iLingo - The Language of Insurance e-Business

(C) 1999 Lexica, LLC

2. The Insurance Supply Chain

The insurance industry supply chain is traditionally divided into two parts--the agency or customer service side of a direct carrier that manages the relationship with the consumer and the underwriting and claims processing of the carrier and their affiliated re-insurers. In the course of doing business, diverse interactions also occur between the "primary" entity (the agency or carrier) and third-party providers of information and services related to insurance sales, underwriting and servicing. With the introduction of the Internet and direct sales through web market portals, the division between trading partners becomes much less well defined. In addition, the possibility of using web technologies to automate this supply chain further changes the way one views insurance.

Thus, a new model for the supply chain must be developed that takes into account new business models for the Internet as well as existing business practices while creating a market. Essential to the operation and implementation of this supply chain is the business party that will deploy, support, and operate components within the market. In this context we define the concept of a Market Maker.

A Market Maker is the business party that operates the systems that implement a marketplace. They provide the framework in which the business parties in the supply chain--the insurers, re-insurers, payment services, credit agencies, etc.--can operate their technologies, components, and platforms that provide business services to the supply chain. Essentially, the Market Maker provides the backbone for the supply chain.

In conjunction with the Market Maker, participating business parties--insurers, etc.--provide components that integrate with the workflow of the supply chain. These components provide necessary functions related to the role that the business party plays.

For example, an insurer must provide components that can provide "rate" information for specific insurance products to produce quotes for a consumer. In addition, they must provide, through their components, the insurer-specific process for taking that quote to the point of binding a policy, producing legal documents and, ultimately, transferring that data into their own systems.

The role of an insurer, as described previously, is that of a Manufacturer in the supply chain. That is, they produce the insurance products that the consumer buys. There is a specific workflow that a consumer must go through that is common to all insurance products of a particular type with the exception that an insurer may have specific requirements or customizations that must be accomplished along the way. It is this workflow that a Manufacturer participates within and enhances by adding customizations to add value.

In support of the Manufacturer--the insurer--the Market Maker provides supporting services with the supply chain. For example, a credit report is often used as data when quoting an insurance policy. Thus, a market maker provides access to credit information through another participant in the supply chain. These participants are called Supporting Participants.

This diagram illustrates the concept of a Market Maker and a supply chain market:

Market Maker Diagram

In addition to providing a market in which Manufacturers and Supporting Participants gain benefit, the Market Maker can collaborate and communicate with other Market Makers. This allows Market Makers to allow their participants to operate within other markets with one single point of integration essentially providing a super-aggregated point of view to a consumer. This concept is called Cross-Market Collaboration.

The following diagram illustrates this concept:

Cross Market Collaboration