It is a pattern that has been repeated time and time again: an industry enters the Electronic Data Interchange age through the efforts of one or two dominant companies that have their corporate eyes focussed on competitive edge. But what happens when an industry lacks players with the strength to pull the rest of the industry behind them? Where no-one has the muscle to get their suppliers or customers to adopt paperless trading ‘or else’? Not a lot, in the case of the UK pensions and life insurance industry, which remains largely paper-based.
Conservatism
The lack of progress was compounded by a well-founded conservatism and the provisions of the Financial Services Act which specifically stopped insurers from tying Independent Financial Advisors into company-specific trading systems. Faced with inertia, the industry has taken a unique path: in 1990, 20 leading insurers clubbed together and and formed a joint company, Origo Services Ltd, with a brief to offer advice to the intermediaries (financial advisors and brokers). While Origo’s remit covers all kinds of information and support services, its subsidiary, ‘The Exchange’ deals exclusively with the technology and Electronic Data Interchange aspects. The results could prove a useful model for other pre-Electronic Data Interchange industries that want to take the plunge, since not only do the insurers seem to be satisfying their trading partners, but they are finding ways to integrate older viewdata technology with new systems. The Exchange’s story starts in 1990 when Origo approached two existing service providers AT&T Istel Ltd, which ran a viewdata-based quotation service called InView, and British Telecommunications Plc with its competing BTIS service. Origo’s aim was to get a unified system so that the intermediaries didn’t need two screens on their desks. In the event negotiations with AT&T Istel were successful and the Origo sponsors bought the rights to the InView system and in return Istel netted 30% of The Exchange’s shares. Despite protracted negotiations, British Telecom has chosen to go its own way and there is little love lost between the organisations: statements from BTIS have characterised the exchange as a monopolistic threat to the market, however the impression is that BTIS is losing the propaganda war – Norwich Union and Legal & General pulled out of BTIS early last year, although others, such as Scottish Life, are still still happy to service the two networks.
Electronic Data Interchange is one of those marvels of the modern world that never quite manages to live up to its promise by becoming universally accepted and use. It offers a standardised electronic means for customers and suppliers to exchange orders and invoices, contract notes, goods received notes and all the other irritating and expensive-to-handle documents, eliminating the vagaries of the mail and the facsimile machine and the vital documents that tend to get lost. There are pockets of intensive users that wonder how they ever got along without it, while the rest of the world sails serenely and incuriously. But new battles are still being won: Chris Rose relates how one such venture finally got off the ground in the UK.
At the end of 1992 The Exchange formally announced that it had signed another agreement with AT&T in August. This time it is a five year contract with AT&T Easylink to build and manage a Message Switching Service designed to provide both Electronic Data Interchange and standard electronic mail. On top of that Message Switching Service, it will encompass the existing viewdata set-up. That The Exchange (30% owned by AT&T Istel) chose to use AT&T Easylink is obviously a matter of some sensitivity. Nigel Phillips, The Exchange’s director of commercial services stresses, when discussing the deal, the rigours of the selection process – in the end he says, the fact that Easylink won was down to both price and its ability to meet stringent service level agreements. These agreements are particularly important to the pensions and insurance business shy of change – the Post O
ffice may have its vagaries, but both the insurers and the intermediaries were loath to switch to an electronic system over which they felt that they had no control. For AT&T, the five-year contract holds out the possibility of worming into the rest of the insurance market, which is no further advanced than the life-insurance sector.
Imaginatively
Meanwhile, the apparent consensus between the insurers and the intermediaries is due in part to the latter’s active role in producing the necessary standards: around the same time that the insurers got together, their trading partners formed the imaginatively named Large Intermediary Group, with a charter to work closely with The Exchange. Now, four months into the implementation programme and UKP20m later, 19 companies are already hooked into the person to person electronic mail using personal computers, and the existing viewdata users should be on line by next month. The ultimate aim, however is to produce a ‘common personal computer system’, which can be placed in each intermediary’s office. Apart from basic communications, the common system should act as an electronic filling cabinet for all of the forms that the insurers produce and the intermediaries have to fill in. This service is planned to be ready by the summer – and yet, exactly how the forms will be updated has yet to be decided. A modem link sounds feasible, until it is realised that each of the insurers has its own set of forms and that these change frequently. In fact, Origo is currently thinking about using optical disks to send out the changes.
