How “high-tech” is your agency? The range of difference between agencies with regard to level of automation is still fairly wide. While many agents bought their first agency management systems years ago, others have yet to implement any kind of system. However, the number in the latter ranks is diminishing.
“I’m amazed and astounded that in today’s marketplace there are still some holdouts out there that have no automation system whatsoever or are using automation systems, not necessarily complete agency management systems,” said Pam Parry, executive vice president at Golseth & Gregson Insurance Services Inc. in Tucson, Ariz., and president-elect of the AMS Users’ Group.
“Maybe a small agency will just have an accounting system, but nothing there for customer service or no database…Because so many agencies have been acquired, the attrition rate is pretty horrendous among agencies nationwide. If someone looked at why, one of the big reasons could be their inability to utilize automation. So people are jumping on the bandwagon, maybe even late, but everybody’s looking at faster, quicker, more customer-service friendly ways to do business. And they’re looking mostly to the automation industry to provide their solutions.”
Whether an agency is one of those last hold-outs, contemplating what type of system to implement, or an old hand at the game, considering possible improvements to an existing system, the functionality of product offerings has significantly broadened in recent years, especially with the growing trend of moving towards an application service provider (ASP) environment.
ASPs started to make a buzz within the insurance industry two or three years ago, but experts note that most of the serious work with regard to ASPs and agencies has probably occurred during the last 12 months.
An ASP is the new alternative to the traditional in-house system, where agencies take on the IT management themselves. “Or if they want to stay in the business of selling insurance-and that’s the [ASP] pitch we make-let Applied deal with your IT burdens,” said Jeff Lebioda, marketing director for the vendor Applied Systems. “We’ll manage the backups, the upgrades and all the other routines that most of the IT managers have to do with an in-house network. All you have to do is dial into the system via a secure Internet connection, just as long as you have a PC that gives you that kind of access and you have the means to access a world-class agency management system.”
The latest release of Applied’s in-house product, the Agency Manager, is version 6.3, and a new release, version 7.0, is due out later this year. Lebioda noted that the in-house network and Applied’s ASP offering, which is on an Internet connection called TAMCentral, are literally the same application.
“There’s no difference in functionality between the Agency Manager and TAMCentral other than if you want to do integrated rating [or] some other offline or third-party application,” Lebioda said. “You can’t do it over an ASP environment…But the core capabilities are the same between the agency manager and TAMCentral. It’s essentially the same product.”
“Agents want to get a better control of their technology costs,” Lebioda continued. “They know that in order to compete, they need technology, and an ASP environment helps give them predictable costs because they get charged monthly for dialing into that management system.” He contrasted that to an in-house network, where, for example, a processor purchased at the outset could become obsolete within a matter of months. “All of a sudden, you’re rebuilding your network, and you have no idea what the cost of those can be six months from now because technology fluctuates in price. But [in] the ASP environment-you know your monthly fee’s always going to be ‘x’ amount of dollars. You may have to upgrade your workstations, but it’s nothing like upgrading a file server and the peripherals that come along with an entire in-house system.”
According to Michael Krassner, vice president, sales for AMS Services Inc., the trend now is a transition to utilize those management systems in a hosted environment “predominantly because it shifts the burden of cost away from the agency. The cyclical high costs of having to replace hardware as well as maintain the operating systems, the security, the backup and all of that is now outsourced back to the ASP provider-in our case to AMS, which is also the provider of the software…From our standpoint, it is a lot more economical [for] a vendor to provide the service rather than, for example, teaching 5,000 agencies how to back their systems up or deal with technical hardware issues that they’re having.”
AMS has three different management systems offerings: Prime, an entry-level system for small agencies; AfW, which spans broad middle-markets; and Sagitta, which is targeted at the high end of the market. Both the AfW and Sagitta products are available as either in-house systems or as systems in AMS’ ASP offering; the ASP versions are called AfW Online and Sagitta Online.
While there have always been a number of vendors in the agency management system field, it is now estimated that the products offered by Applied Systems and AMS combined are currently utilized by more than 80 percent of U.S. agencies.
“In the 20 years I’ve been in the agency management systems business, we’ve seen an overall shrinkage in the number and the size of vendors that are out there,” Krassner said. “Consolidation, mergers, acquisitions have caused a lot of that. Every once in a while a new player pops up. Some have staying power-some come and go. If you took a long view over the last 20 years, we’ve probably seen agency management system vendors of significance shrink from somewhere in the 15 to 20 range down to maybe two, three, possibly four that you would consider long-term survivors.”
But while AMS and Applied serve the major portion of agencies, brokerages, MGAs and even banks that are getting involved in the insurance industry, other vendors are finding specific niches in different segments of the market.
The same applies to ASPs. According to Lebioda, “a lot of ASPs pop up because it’s a very profitable venture…The costs are controllable.” But he added that since pretty much almost any vendor can claim they can operate an ASP, an agent “also has to investigate well. Is the ASP running out of someone’s garage? Does it have the computer redundancy, the fire suppression, the security level built into it? If one grid goes down during a catastrophe, [does] another grid kick in [so] there’s little to no downtime?”
“As far as ASPs, from an agent’s point of view, we were originally afraid of offsite data storage,” said Parry, who is currently an AfW user, but looks forward to migrating to the online version. “Our main concerns were security issues. Who would have access to our data? That type of thinking. After discussions with our vendor, AMS, we now feel much more comfortable with those issues. It’s a huge benefit in any disaster recovery plan. I know our vendor has indicated they have specific recent examples of this. The agency of somebody using AfW Online burned down, and they were able to get them up and going in a matter of hours.”
