Renting a management computer system to help run insurance agencies is an increasingly viable option. This article describes current Application Service Providers and their offerings, including advantages and disadvantages to consider.
The next time you look at a major upgrade to your existing agency management system or decide you might need to change to a different vendor, one of the options you will want to consider is to "rent" your new system using an Internet connection. This new method of computing is called Application Service Providers or ASP, meaning the software applications are provided as a service for which you pay a monthly fee. The ASP trend is affecting how all kinds of businesses manage their computer resources and is now available to agents.
Outsourcing data processing needs has been going on as long as there have been computers. My father sold computer equipment for Burroughs Corporation for over 30 years. I remember visiting one of his clients that purchased a large computer system which took up an entire floor of a very large office building. The client rented out the processing time of that computer to other businesses which could not afford to purchase a computer themselves. The process was called time-sharing.
When Insurnet first started out, their business model was based on renting time on a centrally located computer to agencies around the country. The problem with both of these time-sharing systems was the high cost of the telephone lines needed to communicate between the remote user and the central computer system. The Internet has changed that by bringing down communication costs to the point where access is, for all practical purposes, free.
Every agency should at least consider using an Application Service Provider to rent their next management system. But that doesn't mean it will be the right approach for every agency. Let's look at some the advantages and disadvantages.
There are some significant advantages to the ASP model that justify every agency exploring it as an option. These include the following.
Focus on Core Business. Most agency owners start their business because they like to sell insurance and be involved with people. As the agency grows, these owner/producers also get involved with many other areas of agency management. Some are good at it; most are not. Dealing with computer systems not working correctly, vendor service problems, keeping up with the latest technological developments, and then having to find and hire staff to keep it all running smoothly are not functions agency owners want to do or, in many cases, are capable of doing.
The ASP model allows the agency to take these headaches and pass them on to someone else who is really good at running computer systems. The ASP provider becomes responsible for keeping the system working, dealing with the vendor, keeping up with the latest "stuff," and hiring and training staff. This allows agency owners to concentrate on what they do best—sell insurance.
Reliable Computing. Every agency realizes it needs good procedures for backing up data and performing normal maintenance to keep computing resources operating at peak efficiency. What often happens, however, is that what the agency knows it must do and what actually is done are often not the same. An ASP is able to spread the cost of very sophisticated backup and emergency recovery systems over a larger number of agencies. An ASP is are also going to be able to hire the best and brightest technicians to make sure the systems provided to agencies are going to work a high very percentage of the time.
Predictable Costs. If you are paying a monthly "rental" fee to an ASP for your system, you will be able to accurately budget your costs over a longer period.
Capital Expenses Reduced. By paying a monthly fee for the use of the system, you will not incur the normal budget "hit" as you would have in the past when it was time to upgrade your system to a newer version. Your need to upgrade individual workstations is also reduced because with the ASP model, you do not need the latest and greatest high-powered computer to make it work well. The useful life of your existing desktop equipment is extended.
Challenges Deploying Products. Some ASP vendors will host third-party software packages for you. This means you do not have to spend agency resources to keep up with the latest software versions. And, with an ASP model, you have to upgrade only once to enable everyone in the agency to access the upgrade.
It is important to point out and consider some potential drawbacks to using an ASP for mission critical systems. The following issues need to be adequately addressed to the point you are comfortable with them.
Client Data. With an ASP model, your customer data no longer resides within your agency's four walls. Your data is sitting on a computer in the ASP's office. When we first started purchasing in-house computer systems, we were told that one of the advantages was that we could have physical control of our data. This was true then, but the world is changing, and with it how we think about client information. Many agents feel their only asset is the information they possess on their clients. However, we believe an agency's greatest asset is its relationship with its clients. The information or data merely supports that relationship.
Reliance on Internet. The ASP model relies exclusively on having a high-speed, always-on Internet connection to every desktop in the agency. If this connection is not working, business cannot be processed with your management system. It is as simple as that. So, it becomes very important to take all the necessary steps to make sure your connection is going to work. If you can't yet get a high-speed connection, then the ASP probably won't work well for you.
This is not just theory. There are a number of options currently available and some completely new vendors who are developing systems based on the ASP model.
Traditional vendors have outfitted their existing systems so they can be used over the Internet. Following are some of the systems used.
AMS—AMS's AfW Online is based on its AMS for Windows (AfW) agency management system. The online system includes the same range of features found in the in-house version. One of this product's distinguishing features is that AMS is both the software provider and the ASP. AfW Online is hosted in AMS's College Station, Texas, data center, which is the largest HP/Intel-based data center in the Southwest. AfW Online has been available since April 2000, and to date about 1,100 users in nearly 150 agencies are using the product.
