insuranceNEWS April/May 2016

Gaining Insight,keeping focus

28

Steadfast says thedevelopment of its ownbroking system is thekey to autonomy. Others wonder whythey’re bothering

By Bernice Han

BY NOW, THE DETAILS SURROUNDINGSteadfast Group’s not-so-secret projectknown as the Insight Broking Platform willhave been unveiled at its annual conventionin April.Much is at stake for the giant broker

cluster, which has invested considerable timeand resources to breathe new life into abroking management system that has beenaround since the mid-1990s.It’s not too farfetched to assume the

industry will be watching with bated breathto see if Insight, now bankrolled by Steadfast,will finally gain traction in the market.For the few broker groups that have

attempted similar costly adventures, thereturns would have been graded as some-what below-par if you’re an investor.So the odds are certainly stacked against

Steadfast. Just don’t tell that to ManagingDirector and Chief Executive Robert Kelly,who is confident his company has crackedthe code for a successful broking system.

“We don’t fail in execution,” Mr Kellytells Insurance News. “We expect strong sup-port for our technology initiative. The desirefor this system comes from the [Steadfast]network.”The revamped Insight is the culmination

of a two-year program that started almostimmediately after Steadfast bought thesystem from NAQ Technology in 2014 at a“very decent price” that was hard to resist,Mr Kelly says.Numerous alterations were made during

the process as network members who werebrought into the project to provide userinput gave valuable feedback before the offi-cial rollout.Mr Kelly says Insight, known in its devel-

opment stages as eClipse, is essentially asystem that the brokers have beendemanding for the past five years, and hisonly regret is the length of time it has takento make it happen.“It’s my fault it took so long to build, but

it’s not good, it’s great.“It’s exactly what the network wanted,”

he says, adding “there will be a stampede toget into it” when they see what Insight bringsto the table.The major transformations made

include the way the system communicateswith users. It now boasts an intuitive userinterface, meaning little or no training willbe required to learn how to operate it.“It’s the Google of insurance broking sys-

tems,” Mr Kelly says. “Insight is a cloud-basedsystem. There are others out there at themoment, but this is a first for the industry in

that it is completely intuitive. Training is nowa non-event for the users.”The system is capable of backing up

automatically and users are spared theburden of having to worry about having reli-able disaster recovery programs in place.“Insight breaks new ground for the

Australasian market. Nothing comes close to it.”Mr Kelly says brokers can expect annual

running cost savings of 30-40% in their ITbudgets by using th e new platf orm.“I think it’s important for the growth of

any business that you can contain cost andrevolutionise the process. It’s very importantfor Steadfast because it is a bespoke systemonly for [the use of] Steadfast network bro-kers,” he says.While he won’t explicitly say so, it’s

apparent that Mr Kelly views Insight as a keypart of his strategy to further expand theSteadfast family.Under his watch, the ASX-listed com-

pany has grown to become one of thecountry’s biggest broker cluster groups,offering a plethora of general insuranceproducts.It is now the largest group of its type with

more than 300 fully owned, partly owned or aligned but independent brokers and 22 underwriting agencies.Steadfast network brokers and the

underwriting agencies generated billings ofmore than $6 billion in 2014/15.Its net profit grew 68% to $42.1 million

and gross written premium (GWP) placed bythe network increased 8% to $4.4 billion.

STEADFAST’S LATEST CHALLENGE:

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insuranceNEWS April/May 2016 29

Mr Kelly expects Insight to provide an extra incentive for brokers to join thenetwork.

“Along with other services that we pro-vide, it will be conducive to those wantingto change and become a Steadfast broker,with all the efficiencies that Steadfastmeans to its broker network,” he says.

“It’s central to the core of how we goabout doing business and it’s very, veryimportant to us to see back-office efficien-cies and reduced prices, while improvingclient-broker compliance and instructionexecution.”

Corporate history is littered with a listof big-name titans that have flopped spec-tacularly when they tried venturing beyondtheir main realm of expertise.

As Ebix Australia Managing DirectorLeon d’Apice commented wryly in October2010 when cluster group IBNA announcedit was developing its own (ultimately unsuc-cessful) broker system: “What we have seenover the years is the IT road in this industryis littered with corpses.”

Nearly six years after getting into ITdevelopment, IBNA isn’t shedding anytears over the 2014 sale of 90% of its brokermanagement system to UK-based insuranceservices company Xchanging.

The system had a troubled develop-ment after IBNA formed a joint venturewith BrokerCentral developerInsuranceConnect in October 2010. Theproject to acquire and developBrokerCentral was controversial amongmany IBNA members, who from the start

questioned the need for it. Steadfast had previously looked at

BrokerCentral but a few months beforeIBNA signed up backed away from negotia-tions to purchase it.

