal workflows, business intelligence derived from data and reporting, revenue tracking and management, and various product integrations.
Robinson recalls a time when one of the brokers in her office left for maternity leave a few weeks earlier than anticipated. “In the old days, we would have had trouble figuring out what had happened with her clients when she left so suddenly,” she says. “Now, with BenefitPoint, we just open that file and all the history is there. Theres not a price tag I can put on the help this program provides. Its just been great.”
BenefitPoint can help brokers avoid the problems being uncovered in the Spitzer investigations of the insurance industry. Brokers using the system can say, “These are the carriers we went to, and this is the information we got back.” Steering business toward a company that gives the brokers kickbacks would be difficult to hide.
Since it is a hosted application, BenefitPoint charges monthly license fees to brokers. There are additional fees for implementation and training. Any carrier can access the platform with no charge by invitation from a broker.
Carriers who want to put content into the knowledge base and have their logos displayed pay BenefitPoint a combination of license fees, transaction fees (based on premium dollars sourced through the platform) and professional service fees for consulting and development if they want to build some proprietary technology or need consulting on how to integrate with the APIs.
The Aptus platform uses BEA WebLogic as its application server, and is also using the companys Web Services toolkit. Robinson says her firm can integrate Aptus with its client reporting system. “Weve come so far in the last few years,” she says. “In days of old, it was like pulling teeth, and now its so easy. We love it–it gets exciting with all the options you can get when everything gets Web-based.”
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