Weighing the costs
However, Jack Fries, owner of Fries & Fries Consulting in Alexandria, Ky., pointed out at least one potential downside with regard to ASPs. “My personal experience is that the more users you have, the less economical [the ASP] is, at this point anyway,” he said.
In response, Krassner pointed out that not all ASPs are created equal. “There are differences in how vendors are offering their ASPs,” he said. “Some, like AMS, are offering both the software and the service from a single source. The advantage obviously to the customer is that we only need to cover one set of expenses to operate and generate a process for our business. With a third-party ASP, you have a software vendor who needs to recuperate operating costs, licensing fees and that sort of thing, as well as the third-party ASP provider, who has to generate a profit on its ASP offering. That has a direct impact on cost.
“It’s likely that as you scale up in a larger agency, there may be a perception that it is more economical to have an in-house system than to outsource to any of the ASP providers,” Krassner continued. “I think the answer to that question really depends on the expertise of the agency, how they’re comparing the costs…You have to put the whole ball of wax into the return-on-investment equation before you can say [for] any particular sized agency that this is automatically more or less expensive.”
The influence of XML
In terms of agency management systems in general, Fries pointed out one trend that could be detrimental for agencies. SEMCI (Single Entry Multi Company Interface) “seems to have been pushed to the side of the road by most of the insurance companies, and they are developing their own online access and online input, which continues that horrible thing of multiple input by the agent.”
Lebioda noted, however, that more and more companies are moving away from proprietary languages.
“When I started at Applied Systems, the trend we saw was moving away from minicomputer technology to microcomputer technology,” he said. “The platforms and applications that ran on microcomputers were more robust…more flexible. That’s obvious today because now languages, such as XML- and COM-based languages, allow developers to develop subsets of information, or databases, and [to replicate] those databases. So they don’t have to write a new line of code for each area of the system.”
Applied Systems is now a Microsoft-certified partner, with several Microsoft-certified engineers on staff at various levels within the company, training system installers and even assisting in its sales force.
As to whether SEMCI, however, is really gone for good-replaced by an emphasis on XML standards for the insurance industry-Krassner opined that the advent of XML doesn’t change “the goal that agencies would enter information one time and it would be available to both an agency system and to a carrier system or any other strategic business partner in the workflow process that might need part or all of that data. The objective remains the same.”
While Krassner considers ASPs and XML coincidental in terms of their timing and appearance on the marketplace, he said that over time, XML will have an impact on ASP offerings in terms of some of the interfaces that will be possible and enhanced interactions of data.
Different agency management system vendors have been implementing XML into their products to varying degrees. “We’re aware of start-up companies that are building products specifically with XML in mind,” Krassner said. “We at AMS are integrating XML [into our] interface capabilities and into our products, but this is an evolutionary rather than revolutionary process.” And a lot of what will drive that is how quickly the carriers adopt XML standards, how quickly agencies move to newer technology systems and how quickly XML standards for the insurance industry evolve.
Yet another acronym that has become a major buzzword of late is CRM-Customer Relationship Management. To various degrees, vendors are recognizing the growing importance of CRM by implementing specific features designed to help optimize the agent/insured relationship into their products.
Lebioda said that certain CRM features implemented into Applied Systems’ products allow agents to give their clients notice of when a policy is going to expire. The system can also be used to round out accounts or find ways to mine data for new sales opportunities.
“We have a feature in our system that you can run a marketing search and you can search for those clients that have auto policies and no homeowners policies,” Lebioda said. “It’s a very powerful tool for our customers.”
Krassner noted that in its original or purest form, the acronym CRM spoke to software that was developed specifically for sales force automation. He added that there are many aspects of the true CRM system apparent in most of the better agency management systems. “While I wouldn’t [define] an AMS management system as a CRM system per se, I would say many of the capabilities that CRM systems claim to have are apparent in [AMS] management system offerings.” These include the ability to do mass mailing, or to conduct campaigns, which could be mail, telemarketing, or combination hybrid campaigns that cross several contact methods.
Parry affirmed that her agency’s vendor, AMS, has multiple features for CRM. “There are report building features which allow any agency to accurately profile our client base,” she said.
Parry indicated that AfW also provides a marketing module that allows the agency to cross-sell to its different clients. “We also have a place in our system which allows us to profile each account,” she said. “We can put information on each of the contacts¾ notes about what’s important to the clients, what hits their hot button, that sort of thing. We feel that’s a very important part of CRM¾ to really know your client.”
Consultation and training
As Fries noted, the purchase of an agency management system is “a huge investment-not only as a cash investment in buying the system, but also in what your future is and how much money you’re going to make in your business. Many of these systems are bought without any outside assistance…Whether a system does something or does not, if the buyer doesn’t know to ask the questions, they’re not going to find out.”
Another major aspect is training. An agency may have chosen the best possible system to suit its needs, but if the staff cannot properly use that system, it’s not a worthy expense.
Parry noted that back in the 1980s, agencies might have viewed an agency management system as a one-time expense. “I think we finally arrived as an industry at the mindset where we have figured out that automation is never done. It’s not a project that’s ever completed…So in our agency, we budget for it-for hardware, software and training.”
For the full story, see the Oct. 15 issue of Insurance Journal (West).
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