The Two Faces of Automation

An interesting event happened at a recent strategic planning session with a client. Action items for each department were being discussed. What stood out was that the majority of the action items had a heavy reliance for work to be performed by the Information Technology (IT) manager.

Clearly, automation has been an integral part of many agencies for the past two decades. The good news is that agencies (as is the rest of society) are moving past the era of using the computer as a mere tool and entering into the golden era of true automation. This transition evokes memories of the Roman god of gates and doors, Janus, who was represented with a double-faced head, each looking in opposite directions. This was to indicate both the beginning of one event at the same time as the ending of another, such as the transition from being single to being married.

The insurance industry is now transitioning from using the computer to process data to automating information collection and distribution. The use of paper can be theoretically eliminated. Companies are uploading and downloading client information. Client files are either kept in electronic format or the paper is scanned and e-filed. More and more information can be generated, transmitted, reviewed and replied to with just a few strokes of the keyboard.

Agency management systems and off-the-shelf office utilities can help make the sales process efficient and look very professional. The Internet offers a plethora of services that make the sales and service jobs easier and more effective. Management can review internal operations with the assistance of customized reports.

Aside from the reference to Janus, there is a second meaning we intended with the “Two Faces of Automations” title. Along with the beneficial aspects of automation there is also a downside. What seems to be happening now is that the automation tail is starting to wag the agency dog. Why does it seem that the IT person is now the most critical person in many agencies? What ever happened to personal relationships and customer service?

Yes, computers help us “push paper” and analyze more information faster. However, do we need all that “paper” and information? Back in the B.C. (before computers) era, letters and proposals were drafted on typewriters with carbon paper. Because it was tedious to generate “paper,” it was not voluminous (at least not by today’s standards). Also, the inputting of information has shifted from the insurance company to the agency.

At least computers are improving productivity. Well … maybe. When properly reviewed overall productivity numbers have not changed dramatically from 20 years ago. Yes, there have been improvements, but are they somewhat offset by the incurred costs, such as added salaries and computer expenses.

Low cost clerical employees have been replaced with well paid and well-trained customer service staff. Medium-sized firms now have at least one full-time employee handling automation issues and perhaps data entry staff. Maintenance costs for automation typically range between 1 percent to 2 percent of revenue. There seems to be an endless capital outlay for new equipment. All these costs have impacted the bottom line and offset some of the gains in productivity.

How much does computer down time impact the bottom line? Employees are so dependent upon the computer that when the system is down, work in the agency comes to a grinding halt. Thirty years ago if someone broke their pencil or their typewriter jammed, it affected only that employee and not the whole agency.

Clearly, the genie is out of the bottle and there is no turning back. The good news is that trends indicate that efficiency and productivity could take off. A few vanguard firms are demonstrating that wonderful things can happen when an agency is truly automated and not just computerized. The downside is that agency owners and managers need to be reasonably versed on automation issues, which can distract one from sales.

The following is a partial list of some of the key automation issues agency owners and managers need to be aware of and understand.

Agency management systems
Buy the right agency management system for your firm, not the most expensive. The leading agency management systems clearly are everything an agency needs and much more. But why pay for the “much more” if it is not needed. Many medium and large “sophisticated” firms use only a small fraction of what these systems offer. Small firms should look at the low cost alternatives first since they effectively handle most, if not all the needs of a small agency. Some of these alternative systems cost less than $1,000 and even have an accounting module or at least integrate with Quickbooks.

High-tech security
Maintain data security and integrity. This can be a long list. The basics include daily backups and firewalls. Don’t make the fatal mistake of not protecting all your work. Viruses and hackers lurk around every modem. The database should be audited once a year to make sure the staff is inputting data correctly and consistently. The old computer saying is “garbage in, garbage out” aptly applies. The firm also needs to make sure it complies with all the new privacy laws. This is still a fluid requirement, so keeping current is
imperative.

Electronic mail
E-mails should make things better not worse. Agencies should adopt some sort of e-mail procedure. The firm needs to be consistent in the manner, style and format of e-mail that is sent out. Even Bill Gates has learned that what was written in old e-mails can come back to haunt you. All e-mails should be able to be filed with the client’s records or cross-referenced for E&O protection.

Internet possibilities
The Web is not just for surfing anymore. There are so many useful services that are accessed in the Internet. An agency can tap into ways to improve customer service through 24-hour customer service and businesses that issues certificates. Producers can search for new sales opportunities and firms that help improve marketing to these prospects. The key is to not spend three hours surfing the Web to find a solution that saves 30 minutes. The Internet can be a friend, so use it properly.

Selecting business partners
Work with companies that are automated and make things easier for the agency. It is surprising how much behind the curve some companies are. Despite the “hard market” there are still a lot of options for most risks. There is no sense working with companies that make you double enter data and lack the capacity to do business electronically.

Go paperless!
There is no technical excuse preventing agencies from going paperless. In the recent past, disk space and scanner speed limited this concept, but both have been vastly improved. Much of our data is already electronic, so that helps out on space and eliminates the added step of scanning. Unless a firm goes paperless, there will not be any appreciable change in productivity. Also, the technical aspect of a paperless agency is now in the reach of the computer savvy owner without the assistance of a technician.

Don’t be first, be second
Many people get excited about new technology. Those first to use new technology often spend more time fixing bugs than saving time using the new system. Those in second get the benefits without the hassles. However, those in last get nothing.

A final “bit”

Computers are entrenched in our society. They have been a blessing and a curse. They have added another “stack of stuff” that an agency owner needs to know or at least have a fair understanding. The landscape will most likely change in another 10 or 15 years, hopefully making things more “seamless.” In the meantime, agencies need to focus on sales and service and not let computers overtake the purpose of an insurance agency.

Bill Schoeffler and Catherine Oak are partners in the international consulting firm, Oak & Associates, based in Northern California. The firm specializes in financial and management consulting for independent insurance agents and brokers, including valuations, mergers acquisitions, clusters, sales and marketing planning as well as perpetuation planning. They can be reached at (707) 936-6565, by e-mail at bill@oakandassociates.com, or visit www.oakandassociates.com

Topics Agencies InsurTech Tech