Applied Systems—Applied's ASP product, TAMCentral, became available in late 1999. TAMCentral is designed to work in any size agency and is based on The Agency Manager system, Applied's widely used agency management system. Features include Win-TAM 6.3 and upgrades, Microsoft Office 2000 and upgrades, Internet email, faxing, and imaging. Access to third-party software, such as integrated rating, upload/download, and Web-based training, is also available.
DORIS—DORIS announced its ASP product, FILESERVERonline.com, in January 2001. There are currently 40 users in 9 agencies are using the system. Based on the DORIS32 agency management system, it includes the same features and functionality as the in-house system. In addition to processing business via the ASP, DORIS provides a backup copy of the system that runs locally. In keeping with the same level of simplicity that DORIS traditionally approaches product development and rollout, FILESERVERonline.com is capable of operating in a relatively basic environment. While designed to function in a typical Microsoft Windows environment, the system will run on an IBM-compatible 486 PC. The system also performs well at the 28.8 bps dial-up speed.
Ebix—Ebix's ASP, called ebixASP.com, became available late last year. Presently, about 50 users in five agencies have made the transition to the new system. The product, billed as "the completely Web-enabled e-commerce system for agencies," is an extension and outgrowth of ebix.com's stated goal of becoming "the Yahoo of insurance," and is more than just a new agency management system, but an e-commerce tool as well.
According to Ebix Vice President Andy Whalen, the new product hit the drawing board during the second quarter of 2000. While designed as a new system that incorporates newer and specialized features, Whalen said that ebixASP.com draws on a number of the best features found in earlier Ebix/Delphi systems. Whalen also listed several unique features. For one, ebixASP.com is a 100 percent HTML-based application. It also includes capability to be interactive with a number of niche providers. Third, the system is WAP-enabled (Wireless Application Protocol), which means that it can interact with a number of wireless communication devices. And, just added, the system now includes the ability to engage in interactive chat sessions that can become a digitized attachment to a customer file.
Other ASP Solutions
In addition to the offerings from the traditional vendors of agency management systems, several completely new ASPs and ASP-specific management systems have been recently launched or announced.
Ajasent—Ajasent is an ASP offering from technology consultant Mark Parrish. Mr. Parrish created the service to be "vendor neutral," meaning that Ajasent will host any vendor system plus the third-party and other software that an agency might use. A key benefit of Ajasent's, approach, however, is that Parrish himself is widely regarded as both an agency management and technology expert, a combination of expertise that lends itself particularly well to agencies that want an unbiased, "neutral" perspective.
SPAN2—SPAN2 (formerly the Net-Commerce Company) recently launched its new, from-the-ground-up SPAN2 platform, an ASP-based online system that can be used by both agents and insurers. Presently, the new system has been implemented by AIG, the State of Connecticut, and Century Casualty, and is also being used by JBL&K, Oregon's largest insurance agency. The agency suite includes a number of components, including Web presence tools, marketing services, agency accounting, transaction processing and tracking, and customer self-service. In essence, the SPAN2 platform replaces existing agency and insurer transaction processing systems with a suite of hosted applications that utilize a common repository for data storage and permits one-time data entry, thus eliminating the need for double entry and moving data from organization to organization. XDimensional Technologies—XDTI (formerly Fuher and Associates, Inc.) has been providing a number of computer-based services since 1989, and has offered ASP services since 1999. The company recently announced the development of their new, Web-based agency management system, called Nexsure. XDTI maintains its own data center, which has been hosting several other products since January 2000.
Questions To Ask
It is important that you carefully consider the company you by from as well as the service they provide. Make sure you review contracts carefully to make sure you understand what you are getting and that your rights are protected. Here are some questions you should make sure to have answers for.
What type of Internet connections is available at the ASP, and what redundancy has been built in?
What does the contract say about ownership of agency data?
What are the contractual provisions for the agency receiving a copy of their data? (i.e., how long until they receive it and in what format).
What performance standards are to be maintained?
Who provides system support to the agency? (You should be clear if the automation vendor continues to provide support or the ASP vendor takes on this role).
What is the disaster recovery plan for the ASP?
What level and type of security is provided by the ASP for the agency data?
The ASP model will not cure all of the problems encountered by agencies as they attempt to manage their technology resources. It is an option that deserves a closer look to see if it makes good sense for the right agency.
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