eflecting a bizarre twist of circumstance, the newspaper headline read: "Man bites dog!" An unexpected result in a familiar situation. While the "man bites dog" headline is fiction, unexpected (and impressive) results in familiar situations are occurring in the insurance industry thanks to technology.
Consider these illustrative "headlines."
"Insurance company home office, branch offices 'disintermediated'"
"Agency volume grows 13% despite principal's extended absence"
"Call Web site visitors while they're still at your site"
Steve Doucette, Chuck Killian and Larry Neilson are the names behind these "headlines." What they're doing within their respective areas of the insurance industry brings the "man bites dog" scenario out of the realm of fiction and into the province of the possible.
Rediscovering the agent
Steve Doucette began his career in the insurance business as an agent. He started his own agency from scratch in a small town in central Wisconsin and within six years, he had three agencies. In the meantime, he had an oppor-tunity to join Milwaukee Insurance Group. He eventually sold his agencies and became president and CEO of Milwaukee Insurance Group. But he had a kernel of an idea germinating and he knew more fertile ground lay elsewhere. So with 13 years' experience as an agency owner and insurance company executive under his belt, he headed to Idaho to set up a micro insurance company. (Visit www.roughnotes.com and access the March 1998 issue of Rough Notes, "Personal lines solution," for more information on this operation.)
Great Northwest Insurance Company wrote its first policy in 1993, Doucette recalls. The company doesn't appoint agents as a company normally would. There are a handful of agents in each state operating on an exclusive territorial basis. The size of the territory depends on population density. Each agency is referred to as a micro insurance company. Great Northwest now has micro insurance companies in 12 states and adheres to its principal of allowing its agents to function as the company. "We have no home office, no branch offices, no underwriters, no claims adjusters, no field sales and marketing representatives," he explains. (The central office does handle government interaction and electronic quality control. There are nine employees.) And as a result, "Our break-even loss ratio is significantly higher than any independent or direct writing company. So that translates to our being able to offer better rates."
Looking back at the technology that was in place at the time he was implementing his micro insurance company concept, Doucette says, "The revolution in automation was empowering individuals--moving things out, not centralizing them." And although low cost is close to the top on the customer's list of fundamental needs, the customer also is interested in speed, convenience and accountability. "These things can be done much better on a decentralized basis," he notes.
Each micro insurance company has all the policy information at its site. Great Northwest maintains no customer files. But that's not to say the company isn't keenly aware of the pertinent transactions in each of its micro insurance company sites. Expert systems reside in the software which Great Northwest provides. These expert systems evaluate every underwriting decision made by the agency. Trends can be easily monitored. "This isn't unique stuff," Doucette says of the expert system software. "What is unique is that we decentralize it."
He emphasizes that to get desired results from technology, organizations must start with a business solution and then find the automation to support it. "You must be able to envision the business solution, and then choose and design the hardware and software tools to support that business solution." Trouble occurs when technology leads the business solution, he notes.
"If you're automating the wrong things, it doesn't solve the problem," he continues. "The independent agency system has been unwilling to picture different business solutions. Great Northwest has taken dramatic chunks out of the cost structure." Thanks to timing and technology, he says, his company has "taken what's been described as 'a terribly inefficient system' (personal lines and small commercial lines distributed by independent agents) and made it--cost wise--the most efficient system in the industry.
"It's simply a joke that a large, centralized institution points at the local entrepreneurs (agents) and says they're cost inefficient," he adds. "Agents are highly efficient because they live and die on their margins."
--Chuck Killian, Kettner & Killian Agency
Do the math
Doucette contends that the personal lines market is simply too significant to be ignored. He recalls looking down from an office building window at a busy intersection. Every 90 seconds approximately 50 cars collected at the traffic signal. Using a ball park premium of $800 per car, that worked out to $40,000 in potential premium every 90 seconds.
But, he stresses, it's critical for independent agents to have a cost competitive product. "The idea that you can be within 10% of the competition and sell the customer is nonsense. That works out to an $80 difference and the average person simply won't pay that."
The system, Doucette believes, is inherently flawed because of all the layers of expense built into it; and all the technology in the world isn't going to improve on that. The company cost structure includes the home office expense, the branch office expense and finally the agent expense. "No matter how you automate, you aren't going to save enough dollars to be competitive," he asserts. "You'll become efficiently uncompetitive."
To develop a cost competitive model requires a mindshift on the part of the company. "There's more to it than just 'let the agents do it,'" he notes. Existing companies would have to launch a separate entity--not because of technology challenges but because of the culture issues.
