The technology revolution has created a boatload of collateral damage in the business world, as evidenced by just this week's news. Sears/Kmart, that bastion of middle-class American retail, is in treacherous financial waters and plans to close 120 stores. Kodak, an American institution for more than 100 years, is looking at filing a Chapter 11 bankruptcy; and the USPS, faced with mammoth shortfalls, this spring will close hundreds of mail processing centers nationwide and cut about 28,000 jobs.

Let 'em fail, right? Who needs retail dinosaurs like Sears when you can order virtually anything you want online (ironically, online sales for Sears holding Land's End are doing fine)? Why print pictures when you can upload shots direct from your smart phone? And email, Twitter and Facebook have rendered the government-run, snail mail approach of the USPS irrelevant.

Perhaps this thinking is true, even in the world of insurance. According to a recent study by Mintel Comperemedia, direct mail volume to consumers from life, health and property-casualty insurers is down 11 percent in Q3 2011 compared to Q3 2010. The decrease is across all lines of business, with property-casualty direct mail during Q3 2011 down 8 percent from Q3 2010, and down 4 percent from Q2 2011.

These numbers seem to confirm what we've been hearing for years: consumers, especially the younger ones weaned on technology, prefer the virtual to the tactile.

Which makes it interesting and somewhat contradictory to note that another study released this week suggests the anticipated mail slowdown created by the upcoming USPS cuts could hurt American businesses, costing a typical large U.S. company up to $100 million a year by making it harder to quickly collect payments from customers.

The study, conducted by REL Consulting, notes that more than 60 percent of all invoices are still delivered by mail, and that typical U.S. companies take more than 5 weeks to collect payments from customers. If the USPS eliminates next-day delivery, it would add at least 2 to 4 days to the collections cycle for many companies, which would “potentially increase Days Sales Outstanding (DSO) for many companies by up to $100 million annually.”

I asked some industry tech folks what they thought the impact might be on independent agents. Steve Anderson of The Anderson Agency Report (TAAR), responded by breaking the issue of “direct mail” down to two components: customer service and marketing. Steve commented:

From a customer service perspective I many agencies are moving communication to electronic formats. Customers are demanding it and it's less expensive for the agency…I also communicate almost exclusively by email with my agency. I don't see this trend changing as more people become comfortable with using electronic means to communicate customer service issues and questions. I do see text communication growing as more people have mobile devices and become used to text as an effective communication vehicle. This type of electronic communication does present some challenges for agencies with documenting conversations effectively. But, like other changes in communication platforms, agencies are/will figure this out and the vendors will provide better means for capturing these conversations for a particular client.

On marketing, Steve continues:

Many in the industry are moving toward electronic communications as well social technology platforms and away from “physical direct mail” as their primary means of marketing. I am seeing some strong evidence, primarily in personal lines, where agencies are creating better response and ultimately better sales results by using a mix of electronic and physical snail mail marketing pieces. I suspect younger generations are not as jaded to receiving “junk mail” as some of us who are older. What I might consider junk mail might be new and innovative to someone younger. As an example, one agency I am working with included sending a physical letter along with an agency brochure to Internet leads requesting a quote for automobile insurance. Simply adding this extra “junk mail” step increased the response.

But what about policy delivery and payment? For personal lines and small commercial accounts, most invoices and policy documents are still handled by carriers via snail mail. From an agency perspective, agents should already be asking their customers (and documenting in their agency management systems) how they want their documents delivered, Steve says. More people are requesting electronic deliver in PDF format, which they can then store on their computers.

However, he concedes that there are legal issues involved in going completely paperless:

Some state insurance departments continue to require actual physical delivery of policies using the USPS. There can be a legal presumption that if the policy is sent using USPS then receipt by the client is assumed. The same legal presumption may not be available if it's delivered via email attachment.
So, with all that said, billing and policy delivery is still done primarily by mailing the documents to the client. I would think the elimination of some postal services would accelerate the trend toward delivery by electronic means vs. physical.

So what do you think? Can the independent agency system live without the USPS? What are you still snail mailing at your office, and do you see that changing in the near future?

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