Over the next few years IBNA reputedlyspent millions of dollars developingBrokerCentral. It ended the joint venturein November 2011, then six months laterrenamed the system BrokersIT and out-sourced its development.

The system was sold to Xchanging inNovember 2014 for an undisclosed price.

IBNA President Gary Gribbin’s expla-nation for the sale tends to support thebelief that in IT at least, sticking to yourmain game is infinitely safer.

“IBNA is a broking cluster group, notan IT or technology company,” he tellsInsurance News. “We just didn’t have eitherthe operating capacity or financialresources to carry it to market, so what weneeded was someone who had all the tech-nological skills and the resources andstructure to do that.”

Xchanging has already invested inimprovements to the system that leave MrGribbin in no doubt the decision to sellBrokersIT was the right one.

“There has been a huge amount ofwork done on the system,” he says. “A lot ofcoding work has now been completed.”

Mr Gribbin says there remains a “dis-tinct possibility” that IBNA may increase its10% holding in X-alt in the future.

Insurance News understands the saleagreement with Xchanging includes provi-

INMAG APR 16_page layouts 14/04/2016 5:25 pm Page 29

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insuranceNEWS April/May 2016

sions regarding the future use of the X-altsystem by IBNA members.

Xchanging says it has attracted new cus-tomers since launching the system in Aprillast year, but will not give Insurance News anyfigures.

“We are engaging with brokers, insurersand premium funders across Australia,”Head of Insurance Diego Ascani says. “Thereception has been excellent and ourmomentum continues to grow.”

However, informed sources have toldInsurance News the number of brokers tomove across to X-alt so far is “very, very few”.

Despite the IBNA example andnumerous other sagas of companies failingto build in-house IT systems, Mr Kelly has notime for industry critics who say Steadfastwould be better off using the systems thatalready exist in the market and concen-trating instead on its main insuranceactivities.

“They are idiots, and probably part ofthe IT legacy that holds back the wholedevelopment world. It’s not a distraction. Itis core to our activities.”

Steadfast is no doubt taking a gamblegetting into the broker system business, butMr Kelly believes this is the only way to go ifthe company is to secure its future.

“The reality is the incumbent systems doa very good job, but we don’t want to have athird party controlling our destiny,” Mr Kellytells Insurance News. “We want to be in chargeof our own destiny.

“The execution of data is the most cru-cial part of our business processes. You can’toperate without it. Data is king, and transac-tion and usage is paramount to costcontainment.”

While Mr Kelly did not name who thatthird party is, there are no prizes forguessing he was referring to Ebix Australia.

Relations between the two companiescan be described as cordial at best, or rockyif you prefer, after a highly publicised spatover an interface between Ebix’s broking sys-tems and the Steadfast Virtual Underwriter(SVU) transaction platform.

Ebix Australia is a wholly owned sub-sidiary of US-listed Ebix, and dominatesmore than 80% of the Australian market,thanks to its three insurance broking systems– WinBEAT, eGlobal and CBS.

More than 10,000 insurance intermedi-aries log into an Ebix broking system eachday – an 18% increase in the past five years.

And most are using Ebix’s SunriseExchange and iClose transaction platforms.

Sunrise Exchange is the industry’sleading platform. There are about 967 activeconnections to the platform, which sees anaverage of 8000 policies transacted daily.

It has the support of eight major insurers– AIG, Allianz, Calibre CommercialInsurance, CGU, National TransportInsurance, QBE, Vero and Zurich.

Overall gross written premiumprocessed via Sunrise Exchange last yearexceeded $2.9 billion, and when combinedwith iClose, the figure was over $3 billion.

But Steadfast wants to run its own com-plete system independent of the dominantEbix offerings – a situation that has led to aprotracted conflict between the two.

Top of the list is the long-running skir-mish over Ebix’s commercial terms to buildand maintain an interface between itsbroking systems and the SVU.

For the fourth consecutive year the com-

pany was not invited to the SteadfastConvention in April. Ebix had been a reg-ular exhibitor prior to 2013.

Mr Kelly says the invitation is notextended as Ebix Australia is “not a strategicpartner”.

However, he insists that doesn’t meanrelations between the two companies are at astandstill.

“A really good relationship existsbetween Ebix and Steadfast Technologies.[Mr d’Apice] is a very professional guy andreliable with the products that he puts intothe market. Ebix serves the industry wellwith the products they have developed.”

Mr d’Apice tells Insurance News he alsosees the relationship as “healthy”, despite thebreakdown in talks over the SVU interface.

“We differ on a number of matters butwe still have a healthy respect for Steadfastand we do engage with them on other proj-ects,” he says. “We still, to this day, work forSteadfast in terms of information-gathering.The relationship with them is professional,with open lines of communication.”