Once the cost issues are resolved, service again becomes the focal point and, in Doucette's opinion, it's the local agent who delivers the greatest service. So companies need to restructure and give the agents the competitive tools they need. And in the process, companies will rediscover the local agent as more than a marketing and sales arm for the company.
"The nature of people isn't going to change, no matter how much technology is out there. People still have the same needs as they did 50 years ago," he maintains. "The technology has to serve those needs. And they're not just low cost and speed. This industry has become obsessed with too few of the needs. When everything is okay, it doesn't matter where the company is located; but when there's a problem, we need to be close enough for the customer to come see us. Being able to serve that need is a significant advantage."
If you're a micro manager, fire yourself!
Rough Notes readers met agency owner Chuck Killian and his cyber alter ego, Insurance Guy, in the December 1995 issue. ("Chicago-area agent introduces cyber salesman" may be accessed at www.roughnotes.com.) That was B.C., which in Killian's case means "before cancer." On April 30, 1998, his appendix ruptured. That was the good news. Had that not happened, the colon cancer would not have been detected. And since that day, he hasn't been in the office more than a handful of times. Yet the agency has grown by an estimated 13% and Killian says he's as productive as ever.
Killian's pioneering marketing efforts on the Internet "way back" in 1995 reflect his passion for technology. And even though he "speaks" technology fluently, understanding the nuances of a language that's still foreign to many, he contends that "in today's workplace, you need to have a closer relationship with your computer consultant than you do with either your lawyer or your accountant. Your lawyer and your accountant know your business for the specific things that they do. But your computer consultant needs to know your business for what you do. Too often, automation consultants are limited in their knowledge. They're good with computers, but they don't understand how the flow in an insurance agency works. Without the marriage of those two knowledge segments, it's nearly impossible to come up with any kind of a plan for using your technology."
Lately, Killian has had a couple opportunities to review his technology plan. Most recently, during his recuperation, not only did he critique the technology, he critiqued himself and discovered that prior to his illness, he had been a micro manager. But since he's had to be away from the office (which is 45 minutes away from his home), the staff is handling more tasks. "They're good insurance people and well able to come up with solutions without my input," he observes. "Had I not gotten sick, they might not be as good as they are today."
It's an easy trap to fall into, according to Killian. When he started his agency in November 1993, the staff consisted of a part-time person and himself. Then he purchased an agency two years ago. Now the staff consists of eight on-site people and two telecommuters. "That's a much different managerial task and a very different mindset. But I'd never bothered to change. I was still operating in the 'start-up' environment."
Typically, technology adapts more readily than the users do. And such is the case with the Kettner & Killian Agency. The Kettner Agency is the oldest independent agency in the Fox River Valley of Illinois, dating back to the 1920s. When Killian first visited the agency, it had one computer that the staff used to run rating software. Today the agency uses AMS Prime, the same system that the Killian Agency was using. Thanks to transactional filing, Killian can access files from home and doesn't need to refer to a paper file. Similarly, the on-site workers know about any transactions that Killian has handled from his office in his home.
The merger gave Killian another perspective from which to review his technology decision. Two years ago when Killian introduced the Kettner Agency to the t-filing concept, his illness wasn't an issue. Time (which in a business equation is money) was the issue. He reasoned that the agency's 2,200 customers generated enough filing to employ a full-time employee and in the Chicago-area market that equates to a salary of $20,000 to $25,000. He also noted that 95% of the filed material is never looked at again. "Filing is a non-productive activity," he says simply. That frees up enough money to upgrade technology capabilities and still have some money left over.
Faxes are another potentially time-consuming activity. Killian offers this hypothetical situation: Each of the 10 people in a workgroup sends 10 faxes. Each fax takes 2.5 minutes to send. (This includes getting up from your desk, going to the fax machine, waiting your turn and actually transmitting the fax.) By Killian's calculations, that equates to 250 minutes a day or 4.16 person hours. Calculate it out over a week, and it's 20 hours--the equivalent of a part-time employee. Use the computer instead and the 4.16 hours is reduced to 20 minutes a day, based on a 20 second transmission rather than a 2.5 minute transmission.
Scanning non-ACORD forms into the system is another time-saver. Using an optical character recognition program, he converts the forms into documents that are available on the network and that can be filled in on the screen.
"There are countless agencies around the country that are unhappy with their technology because they know they're just scratching the surface of the potential increase in productivity that's sitting on their employee's desks...but they don't know how to move forward," Killian notes.
Killian acknowledges that implementing technology solutions was a lot easier when it was just him and the part-time employee. Helping the staff of the agency he acquired to understand why the technology is important from a philosophical standpoint is a delicate process. Nonetheless, he advises, "you have to first think about how you're going to run your business and then get the technology to support. Not the other way around."
