Using technology to improve the bottom line

SOME agents and brokers are fascinated with technology for its own sake, but most see it strictly as a means to an end: a more profitable agency. This link between high tech and high margins was explored during a panel discussion at the Independent Insurance Agents & Brokers of America's annual convention, which was held in September in New York.

Jeff Yates, executive director of IIABA's Agents Council for Technology, was the moderator for the panel. Participants were Stuart Durland, vice president of Seely & Durland Insurance, in Warwick, N.Y., Edgar Higgins Jr., CPCU, owner of Thousand Islands Agency, in Clayton, N.Y., Linda Dodson, e-business consultant for the Chubb Group of Insurance Cos., Elaine Bugyi, senior agency interface coordinator with New York Central Mutual Insurance Co., and Doug Johnston, executive vice president of interface services at Applied Systems. Following is an edited transcript of part of the panel discussion.

Yates: Our title is, "Five Steps to a Better Agency Bottom Line." So we thought a good way to start would be to ask each panelist what he or she has done that has had the biggest impact on improving their agency's financial position. Panelists with companies or vendors can discuss what they see as having the most benefit for agencies.

Durland: I imagine everyone in this room has implemented some form of technology, whether high-speed Internet access, download or real-time transacting of business. We've started to implement dual monitors, having two workstations currently. Everybody loves them. We've also been scanning and storing all documents, using imaging technology, for nearly three years.

Having implemented such technologies has allowed me to rethink how I do business. One of the biggest concerns for agency owners contemplating an investment in technology is: "What's my payback? If I'm going to spend $10,000 or $20,000 on an imaging system, what's my return?"

By becoming paperless, you can free up a lot of time for your CSRs, who now can do a lot more work right from their workstations, and that will save you money. You'll probably get back your investment within the first year. That's what happened in our agency. Our customer service agents (as we call CSRs) now have more time to spend servicing customers. Even more important, going paperless enabled us to move CSAs into sales.

Of course, planning and preparation were essential. We started by making sure everyone in the office was licensed. If you're going to develop a sales culture, the people making sales, whether CSAs or producers, must be licensed. We also made sure everyone had a designation. All of our CSAs have the Accredited Customer Service Representative designation and many have, or are gaining, the CIC, CPCU or other designations. I think that's important for obtaining the maximum return on our investment, as well as ensuring that our CSAs stay up to date with changes in the insurance world.

Next, we needed a plan for helping CSAs sell. Developing one took us awhile. We held a lot of meetings to discuss the idea with CSAs and get everyone involved. At first, many people were a little nervous. But we emphasized that CSAs would be selling mainly to people who already were our customers-people they talked to every day.

If CSAs are going to sell, they should be rewarded with more than just their salaries. Our CSAs fill out worksheets each month on which they track their sales efforts. They are rewarded various amount for new-account sales, accounts they cross-sell, accounts to which they add a third policy, etc. As an incentive to retain business, their sales compensation is reduced if they lose an account for any reason-although not by as much as they receive for selling a policy. At the end of the month, they get a check. When we started this program, the checks typically were for $20 or $30. Now that it has been in place for a year, most CSAs are averaging $200 to $300-sometimes as much as $400-a month in additional compensation.

At this point, our CSAs are ecstatic about our sales program for them. Instead of just taking a call from a customer who wants to change a deductible or whatever, they wind up having a conversation with the customer. They're asking, "We currently insure your home. Can we take a look at your automobiles too?" Nine times out of 10, the customer will say, "Yeah, I don't know why I didn't have you do that in the first place." As soon as CSAs start getting that kind of response, they become much more comfortable with the sales process.

Yates: Linda, what innovations would you mention?

Dodson: Actually, Stu, Jeff and I have had a lot of conversations. Everything we're striving for is aimed at improving service. Technology has made it possible to service the client immediately. No longer do you have to hang up the phone, pull a paper file, find what the customer wants and play "telephone tag" until you finally reconnect with the customer. Now, within one or two mouse clicks, you can respond to that client's questions concerning coverage, billing, claims, etc. Rapid service leads to increased retention. You're making that customer happy. Cell phones are another example of technologies that enable you to respond to clients immediately. They help you do business faster and easier.

