ChannelPoint Stakes Claim to Be Insurance Industry Portal

Computergram International, April 7, 1999

By William Fellows

ChannelPoint Inc's business-to-business insurance industry portal solution will go live at the end of June in the New York, New Jersey, Connecticut TriState area, with six health insurance providers offering their plans on sites designed to support an estimated 15,000 insurance brokers in the area. A local brokerage, The Kooper Group is already piloting the service.

By offering brokers access to online policy details, comparisons and the ability to generate proposals ChannelPoint says its Commerce Broker online exchange will greatly reduce the time it currently takes to provide customers with proposals and policies. Currently 95% of all small and medium sized insurance transactions go through brokers' paper-based systems; that's why ChannelPoint isn't attempting to put insurers and consumers in touch directly through its Commerce Broker exchange and cut out the middleman. At the moment industry can't afford to cut off its distribution channel - there are 750,000 insurance brokers in the US - even if between 18% and 22% of every dollar spent on insurance goes on distribution costs. The insurance industry will be worth one trillion dollars by 2003; it already accounts for 10% of US GDP. ChannelPoint claims that it's because the products themselves are too complicated that they won't be offered directly to consumers, at least not with Commerce Broker. ChannelPoint says it will add support for personal property and casualty insurance by the end of the year and as well as other benefits and some specialized financial services.

Commerce Broker is the first online exchange. The company also has Commerce atWork and Commerce Consumer cuts of the software in hand. The former designed to drive voluntary insurance benefits sales directly to employees. The latter will support a direct to consumer insurance and benefits portal. It's looking for a third party to build an auto insurance storefront that will use Commerce Consumer as its back end. The sites/exchanges are branded by whichever company is hosting them.

The products build on ChannelPoint's first product, Insure, which has been marketed last year as a way for insurance companies to make all of their policy and customer information available internally behind a firewall. United Healthcare, one of the six TriState companies which will have its policies offered on branded brokerage exchanges, says proposal turnaround is down to one or two hours from one or two days and case processing down from 45 days to between two and five days using the ChannelPoint software. ChannelPoint expects most of its Insure customers to adopt Commerce Broker and is already planning a move into the hot enterprise application integration (EAI) space with a product called Commerce Link due later this year which will link insurance carriers' legacy data into exchanges created with its software by converting it to XML. Companies can use Insure to update policy information on a Commerce solution exchange, otherwise maintaining data integrity is up to the exchange host.

ChannelPoint's Commerce software is free to brokers and agents. It takes a cut of the premium on each policy sold. Its business therefore calls for a revenue stream based on annual annuities from policy renewals rather than a quarter-by-quarter product or license revenue stream. The company has talked about booking $20m this financial year, but SVP Jeffrey Bork says that while its pipeline could support this, a more gradual increase in its annuity revenue stream is more likely. The company set to head for an IPO as a hot internet property within the next 12 months, has raised $36.5m in three VC rounds and counts Intel Corp among its investors. It may also seek a further private round of funding to gets its investor ducks in a row before IPO. The company has 12 US offices and 230 staff, aiming for 400 by year- end. It also claims a partnership with the world's 'third largest' insurance company to roll out a Commerce service in Europe.

Commerce is claimed to be one of the largest, if not the largest Java application in products at 1 million lines. It has created 5,000 separate benefits components and has written over 400 objects, including EJB work. ChannelPoint hired away a large number of Sun Microsystems Inc's Rocky Mountain internet development team, especially those who were implementing Java across a Sun systems management technology called Solstice which has faded from view these days. It picked up the creators of the Java-based Tom's Windowing system for example. It built its own product configurator and rules engine after examining all of the products available and quickly arriving at the conclusion that none of them could handle insurance. It uses New Atlanta's Servelet Executive suite and the services run on an AIX-based Oracle database hosted by Verio. Manufacturing and build-to-order systems were about their limit, ChannelPoint says. In future it may add bid or online auction technology to its site products.