DECIPHERING THE E-BIZ BUZZ

Panel discusses tech-savvy consumers, agency-company technology, outsourcing, when the Internet is an appropriate solution for agents and when it isn't

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Members of the Indiana CPCU Insurance Day "insurance.com" panel (introduced in the Editor's note far left) included (seated from left) Alan Symons, Ann Nelson, and Phil Engel. Standing (from left) are Paul Lahm, John Ashenhurst and panel moderator Steve Anderson.

Editor's note: The following comments are excerpts from the Indiana CPCU Insurance Day "insurance.com" panel discussion that took place in late February. This year's panel was cosponsored by The Rough Notes Company and pf enterprises, LLC, which provides insurance-specific consulting and training.

The panel moderator was Steve Anderson, a licensed independent agent for more than 20 years with experience and background in agency internal operations, marketing, management, and the effective use of technology. Panelists included John Ashenhurst, who, since 1975, has reported on and applied emerging technologies to the solution of insurance distribution problems; Phil Engel, who retired from CNA in 1999 after a 38-year career with the company and who has since become chairman of the board of InsureSEEK.com., a Web-based insurance broker; Paul Lahm, who leads the agency consulting, technical support services and associated programs for Westfield Services' Agency Connected Solutions group; Ann Nelson, who, with more than 20 years' experience in independent agencies, is manager of the agency outsourcing servicing department for Westfield Services; and Alan Symons, who is president and CEO of a major underwriter of nonstandard auto and crop insurance.

Steve: The independent agent is a key component to the insurance process, but carriers and other third-party companies continue to try to bypass the agent and create another distribution channel, using the Internet to quote, bind and issue policies. With technology making it easier for carriers to work around agents, why are agents still so important?

Customer service

Alan: Allstate is offering a variety of access modes, but they found that they need the local presence offered by the local agent. Instinctively we look for the "local" presence for help--even when we go into a department store, we look for someone to help us. At the grocery we're now able to check out our own groceries, yet there are still lines--people wanting to be served by someone else. By nature we seek out some kind of human touch and feel. So the agent has to be part of the process in a complicated business like insurance.

John: There are countless insurance companies, yet only a few have national recognition. What matters to consumers is the person in their local community whom they buy insurance from. That local presence should have stronger brand recognition than the companies it writes for. For all the companies to try to sell insurance via the Internet, there would be a tremendous amount of noise--they would be totally lost. The way that companies will continue to need to sell is through local representation.

What's more, having a local presence also provides consumers someone who is accountable.

Allstate has figured out the multi-access system to provide for their customers. An Allstate customer can come in through the Internet, or the 24x7 call center, or call or visit his/her Allstate agent. All three access methods yield the same information, and the consumer isn't forced to do business one particular way. That's what independent agents and agency companies need to figure out how to do. This multi-access is part of the expectation of the service paradigm of the U.S.

Phil: The customer rules. Allstate figured that out. They could no longer afford to access only part of the market. They decided to go after all of it. They didn't assume that there was only one way to interact with customers. Organizations can't tell the customer how the customer will do business. Ultimately the customer is going to tell you how he/she wants to do business and if you respond to that, you'll find your market.

Steve: Assessing the value of various customer service capabilities was one of the objectives of the Addison Study conducted for the IIAA. One question asked how important 24x7 customer service is when consumers are making a purchase decision. (That doesn't mean providing a claims hotline or your home phone number on your business card.) Of the personal lines consumers responding, 87% said that level of access was important. Of the small business consumers ($10,000 in premium or under), 70% said it was important. However, only 34% of the agents surveyed believed it was important.

The disparity between what consumers are expecting us to deliver and what we think we should deliver is of critical importance.

Another important question was: "How important is it to consumers to have online access to their account information?" (Just knowing it's available--not even doing anything with it.) The same three groups were surveyed. Some 59% of personal lines customers said it was important; and 47% of small business owners wanted that access. And what did agents think? Only 6% believed consumers would consider this important.

05p42a.jpg Your success as a business person and your success as an individual will be determined by how you react to change and whether you stay on top of change.

--Phil Engel

Things are changing. Consumer expectations of what good customer service is are different than what a lot of us think it is. We need to be very aware that it's not what we think consumers should be able to do, but it's responding to consumer expectations and providing a means for them to do that.

Phil: As an agency principal you need to think about strategy. Don't assume that everybody is just like you. You need to read Growing Up Digital (Tapscott) so you can make informed higher level decisions about what's happening to your markets.

