Measure Your Technology R.O.I.

Implement real time. Go paperless. Become automated. Upgrade your agency management system. Encourage download. Invest in multiple monitors at every work station. Becoming a competitive and efficient agency in today’s market almost mandates keeping up with the Joneses when it comes to technology. But as you sink more and more money into these technology-centric initiatives and processes, how can you ensure the payoff is worthy of the expense?

If your agency hasn’t learned to estimate its R.O.I. on technology, you’re not alone. Staying abreast of and implementing the best tech changes of the past five years have themselves been huge challenges. What’s more, technology has been integrated so thoroughly into agencies’ core business processes and operations that it’s difficult to make the calculations. To break things down, look at each major tech improvement recently made available and see where the savings accrue.

Counting Up the Savings

Dave Fenner and his automation manager, Angie Ball, are among the growing number of agencies that are discovering ways to calculate the savings their agency’s technology produces. They’ve measured the savings in time, money and people that the biggest technology jumps at the Thomas-Fenner-Woods Agency in Columbus, Ohio, have created.

Before using Applied’s Transformation Station to interface with companies in real time, for example, Ball knew that CSRs spent about seven minutes per transaction. After transitioning to Transformation Station, Ball found that each transaction took only 30 seconds. “On the basis of 1,100 transactions per CSR per month…that translates to an annual savings of $26,000,” Fenner says.

These savings constitute just one area of returns on its technology investments. Fenner and Ball say that in personal lines alone, the firm has grown by more than 1,000 policies a year for the past two years without hiring additional employees. “Without electronic filing and download [for new business, renewals, cancellations and endorsements], we’d have needed at least three more people to do this work,” Ball says.

The agency also has measured colossal time savings in automated invoicing. Thanks to company download, Ball simply runs the update into the agency management system. With the client code information from the agency’s system already entered into the company’s system, the invoice amount and commission are correct, and there are no account corrections from the company. “I processed approximately 128 invoice transactions this morning in about a minute and a half,” Ball says.

Now that the firm is going paperless, future savings will include money currently spent on paper-file storage space, and a serious amount of time formerly spent maintaining paper files.

That Thomas-Fenner-Woods has realized any monetary return on its technology investment is, to them, icing on the cake. “Fifteen years ago, we decided to take advantage of automation,” Fenner recalls. “At the time, we said that if all we see is a better ability to serve clients because the computer can handle the transactional work while our people serve our customers, that would be worth it.” Now 24 staff members produce and service more than 7,600 policies in commercial lines, personal lines and life-health.

More Processing, Fewer Clicks
Al Diamond, president of the Agency Consulting Group (www.agencyconsulting.com) in Cherry Hill, N.J., observes that in the past 10 to 15 years, carriers thrusted an enormous amount of processing work onto agencies. At first, agencies were forced to use carriers’ automation devices, but then agency management system vendors tackled this issue and have since added a barrage of new features and functions to their systems to meet the demand. Agencies also have done their share to design best-of-breed systems that perform numerous tasks in addition to those handled by agency management systems. The results? According to data gathered by the Agency Consulting Group, while agencies lost 25.7% of their employees over the last 15 years, the revenue per employee increased by 41.7%.

Some agencies may have done even better, particularly ones that implement on a regular basis the upgrades, add-ons and integrations with other software that agency management system companies provide. And remember: Operations managers should be able to create reports that calculate almost everything, from the number of activities a CSR completes in a day or an hour to the ratio of closings-to-sales presentations made.

Newer phone systems can add still more efficiencies while allowing you to track them. The one installed in February at Thomas- Fenner-Woods can send caller names and numbers into e-mail via Microsoft Outlook, where they can be retrieved from a handheld computer. If the call goes directly to an employee’s desk, the information is logged into a database that tracks the number and the identity of the person who took the call. Says Fenner, “I can tell you how many times you called each month and who you talked to.” The agency can also monitor how many times a customer is placed on hold and how many times the phone rings before a call is answered.