You know, we are all getting used to immediate service. You're used to it-and your clients are used to it. But we're lagging far behind in the insurance industry. Is it really acceptable anymore for your client to call with a question about a bill and hear your CSR say, "I'll have to call you back." And when the CSR does call back, what happens? The client is in a meeting. The client is away. And when the client does call back, the CSR has moved on to something else and has to interrupt that activity to respond to the caller. I think this is just unacceptable.

Yates: Elaine, would you speak about the innovations you've identified?

Bugyi: New York Central Insurance Co. realizes that "ease of doing business" is an important criterion. But because we are a regional carrier with limited resources, we must evaluate new technology carefully before deciding to invest in it. Following such an investigation, we implemented IVANS' Transformation Station and AMS's TransactNow technologies for real-time transactions with agents.

Agents should give their companies feedback about which technologies are important to them. If a company then implements such a technology, agents should make sure everyone in the office is using it. After we implemented Transformation Station, we had to ask some of our agents why they weren't using it. People become accustomed to doing things in a certain way and don't automatically migrate to a new technology, even if it's faster and better. Agents have to train their staffs to use the technology.

Yates: So you monitor your agents' use of technologies you implement?

Bugyi: We monitor it very closely, and our decisions concerning future technological investments are affected by what our agents have been using. We always look for things that are going to best suit the majority of our agents.

Yates: Ed, what technologies would you identify as important to the bottom line?

Higgins: As the other panelists were talking, a couple of things came to mind. The first is that technology issues are totally integrated with other agency management issues. Stu talked about the importance of technology to account development. At my agency I focus on the use of technology for errors and omissions loss prevention, as well as for adding more business. Technology also affects employee morale, and an agency's ability to get and keep the best people.

I'm a small agent. I have six employees in two locations. About three years ago, I bought an agency that was larger than the one that I had. Technology made that possible; i.e., we had compatible systems. The technology change that has made the greatest contribution to my bottom line was going paperless, which we did four years ago.

The reason I mentioned my agency's size is that many small agents think, "I can't do these things. They're only for the big agencies." Stu talked about a $20,000 imaging system. I was able to go paperless for less than $5,000. We had used transactional filing (a system of filing paper documents in folders by transaction date, rather than in individual paper client files, and noting the transaction dates in computerized client files) for 12 years before going paperless in 2001. We just shifted to scanning what used to go into the paper transaction file.

I mentioned the importance of technology to E&O loss prevention. At loss-prevention classes I've attended, attorneys have said the best thing agents can do to reduce their E&O exposure is to sell more coverage. So you start to see how all this is integrated. By converting all the paper into electronic records--PDF files--I can e-mail requested documents to callers while they're on the phone. That often exceeds the customer's expectation of service, which leads to more sales. Also, the time freed up by document imaging and storing can be use for other things-like annual coverage reviews. E&O attorneys long have stressed the importance of annual coverage reviews for all clients, but the only way that's possible is in a highly automated agency.

One of the chief points of differentiation between the independent agency distribution channel and the direct-response writers is that we provide one-on-one counseling and they don't. I would suggest that by leveraging technology, we can get more time to provide this counseling--and that creates a huge opportunity. While independent agents control more than 70% of the commercial-lines marketplace, we command only 34% of the personal-lines end of the market. We need to find ways to make things happen faster, so that we have time to give personal-lines customers better value and allow our companies to increase their market share. For me, scanning was a huge part of creating that extra time.

Yates: You've told me that technology doesn't remove you from the customer but actually gets you closer. How did that happen in your case?

Higgins: The biggest thing is by enabling you to handle data faster, technology allows you to get to customers quickly when they call. If every document you need is right there in your system while you're having conversations with clients, they're more satisfied and you become closer. You also can enter data in your system--whether in Microsoft Outlook's contact files or elsewhere--that enables you to personalize your conversations. While making a change of vehicles on a client's auto policy, with a couple of mouse clicks you can find the information to say, "By the way, is your son still going to Colgate?"

Another piece of technology we implemented seven years ago was a 24-hour claims service. I had a client, a small, fuel-oil gas dealer, who recently was killed when a gas fireplace he was servicing blew up. His widow called me on a Friday night using our 24-hour claims service. That kind of personal touch lends great comfort to clients at such dire times. We can provide it on a 24-hour basis by leveraging technology. When GEICO's clients make such calls, they're not going to get the same person who sold them their policies. They're not going to get a person that knows them and their community. Direct writers suggest they provide instant service and that we don't. But we have the technology to provide instant service-and we can add the personal touch, because we're local and know our clients and their communities.