Paul: Seek assistance. You can't expect to be expert at everything. Westfield Services offers agency consulting to Westfield and non-Westfield agencies. We can provide solutions for desktop e-mail and Internet connectivity. We have a dynamic Web site program that provides the agency full content management control. One of the issues with agent Web sites is that they're static and they get stale. With the dynamic Web site capability someone in the agency can be assigned the responsibility of keeping that
site updated.

Ann: The majority of agencies that have chosen Westfield Services to handle their outsourced customer service have decided that they want to focus on sales. That's something that every agency claims they want to do--and I'm sure it's at the top of their list--but frequently they find that they get bogged down in the day-to-day service work. Westfield Services provides that very necessary customer service component, freeing up the agent to sell and bring in more business.

05p42b.jpg One of the myths is that technology limits choices. The issue here is expanding choices. As you provide your customers more ways for them to interact with you, they feel like you're providing more value.

--Steve Anderson

Steve: One of the myths is that technology limits choices. The issue here is expanding choices. Think about online banking. The consumer is doing the banks' work. Speaking for myself, I wouldn't do business with a bank that didn't provide me different ways to access account information. I feel like the bank is providing more value by doing so. As you provide your customers more ways for them to interact with you, they feel like you're providing more value. Even if they're doing more work, they're more in control; they can do it whenever they need to.

John: This move toward self service has in fact taken place over the last 100 years. Long ago, the clerk at the counter would go and get what you needed. You wouldn't walk around and pick up your own goods. Now we pump gas for ourselves. We handle a lot of our own banking transactions. Economics has driven this. If we can take care of ourselves, we can save ourselves some money in the process.

Phil: But not all customers will want to do business the same way. The service component is important to a large percentage of consumers. So even though customers may want to buy from a person, they are comfortable doing some of the service functions themselves.

Agency-company technology

Steve: I'm cautiously optimistic that XML (extensible markup language--that allows operating systems to share information) may do something positive for us as an industry. The rest of the world is ahead of the insurance industry in its use of XML--manufacturers, financial services, etc. ACORD is moving the XML standards forward, so there are more possibilities for real-time transactions rather than batch, store and forward.

John: We still need to be cautious, though. There's great promise because XML can be interactive, but companies can't come up with the financial justification to go through and do a new sort of EDI. And there's the sobering reality that when it's time to connect XML with existing legacy systems, it turns out to be very difficult. We're not going to see great change from this quickly. So pending this change, what should agents do today to make use of their Web sites to get benefit from them? It's not a good idea to wait for all these huge transformations to occur because I think it's going to take a long time. But there are things you can do today to help from a sales, marketing and service point of view using your agency Web site. These are things that are under your control.

Phil: XML is going to win, but it's not going to happen quickly. So the industry needs to do something today. You can't run your business on what technology may be available a year from now. So while you need to be able to plan ahead and pay attention to what's out there, you need to do something today.

Steve: Companies sometimes have a hard time justifying the money to develop some of the technology solutions and then the agents look at what's delivered and ask, "Didn't we see this already?" Carriers are waiting for the agents to be ready and the agents are waiting for the carriers to have something they can use. How do we solve this?

John: Agents must not wait. Anything that's in their control, any changes they can make, anything they can do to make their business better and more successful, they should do--and not be dependent on their companies or wait for their vendors. What we saw in the '80s was hundreds of millions of dollars spent by companies to procure automation for their agents. Agents should be beholding as little as possible to their companies. The companies are business partners. One shouldn't be dependent on the other. Agents need to take the initiative and look for ways they can help themselves.

Phil: The companies have a company perspective so agents need to do things differently than they have in the past.

John: When you have a subsidy, you distort the process, it takes the initiative away. You take away the likelihood of rational business decisions and people being careful about the decisions they make.

05p43a.jpg The smartest thing you can do as a company or as an agency moving into the digital world is to go to those who have already done it. You may not need to build your own solution.

--Alan Symons

Alan: But you don't want to be leading, bleeding edge. The smartest thing you can do as a company or as an agency moving into the digital world is to go to those who have already done it. You may not need to build your own solution. Someone may have already done so and you can learn from them.

Steve: But you may want to find the people who like being on that leading edge and learn from them. From the agency side, that's something I like to do and I have the arrows in my back to show for it.

