The following article was adapted from Mr. Baker'spresentation at the AMS User's Group convention, which was held inApril in Nashville, Tenn.)

IN MY 25 years in the insurance industry (in addition to being aconsultant, I confess I'm also a recovering producer), I've workedwith many agents and brokers seeking to improve their workflow. Newtechnology is often an important part of the effort. To improveworkflow, however, agencies must analyze their workflow beforemaking technology decisions. They must also realize what technologycan and cannot do.

Some of the most frequent questions I get from agents andbrokers these days are about electronic filing. Agencies want toknow if they should adopt it, how to start, what technology theyneed, what the benefits will be and if they're doing it right. I'vefound that a big part of helping agencies set up a properelectronic filing system is to clear up their misconceptions aboutwhat they will achieve and how to achieve it. In this article, I'lldiscuss some of the most prevalent myths of electronic filing.

- Myth No. 1: The goal of electronic filing is to create apaperless office.

Insurance agencies will always have to deal with paper. Livewith it. If your electronic-filing goal is to become completelypaperless, you will fail to reach it–and no one should set goalsthat guarantee failure. Even if you could eliminate 100% of thepaper, what would you have accomplished? Would you be making moremoney, reducing your employees' stress or improving customerservice? Maybe, but not necessarily. The only thing you wouldguarantee by going paperless is that you wouldn't have anypaper.

An electronic filing system can help you reduce the amount ofpaper in your office, which is good. But your real goal should besimply to find the system that helps your agency improve itsworkflow the most. No new system will work 100% of the time. I findthat the “80/20 rule” often applies to electronic filing–80% ofyour documents can be filed electronically, but you need to keephandling paper for the remaining 20%. Trying to file that 20%electronically can be like trying to fit a square peg in a roundhole.

For example, I talked to an agency a few years ago that hadstarted transactional filing. The agency was having a lot oftrouble with their personal auto policies, which were constantlybeing cancelled and reinstated–not because policyholders weremissing payments, but because the carrier's accounting system wasflawed. The CSRs complained that they were going crazy, searchingthe t-files nearly every day to reconstruct account information. Isuggested they use a “traditional” filing system for personal auto,and keep the t-filing for everything else. They said, “We can't dothat, because our boss says it's all or nothing.” Their failure tobe flexible with a new way of doing things hurt theirefficiency.

Another agency I worked with was making the move to electronicfiling, and a CSR spoke to me about a particular commercialaccount. She had the file on her desk, and it was quite thick. Whenshe asked if she should “go paperless” with the file, I asked herhow often it was on her desk. Her answer was, “It never leaves.”Since she was touching that file every day, the smart choice–atleast at first–was to make that file part of the 20% that didn't goto e-filing. After the agency had been e-filing for a while, Isuggested, they could revisit the “20% files” and determine if andhow they should start filing them electronically.

Live in the real world when you start e-filing. There may besome files that never go “paperless.” Revisit your decisionfrequently, and evaluate it based on what works best for yourworkflow, not the mistaken notion that you can–or should–becompletely paperless.

- Myth No. 2: Agencies have a choice about whether to usee-filing.

When transactional filing started to replace the conventionalfiling system, some agencies decided to stick with what they had.That was a valid choice. Electronic filing is different. Agencieshave no choice. They must adopt an e-filing system, for severalreasons:

• Privacy laws: Rising awareness of identify theft and privacylaws dictate that all businesses must “lock down” any confidentialinformation they have about their clients. We live in anincreasingly litigious society, and the smallest leak ofinformation could lead to big trouble.

A traditional filing system is no longer sufficient to protectinformation. I knew some agents in Fort Worth, Texas, who were hitby a tornado. They received phone calls from people 20 miles away,saying, “We found some paper in our yard with your agency's name onit.” A few years ago, that would be embarrassing; today it'sillegal. And protecting files from natural disaster or theft maynot be enough. E-filing systems can be arranged to protectinformation within the agency as well. For instance, if your agencyprovides group health benefits to clients, the system can bearranged so that another producer looking for cross-sellingopportunities has no access to any of a client's confidentialmedical information that may be stored in your system.