Mr d’Apice says the insurance tech-nology specialist is always ready to meet anynew challenges and competition.

“We always watch what is happening inthe market and try to act appropriately,” Mrd’Apice tells Insurance News. “There hasalways been competition, which encouragesus to develop and offer new and enhancedsolutions to the market.

“Competition is healthy. We are notdaunted by it. We recognise that competi-tion is a good thing in the market.”

For the moment, Mr d’Apice prefers tolet the market be the judge of whetherInsight is a better alternative to what his

30

“The reality is the incumbent

systems do a very good job, but

we don’t want to have a third

party controlling our destiny.”

– Steadfast Managing Director Robert Kelly

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insuranceNEWS April/May 2016

company offers, and he is quietly confidentthat history is on his side.

“A lot of new software products havebeen launched but failed miserably,” he says.“In terms of where we are sitting with aproduct like Insight, the jury is still out onwhether it will be successful.”

Steadfast’s move to run its own brokersystem does not come as a surprise to Mrd’Apice, but he maintains this end of thebusiness is better left to the specialists likeEbix to manage.

“It’s an expensive exercise to develop abroking system but equally important is thehigh cost to maintain a broking system,” hesays. “Many underestimate the complexity ofthe ongoing system support requirements.

“Historically, local and international bro-kers have developed broking systems butthey have largely stopped doing that becauseof the challenges involved.”

The cost of maintaining the softwarerunning a system over its reasonable life caneasily run up to five to 10 times the initialinvestment, he says.

Besides, mixing technology and insur-ance together is not always a surefire recipefor success, as Google’s recent closure of itsinsurance comparison website in the US andUK demonstrates.

“Technology companies don’t do well ininsurance and typically, insurance compa-nies don’t do well in technology. Google is agood illustration of the first point,” Mrd’Apice says.

“Software development is an expensiveexercise and a business you need to concen-trate on. Many corporates have shown theyare not necessarily good in the softwaredevelopment arena.”

He says Ebix has done extremely well inAustralia, and also in the US, because thecompany understands what clients need.

“The major international brokersincluding Aon, Marsh, Willis all haveinternal software development capabilities,yet they use our broking systems both inAustralia and internationally,” Mr d’Apicesays.

“They don’t do that just because theylike us. Their decisions were made becausewe have got good solutions that address theirrequirements. They also know that buildingand maintaining systems is an expensiveexercise. It can be a minefield.”

He says the company does not for onesecond take its success for granted and isalready working on a fourth broking systemcalled Ebix Evolution.

A test version of Evolution has alreadybeen released for a few of its larger clients toreview.

“Their feedback has been very positive,”Mr d’Apice says. “We have been working onEvolution for the past 18 months.

“It’s designed as a global project andbacked by a mult-million dollar investment.We have to constantly reinvent our softwareproducts to remain relevant and that is whatEbix Evolution is all about.”

The Australian market remains an attrac-tive proposition despite the drop in thenumber of brokers in the past 10-15 years.

A broking system is a must-have for everyinsurance broker in Australia and the latestVero SME Insurance Index finding that theproportion of business owners using brokershas increased is good news for Ebix.

“There are businesses in the Asia-Pacificregion who can survive without a broking

system, but you can’t operate without one inAustralia,” he says.

“Broking systems provide the backbonefor any business managing clients, transac-tion processing, assisting with compliance…I don’t think you will ever see broking sys-tems made redundant.”

The way Mr d’Apice sees it, broking sys-tems will take on greater importance as theindustry evolves and brokers seek greaterlevels of efficiency.

“Over the years, broking systems havebecome more sophisticated in what theyoffer a broker, and for the future these levelsof sophistication will increase in order toprovide even more facilities for brokers,” hesays.

“The future will see greater interconnec-tivity to third parties and external systems.Customer self-service and mobility solutionswill also play an increasingly important role.”

The figures explain why Ebix guards itsstranglehold of the market zealously anddevotes more than 40% of Australian rev-enues on research and development. Thecompany says the size of its R&D budget isconfidential.

“We invest heavily in R&D to ensure thatour broking systems remain market-leadingsolutions. This situation hasn’t changedsince we commenced developing softwarefor this market over 25 years ago,” Mrd’Apice says.

Australia accounts for around 2% ofGWP globally but it plays an outsized role asa revenue source for Ebix and is the com-pany’s biggest market outside of NorthAmerica.

Of the $US265.5 million earned last year,Australia’s contribution “is far more than

32

“It’s an expensive exercise to

develop a broking system but

equally important is the high

cost to maintain a broking

system. Many underestimate

the complexity.”

– Ebix Managing Director Leon d’Apice

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