Phil: Not only should you seek out the pioneers, you need to do that. We are going through an incredible revolution as a planet--the transformation from the industrial age to the information age. It's largely because of the computer. It's a huge wave of change. And your success as a business person and your success as an individual will be determined by how you react to that change and whether you stay on top of that change. That's why I urge business people to give their employees the right tools and learn to use modern technology tools.

Paul: Westfield Services provides the support services so agents can react to change. Too often agents are unsure of what to do or who to talk to when it comes to technology. We enable agents to outsource the technical side and get back to selling insurance.

Steve: What's the impact of the Internet on SEMCI?

John: All the talk about interface over the years has been about technology and getting agents and companies to talk to each other. But that's not the point. Years ago a customer could walk into an agency, be underwritten, etc., and walk out with a policy in his/her hand. Technology has caused us to focus less on the customer and we became preoccupied with internal processes--how agents' computers talk to company computers, etc.

Fifty years ago we could provide consumers with once-and-done processes. By concentrating our energies on internal processes, we've made it worse for consumers. Technology is giving us a chance to reverse that but we have to change our thinking--it's not a question of technology...it's a philosophy, a business direction.

So instead of focusing on interface, let's first concentrate on what we want to do with the customer and then figure out how to do it. What we've done instead is wonder how we can get our computers to talk to each other and we're not thinking about the customer at all.

The service bar has been raised. I moved recently and you know how that goes--you need to change your address with all the publications you receive. I discovered I could do that on the Internet. I went to the Web sites for the magazines I receive and changed my address.

Paul: Agent attitudes about companies using the Internet is that it's good for the company but it does little to benefit the agency.

Phil: History has shown that companies that tried to make proprietary automation a competitive advantage failed.

Alan: Companies are taking the position that they won't do business with agencies that won't link to the company system. On the other side, agencies need to spend some money to get to the virtual world.

Steve: The last statistics I saw indicated that 97% of connections to the Internet were via a dial-up modem. There's no excuse for anyone not to have high-speed, always-on Internet access. There is now two-way satellite Internet connection available. There are two systems: StarBand and DirecPC. It costs about $600 in equipment to get started with StarBand and then $60-$80 per month.

05p43b.jpg Outsourcing some of the customer service activities is something the agency can do right now and by doing so, the agency may even solve some of its automation needs at the same time.

--Ann Nelson

If you have DirectTV you can add DirecPC. DirecPC currently has a dial-up modem out and satellite down. But DirecPC just announced a new system that bypasses the need for a dial-up connection. So if you can get a satellite signal, you can have high-speed access--except when it's raining. For the satellite, when the frequency is low, if it rains or snows, you lose your signal. But how often does something like that happen? It's still better than dial-up, even with those issues.

John: Rather than look at the transaction from a technical point of view, I'm suggesting we look at it from a business point of view--we need to collapse a multi-stage process that's now very complicated into one step. We're not going to get there by trying to get all the companies to cooperate and all do it the same way. We may be able to get there by having a few vendors each working on all the diversity behind the scenes and making sense of it and making it uniform for the agent.

There's a new voice for agents: the ACORD User Groups Information Exchange--AUGIE. The idea is to bring together the heads of the various user groups--the technology orientation is already there, and collectively maybe they can have some influence that the associations haven't had so far. My concern is that they'll focus too much on technology and not enough on the business issues. But there is potential.

05p44a.jpg Too often agents are unsure of what to do or who to talk to when it comes to technology so it's important to seek assistance. You can't expect to be expert at everything.

--Paul Lahm

Steve: With ACORD sponsoring AUGIE they bring the company relationship or viewpoint into the discussion--it's not just the user groups. You have some carrier input into that process which in the past hasn't been there. So there's potential for a more focused perspective. From my point of view as an agent, there hasn't been a group that's created a business model that makes sense for an agent--and certainly not one that invites carriers to help or interact with agents based on that model.

Phil: In the '80s, company proprietary systems were housed in separate computers. Today when we're talking about proprietary systems, we're talking about accessing the company system directly to perform some function--issue a policy, get a rate. It's not on separate hardware anymore, we're doing it over the Internet with interfaces that are very similar.

05p44b.jpg Technology has caused us to focus less on the customer and we became preoccupied with internal processes--how agents' computers talk to company computers.

--John Ashenhurst

John: We need to go back to the purpose: to do the right job for the customer and to squeeze expenses out of the distribution system. If we could get to a once-and-done environment it would make the customer happy, as well as the agent and the company. The process would be less expensive.