• Storing information: When agencies are discussing a move toe-filing, I often hear CSRs say, “I'm concerned that we might nothave enough storage space on our server” and, “I'm afraid that ifwe lose an electronic file, the information is gone for good.”These are valid concerns–just as they are with paper files. It'sfunny that I rarely hear people say, “I'm worried that we might runout of space in our filing cabinets.” E-filing stores documentsmore efficiently than paper files do, and hard disk space todaycosts a lot less than a fireproof filing cabinet.

Computers can lose information, just as paper files can be lost.The advantage of losing an electronic file lies in the backupchoices available. Agencies can back files up on tape and keeptapes at a separate location. A number of backup services–somethrough agency management system vendors–offer online data backup,storing the information at their secure servers and offeringassistance with recovery.

Ultimately, many CSR concerns about e-filing are not based onworries about the agency, but about themselves. If an electronicfile is lost, it somehow will come back on them. Management shouldacknowledge the validity of this concern and not treat itlightly–it is good for agencies that CSRs are so concerned aboutprocess and security. But ultimately, this is a top-down decision,and CSRs must accept it.

• Efficiency: With a paper filing system, let's assume it takes aCSR five minutes to get up, retrieve a file and return to the desk,including the time the CSR spends chatting at another desk alongthe way. Let's also assume the CSR has to retrieve a file 10 timesin a day. That's nearly an hour that the CSR is effectively out ofthe insurance business. If you have a staff of four CSRs, that'slike paying a half-time employee; with eight CSRs, it's theequivalent of an additional full-time employee who does no work.Agencies cannot remain competitive with such an expense.

You only gain efficiency, of course, if e-filing comes from thetop and is implemented correctly. If producers refuse to learn thesystem or managers demand to see paper files on a client, you'reincreasing, not decreasing the CSR workload by going toe-filing.

- Myth No. 3: E-filing is simply the latest filing system,like the move to t-filing.

E-filing is far more than just the next type of filing system tocome along. A successful shift to e-filing involves a culturalshift for an agency. Part of the move, for instance, involvesexamining all documentation within the agency and re-evaluatingwhat to keep and what to throw out–in any form.

For example, E&O classes have for years been stressing,“document, document, document.” Well, I know of an agency that useda popular agency management system, and had a policy of attachingevery possible document to client files in that system. The agencywent to court for an E&O case, and their electronic files weresubpoenaed. Those files included a note saying, “The husband onthis account bought a house for his girlfriend. Do not tell thewife.” This type of potential problem has led some agencies toconsider the thought, “What we don't keep, the courts can'tsubpoena.”

Some agencies are also tempted to keep certain paper documentsas backups, in effect creating a dual filing system. This is evenmore fraught with potential danger. Whenever you have a dual filingsystem–say, when a producer gives some handwritten notes to a CSR,who enters the notes in the system and keeps the handwritten copyas a backup-there could be discrepancies between the two versions.Keeping such notes could help you later in court, or it could nailyou to the wall.

Before implementing a new system, an agency should go throughevery document that comes into the agency–in either paper orelectronic form–and decide what you do with it, and why.

Start by grabbing someone's stack of mail and looking at what'son top. Say it's a direct-bill premium notice. The first questionto ask is, “What are we currently doing with this?” Are youthrowing it away or keeping it? If you keep it, are you scanning itor creating an electronic activity in your management system? Doingthis at an agency-wide level should help you identify anyinconsistencies in your procedures.

The next question you should ask is, “Is the world going to cometo an end if I don't keep this?” (And by “keep,” I meanelectronically.) You could develop a chart-say, divided up betweencommercial and personal lines-and include every piece of paper youreceive. Use the chart to indicate what you'll do with each pieceof paper. When you finish this chart, you can distribute it toeveryone in the agency to say, “This is how we do things.”

The next piece of paper in the mail stack might be a direct-billintent to cancel. This is a copy of a notice that the carrier sendsto the policyholder. Some agencies file these. You shouldn't. Theidea of direct-bill is that the carrier handles the billing, forwhich the agency gets a reduced premium. So every time you touchsuch a notice, the agency is losing money.

The next item might be a final cancellation notice. You alreadyenter this electronically, through scanning or manually entering anactivity in your management system. Should you keep the paper?No–again, this would be creating a dual filing system.