He recalls that the first year the Killian Agency was in business, it grossed $150,000. He expects to gross $800,000 for 1998. "We're going to continue to grow and as we do, we're going to squeeze every bit of productivity out of the machines that we can," he says. "I'd rather have a machine do a task rather than a human when it's a rote function. Machines do rote functions well. I want my people to think. I want us all--every CSR, manager and producer--thinking about what we do that produces revenue and makes clients happy. That's what we do best: produce revenue and make clients happy."
Cyber ringy-dingy
What would you call the blending of a call center with Internet technology? National Marketing Services calls it "Internet Call-Back Service." Using ATIO Corporation's CyberCall® technology, National Marketing Services provides an immediate connection between your agency and visitors to your agency Web site. (See the related article, "High-Tech Telemarketing," in the October 1998 issue of Rough Notes at www.roughnotes.com.) According to Larry Neilson, president of National Marketing Services, this type of access is an important step as it offers visitors to your Web site another contact option. "People want a choice when they visit a Web site," Neilson explains. Sometimes, however, the choices don't take advantage of Web technology--some sites don't even offer e-mail access. Instead, they provide a phone number and/or a mailing address which forces visitors to jot down information to use--later. And that's an issue. Typically, Web users want their information now. The Internet Call-Back capability resolves that issue.
The Internet Call-Back Service provides a telephone icon at the agency Web site. Visitors who wish to speak with someone immediately simply click on the icon. A brief form appears requiring the visitor to provide a phone number so the call may be returned; the visitor hits the send key; and moments later the visitor's phone is ringing--and the visitor hasn't left the Web site! (Of course that assumes two phone lines, but more households are moving in that direction.)
The person returning the call is a National Marketing Services representative; but from the Web site visitor's perspective, they're communicating with your agency. Neilson explains that National Marketing Services has been responding to the telemarketing needs of the insurance industry for over 10 years. "You can get the technology elsewhere," he notes, "but the industry knowledge is what we offer. What's more, there has to be a person in the call center when these calls come in." National Marketing Services provides that coverage.
The good news about the Internet is that it allows anyone in the world to visit your Web site. Of course, that's also the bad news. The agency receives a record of all its calls handled by National Marketing Services; but their representative screens the contacts who use the Internet Call-Back feature, provides the agency with the quality leads and even sets up appointments. (National Marketing Services uses this CyberCall technology in its own operation. To "test drive" it, visit the National Marketing Services Web site: www.nationalmarketing.com and click on Information Request.)
But you don't have to go to the Internet to see innovative communications technology. Neilson explains that telecommunications capabilities such as computer telephony integration, automatic call distribution and automated/preview dialing are enjoying more widespread use as more organizations upgrade their phone systems.
Computer telephony, as the name suggests, is the melding of computer and communication technologies. One of the ways the computer telephony integration (CTI) functionality can be used in an agency setting is with a business version of caller ID. Suppose a client calls in. The automatic number identification feature matches the phone number of the caller with the phone number in the agency database and sends the call to the next available CSR. The caller's customer record appears on the CSR's screen so (s)he has the necessary information and can greet the caller by name.
In a nutshell, automatic call distribution routes calls to the person best able to help the caller. To accomplish that, the caller responds to prompts from the automated attendant. This gives the CSR or other staff member sufficient information to be prepared to respond to the question/concern by the time the caller is at the front of the call queue.
Automated/preview dialing enables the agency representative to access a customer or prospect record in the agency management system, pointing and clicking on the phone number and allowing the system to dial the number. Neilson says that statistics show that productivity is increased when preview dialing is used. (The likelihood of transposed numbers and other misdials is certainly reduced.)
Doucette, Killian and Neilson agree: To get desired results from technology, organizations must start with a business solution and then find the automation to support it. And with the right technology in place, local agents can put the "person" back in personal lines. *
Author's note: Steve Doucette, Chuck Killian and Larry Neilson were participants on a "Forward Technology" panel moderated by Virginia Bates at the IIAA's National Convention in Boston. In Bates' article on page XX, she "looks around the corner" at some of the technologies discussed by the panel.
Steve Doucette
Great Northwest Insurance Company
Telephone: (208) 725-0667
E-mail: steve@greatnorthwest.com
Web site: www.greatnorthwest.com
Chuck Killian
Kettner & Killian Insurance
Telephone: (847) 949-4611
E-mail: killian@wwa.com
Web site: www.insures.com
Larry Neilson
National Marketing Services
Telephone: (800) 736-9741, ext.3002
E-mail: larryneilson@nationalmarketing.com
Web site: www.nationalmarketing.com
©COPYRIGHT: The Rough Notes Magazine, 1999