It would be wonderful for the industry to be able to say: This is what we need to do. Now what's the best way to do it? Instead we've said: Let's get SEMCI going and then we'll figure out what to do with it.

Phil: John is right if you accept the idea that you're going to work with 10 different company Web sites. At InsureSeek we have a common user interface that is directed to the customer who comes to us on the Internet. But it can also be used by a CSR. Behind that user interface is all the coding that will do comparative rating and will also go out to those companies that provide access to their mainframes for rating. It's been said that technology will make impossible things possible and difficult things easy. Today it is difficult but still possible to put together a system that will allow you to take all the interfaces companies give you and do all of that behind the scenes so that you have a common interface. We have that. AMS is working on this. Applied is working on this. ChoicePoint is working on this. Technology will make the particular issues that are so troublesome today transparent in a few years.

Steve: But we've been hearing this for 20-plus years. Why should we believe you now?

John: Technology doesn't solve problems. People use technology to solve problems. Agents have to take control of their own destiny and do whatever they can do on their own with the resources they have on hand, encourage their vendors, encourage their companies, etc. But they have to keep going.

It is enormously optimistic to think there will be a single anything--ever--in this industry. So you will have to make business decisions about how you operate and make your organization successful.

Steve: The business issue remains. SEMCI has never been a technology issue. It's always been a business issue.

Outsourcing

John: And maybe we're on the verge of a new paradigm where we no longer need agency management systems or policy processing systems. Maybe we can use off-the-shelf solutions such as ACT! or QuickBooks, etc.

Steve: QuickBooks recently announced they're opening up QuickBooks API (application programming interface) which means that third-party developers can now use QuickBooks' engine to develop specific proprietary add-ons.

Westfield Services offers a customer contact center for agents. It's like a carrier service center except it's not specific to a carrier. So they'll take over all of the customer service functions for an agency. The agency can access the Westfield Services agency management system through a Citrix connection. Soon the customer will be able to have some kind of interaction with that system. Westfield answers an 800 number that is specifically for that agency using the agency's name. All from Columbus, Ohio.

Outsourcing that customer service function does what for the agency? It frees them up to sell or to do other things. But they're not managing that part of the technology. Is it right for everybody? No.

Ann: Every agent should take a step back and think about goals. For instance, a principal may decide that someday the agency may want to be automated to the point where it has a Web presence and customers can contact the agency via the Web site to order certificates or order coverage changes. But outsourcing some of the customer service activities is something the agency can do right now and by doing so, the agency may even solve some of its automation needs at the same time. The agency wouldn't have to invest in the latest and greatest because we have it available and it would be available to their customers immediately.

Initially we believed that this outsourcing capability would be well suited for agencies with large books of personal lines business. But there are some agencies that turn over their small commercial business to us. We have large agencies in large cities that want to do book rollovers. They don't have trouble finding good CSRs but expenses are lower in Columbus, Ohio. There are also agencies in small towns that have a tough time finding good help.

Steve: So for the agencies that make this type of a business decision, they don't have the technology in-house either. More than saving the expense of having that system, it's less time-consuming, less effort is involved and it's less frustrating.

Internet-based technology is allowing new vendors to enter the agency management system marketplace. These new vendors offer a fresh perspective and don't have the overhead of an Applied or an AMS.

Another approach to outsourcing is an application service provider (ASP)--software applications that you access over the Internet. ASPs are not insurance-specific. The idea is you rent the software. You pay a monthly fee for access to that software.

Microsoft is talking about the dot-net initiative. That's where they're headed as a company. You can rent Microsoft Office and access it through an Internet connection and a browser. I've used it on a 28.8 modem connection. It was slow but it was doable. So there's another good reason for wanting that high-speed bandwidth connection.

AMS has its AfW Online that you rent by the month. Applied has an online version of WinTAM. So there are options available.

Individually and as an industry we need to manage change and learn how to keep up with it. Don't focus on the technology itself but on the business and strategic issues--and how technology can help us achieve these goals. *

For more information:

Steve Anderson
steve@steveanderson.com

John Ashenhurst
john.ashenhurst@worldnet.att.net

Phil Engel
phil_engel@interaccess.com

Paul Lahm
paullahm@westfieldservices.com

Ann Nelson
annnelson@westfieldservices.com

Alan Symons
asymons@sigauto.com