Look through everything else in the mail and decide what to dowith it. One agency we worked with established a rule that theywould not keep paper or electronic files for any information theycould get within one business day from any other source.

- Myth No. 4: Imaging and scanning are the samething.

Most people use the terms “imaging,” “scanning” and “electronicfiling” synonymously, but they are not the same things. Scanning isjust one type of imaging, one way to get things into an electronicfile–and it is the most costly, least effective way, at that.Scanning is a step up from a completely paper-based filing system,but it still takes time and introduces the possibility ofinconsistencies and mistakes. Electronic filing that uses imagingmethods other than scanning–i.e., by using original electronicdocuments–is more efficient and consistent. Agencies still usingscanners should choose the most efficient scanning method.

• Some agencies use front-end scanning, in which all incomingmail is scanned at a central source before being routedelectronically to the appropriate people. In most cases, nothing isscreened before scanning; CSRs later make the decision about whatto keep and what to discard. This means that as much as half thetime spent scanning could be wasted time.

• With back-end scanning, incoming documents are immediatelyrouted to individual CSRs. The CSRs process the documents anddecide what to keep. For each item they keep, they print a barcodelabel and attach it to the document. All such documents are routedto a high-speed scanner in a central location, and the barcode“tells” the system where to electronically store the document. Thiscuts down on front-end waste, but it has its own drawbacks. Forinstance, I spoke with a 100-member agency that said its IT personhad to fix about 20 to 30 documents a day that had been stored inthe wrong electronic file, either because of a system “glitch” oran error by a clerical employee doing the scanning.

• The third method is to use desktop scanning. Every CSR has ascanner on his or her desk and decides which items to scan andwhich to discard. A number of reliable, relatively low-pricedscanners are available. Many of these scanners provide theadditional advantage of effectively serving as a desktop faxmachine as well. One drawback of this method is the use of theCSRs' time to scan documents, instead of having the task performedby a clerical employee.

A 20-CSR agency we worked with implemented a procedure to reducetheir paper without using scanners. Whenever anybody called themand said, “I need something mailed to me,” the CSR's first responsewas always, “If you give me your e-mail address, I can send it toyou.” If the requesting person didn't have or want to use an e-mailaddress, the next response was, “OK, if you give me your faxnumber, I can fax it.” The CSR could then fax the item directlyfrom the desktop. Only if the person declined that option would theCSR ask for a physical mailing address. In a nine-day period, thisagency reduced their postage bill by $1,500.

- Myth No. 5: Electronic filing is all there is.

Electronic filing is a great start, but it should be justthat–the start of a cultural change at the agency. We believe thatall agency employees should sit down to a perfectly clean deskevery morning and leave a clean desk every evening. That may not becompletely possible, but the closer you get to it, the more of apsychological boost agency employees would get.

Seeing double

More and more agencies are fortifying their shift to e-filing byputting dual monitors on CSRs' desks. Agencies that have not triedthis worry about the cost and wonder about the benefits. Agenciesthat have purchased dual monitors have learned that new flat-screenmonitors can cost less than $250 and that their CSRs would shootthem if they ever tried taking the monitors away.

Agencies are finding that whatever the cost, dual monitors payfor themselves quickly through increased productivity. Many CSRsfind the arrangement easier to use than to tab back and forthbetween software applications, and it's certainly preferable to theother two options–either comparing a paper file with what's on yourscreen or simply remembering everything in a file when you openanother program.

Elementar-E

Many agencies afraid of e-filing say, “But we're insurancepeople, not computer people.” Well, I'm not a computer personeither. I don't care all that much about computers-but I do careabout the benefits they can bring to an agency when they are usedcorrectly. With all of the software and hardware available today,what agencies need most is to change their mindware. They mustanalyze their workflow, chart a more efficient path, and give theiremployees the culture and tools they need to follow it. E-filingisn't rocket science–it's just a way to give insurance agenciesgreater control of their time and launch them toward higherprofits.

Ted Baker founded Advanced Automation, a consulting groupproviding assistance to independent agencies, in 1990. Mr. Bakerhas worked in the insurance industry for 25 years. He has presentedseminars to such groups as the AMS Users Group, the Applied Systemsusers groups, the IIABA, the PIA and ARM Partners. Readers cancontact Advanced Automation by calling (877) 704-1480.