Yates: Doug, what innovations would you point out?

Johnston: One thing I'd say is that agents should investigate application service providers--i.e., the hosted Internet-based model--for their agency management systems. The cost of having your system hosted by a provider might be more than what you pay for maintenance support from your vendor, but the ASP model is still going to be a lot cheaper. You don't have to pay employees to come in on weekends and Sundays and late at night to do your backups, install your patches and take care of all the other things that go into maintaining an in-house system. Furthermore, your systems are always up-to-date and available.

But the really important thing is that with an ASP model, you and your employees can log into the system from anywhere. Employees can log in from a hotel room or from home. This also enables you to offer flexibility to your staff. You may have employees who would like to leave a bit early-perhaps to pick up kids-then make up the work time later in the evening.

In the event of a disaster, like the hurricanes we've seen this year, your system is unaffected. Your server with your data and information is elsewhere in a secured hosting facility. You even have the option to have your information hosted in redundant data centers.

I also would advise agents to find out if their systems will accept direct-bill commission download from their companies. If their systems can't do that, can they at least process the direct-bill commissions off companies' downloaded policy transaction statements? (Under the former approach, the companies are transmitting commissions on a paid basis; under the latter, on a written basis.) I bring this up because in a small agency it might take one person five or six days to reconcile the commissions. In a big agency, two or three people may have to work full time on the task.

The main reason you're reconciling commissions is to pay your producers their part of the agency's total commission on each direct-billed sale. The cost of figuring this out, however, is coming out of the agency owner's share of the commissions, not the producers'. So agency owners definitely should find out whether direct-bill reconciliation can be done automatically.

Yates: Now that we've heard from our panelists, I'd like to open up to the discussion to the audience.

Question from the audience: Some commercial accounts have 20-page worksheets. You also have NCCI worksheets and loss runs, etc.; does that somehow have to be put into the computer? How do you handle all that?

Higgins: With today's scanning solutions, you can make that information, in a very orderly way, instantly accessible without leaving your chair. I would not suggest that going paperless means retaining less information. If anything, it means retaining a lot more, but you can retrieve it instantly and you never lose it.

From a business standpoint, it often makes the most sense to implement a paperless system or other new technology when you have to make some other change. For example, we were about to buy a new copier, then realized that copiers are now paired with scanning equipment. You can take that 100-page commercial-lines policy, drop it in the document feeder and scan it in a couple of minutes. With high-speed scanning and low-cost storage capacity, you can store a lot of information in a more orderly way, retrieve it quickly and, by integrating it with e-mail and fax, move that information someplace else much faster.

But it's important to implement a paperless system properly. Indeed, I've been an expert witness in E&O trials in which agents failed to do so. There needs to be continuous management oversight to ensure that record keeping is consistent and that employees are using only the paperless filing system.

Durland: We, too, have been imaging everything that comes in, although we draw the line at information we can access from our carriers in real-time via Transformation Station. This is mainly policy information. Since it's instantly available online, we don't need to scan it-although, as Ed said, the cost of technology and storage is such that we could.

Higgins: If your objective is to place the vast majority of information in your agency management system, you eventually should ask your companies to stop sending you the same information in paper format. About four years ago, we turned off the paper from two of our personal-lines companies. That reduced the amount of scanning we needed to do, because the information they were sending us already was available electronically.

Durland: There is a misconception that scanning is basically photocopying documents into a system. Today's scanning systems actually recognize the text in a document that's being scanned and will index it. So you don't have to remember the name of the document that was scanned into the system-a common misconception. You can just remember what was in the document and maybe reference a couple of words, then the search utilities will find it. Or you can just type in a policy number, and the system will retrieve scanned documents that have it. The imaging system that we chose is integrated with our agency management system. Thus all images are attached to the appropriate customer, prospect or company file. This improves our workflow significantly.

Yates: The Agents Council for Technology has developed the "Best Practices to Agency Electronic Information Management," in conjunction with consultant Laurie Nettles. It contains a whole decision tree showing different ways agents can move into a paperless environment. That's on the ACT Web site, located at www.independentagent.com/act. There also is an ACT report dealing with issues that should be addressed when going paperless.