Efficiency and Expense: The Technology Balancing Act
January 2003
While modern technological advances certainly
help the insurance industry be more efficient, they also pose certain "costs."
How do you stay current with technological issues, and when do you buy versus
wait? The most important thing is to stay abreast of changes that affect your
business.
by Robert
S. Giles, CIW
American Association
of Managing General Agents
Modern technological advances can bring efficiencies to the insurance industry
that would have been unimaginable a generation ago. These efficiencies can provide
faster, more satisfying customer service; easier and more reliable collection,
maintenance, and retrieval of important records and documents; and significant
increases in productivity for everyone in your organization.
But progress has its price. Hardware is always most expensive when it is
new, and often becomes obsolete after only a few years of service. Software
is constantly rewritten and upgraded. Compatibility of systems is an eternal,
and expensive, challenge. Changes in software licensing arrangements are emerging
as a hot-button issue.
Pros and Cons of Technological Advances
The challenge for the independent insurance professional in the 21st century
goes beyond finding markets and serving them effectively. Almost as important
is the challenge of balancing the benefits of modern technology against the
costs of installing and maintaining it.
As experienced insurance professionals, we know how to weigh the pros and
cons of various coverage options and recommend sound options to our customers.
But how many of us have anything close to that level of expertise when it comes
to making a choice on a software package or a virtual private network for our
own business?
It’s not an issue any of us can ignore. Even if you were willing to bypass
all the efficiency improvements that technology offers, your customers and industry
partners will have expectations for technological capabilities that you have
to meet. Along with dramatic improvements in security for electronic commerce,
there is now a much higher level of public acceptance of and comfort with electronic
transfers of sensitive information.
It’s not a matter of falling behind. Without technology, you simply can’t
do business any more. And really, who would want to go back to doing business
without cell phones or laptop computers? The advantages are just too great.
Look at remote access, for example. With technology that wasn’t widely available
even 5 years ago, you can connect to your business network and be productive
anywhere: sitting in a hotel room on a business trip; waiting in an airport
terminal for a flight that’s been delayed several hours; even while on a vacation
in some remote spot. Higher-speed remote connections save you the hassle of
interminable waiting for information to download. You get more done in less
time, and wasted time is kept to a minimum.
Reducing the Wait
But saving time within your organization is just the beginning. Remote access
technologies already in place allow faster customer service and reduce errors,
because the producer and end user are placing information into the system together,
in real time. No more waiting for the mail or even overnight delivery to put
important documents in your hands; and no more straining by data-entry workers
to read someone else’s handwriting—or cleaning up the inevitable errors after
the fact.
A fully automated, computerized system—one that recognizes and authenticates
electronic signatures, allows real-time electronic binding, and establishes
a real SEMCI (single entry/multiple company interface) at the point of sale—would
revolutionize the industry. An agent would be able to provide high-speed, state-of-the-art
customer service from anywhere. The need for a high-overhead headquarters office
would disappear. Automatic storage of key records and documents on a remote
server would ensure business continuity against almost any contingency.
That utopian future hasn’t arrived yet. (Haven’t we been told that SEMCI
is “just around the corner” for more than a decade?) However, there has been
significant progress. The question many independent insurance professionals
are asking is, “Which new technologies will meet my needs, at a price I can
afford?”
Current Technology Issues
There are no guarantees. First, the collapse of the dot-com economy has both
hardware and software marketers scrambling for new sources of revenue. Few believe
it’s merely a coincidence, for example, that so many software companies have
decided to introduce new “upgrades” and “modified” licensing agreements in the
past 2 to 3 years. Software suppliers have traditionally enjoyed the upper hand
in negotiating these contracts, while insurance professionals have struggled
to level the playing field. There are ways to protect yourself in the software
jungle, but not every insurance professional knows about them.
Second, rules and regulations will need to be rewritten to accommodate the
capabilities of new technology. E-signatures are a classic example. The technology
is in place; what’s lagging is recognition of that technological capability
by state government regulators. Just as important, will the states work together
to produce compatible standards, or will the insurance industry have 50 different
sets of regulations to follow and standards to meet?
Finally, how do you separate the state-of-the-art from the snake oil? What
software packages do your peers consider a boon? Or a bust? Does a VPN (virtual
private network) make sense for your organization and the way you do business?
Are PDAs (personal digital assistants) a worthwhile investment for your team?
Or do the laptops and cell phones team members already have get the job done?
Among the vendors, who’s over-promising and under-delivering, with regard to
“easy maintenance” systems or “foolproof” policy management software? What “open-source”
solutions exist that are reliable, efficient, and suitable for our industry?
Keep Abreast
There is a real need for independent insurance professionals to get together
to discuss these issues; to compare notes on both good and bad experiences with
technology suppliers and systems; to get the latest information on technology
advances and the regulatory response to those advances; and to compare technology
products and services from multiple suppliers in one place at one time.
Fortunately, such opportunities exist. For example, the American Association
of Managing General Agents annually sponsors an Automation Conference to give
insurance wholesalers an opportunity to meet and talk with multiple technology
providers at the same time, in an atmosphere geared specifically to our industry.
It also gives insurance professionals an invaluable opportunity to both attend
structured educational sessions on specific topics, and compare notes with and
learn from their peers. In 2003, the AAMGA Automation conference is focusing
on topics such as Electronic Signature and E-Business Regulation; Business Continuity;
Big Business Remote Access on Any Business Budget; and Software Licensing Trends:
What Goes Around Comes Around.
Many insurance trade associations serve their members with technology programs,
and insurance professionals serve themselves, their organization and our industry’s
customers by keeping abreast of insurance technology advances.
Opinions expressed in Expert Commentary articles are those of the author and are
not necessarily held by the author’s employer or IRMI. This article does not purport
to provide legal, accounting, or other professional advice or opinion. If such advice
is needed, consult with your attorney, accountant, or other qualified adviser.