Magic of Dual Monitors
Gary Roach put a second monitor on one employee’s desk a couple of years ago, and within two weeks every other CSR wanted one. Now that dual screens are standard equipment in the Wiseman Agency in Gallipolis, Ohio, Roach says the processing backlog has vanished. “Before, everyone had to toggle back and forth between company Web sites and our agency management system,” he says. This inefficiency alone caused an average, chronic backlog of four to five days of work. Now that dual screens have eliminated dozens of movements, Roach says everyone is caught up. “Short of someone being out on vacation,” he says, “we run real time.”

The Wiseman Agency believes in technology, but Roach admits he’s not the first to saddle his horse every time an innovation appears on the horizon. He bases many of his decisions on staff input, and often tests a product or procedure on a single worker before investing in it more fully. Says Roach, “We really try to take advantage of automation, but we’re in a people business, and whatever you do has to make sense to your customers and your employees before you jump in.”

Saving Paper, Saving Money
The Agency Consulting Group gathers financials from several thousand agents annually and calculates productivity gains. Consequently, Al Diamond has evidence that agencies going paperless are experiencing a one-time productivity increase of 20%. “Even with the added labor to do the imaging, agencies no longer have to file or store paper,” Diamond says. Nor must they dedicate entire rooms to file storage. “Most agencies want to grow and prosper, so it’s a matter of not having to expand your space if you expand your producer or employee population,” Diamond says.

Nor do paperless agencies buy as much ink, postage or paper—or spend much time looking for paper. HBA Insurance Group in Miami embarked on the path to paperlessness about two years ago, and since then, CIO Oscar Miniet says the agency has grown between 40% and 50% in revenues, but added only one employee. “And when it comes to space, we have an entire room that we used to keep dead files, and now we’re using it for hurricane preparation,” he adds.

Miniet and Carl Moll, executive vice president of this major multi-lines agency, remember the steps involved in retrieving a paper policy. “If [a client] called for a copy, we’d have had to grab your file, unclip it, fax or scan it, wait for the confirmation, and then put it back in the files,” Moll says. “Today in a couple of clicks, I can send you your policy while we’re talking on the phone.” Before implementing ImageRight, Miniet says the agency’s CSRs were managing roughly $350,000 to $400,000 worth of business each. “Now they’re doing more like $750,000 each,” he says.

In the same vein, HBA’s revenue per employee is growing by double-digits annually and keeping pace with the agency’s revenue growth. Margins are improving each year, says Moll, and the next step planned in productivity is to determine how much it costs to touch each account.

Means of Measuring
One indicator agents commonly use to get a rough reading of their technology ROI is revenue per employee. But Tim Cunningham, principal of Optis Partners, LLC (www.optisins.com) in Chicago, believes spread per employee provides a more accurate picture. “If you take the revenue per employee, less the average salary per employee, this gives you the spread, telling you how much revenue is left for other expenses,” he explains. Looking at the spread strips out the vagueness of compensation, he believes, providing a more accurate benchmark.

Cunningham also suggests focusing more closely on incremental improvements than on best practices data. “You have to remember that best practices figures come from the past,” he reasons. “Even if you’re better than the norm, you can still get better through incremental improvement.”

If your employee spread is $30,000 this year, for example, why not shoot for $35,000 next year? Historical productivity data gathered by the Agency Consulting Group, Inc., shows that the average spread between employee revenue and employee compensation for small agencies (fewer than 10 people) grew from $35,511 in 2005 to $40,869 in 2006. For the largest agencies (more than 69 people), the spread increased from $38,654 in ’05 to $42,049 in ’06.

To make such an improvement, Cunningham says to grow the top line of your business and manage the expense side at the same time. Delegate tasks to the most junior employees who can handle them—this is particularly easy with e-mail, since you can forward messages and say, “please handle.” And evaluate your agency’s use of technology to find out if there are functionalities and features that employees don’t know how to use. But don’t merely send your CSRs to system user groups; “fix” your problems by applying technology, systems and processes. Says Cunningham, “It’s a three-legged stool.”

And lastly, don’t step over dollars picking up pennies. This can happen when you focus so much on benchmarking that you overlook ways in which the creativity of your staff might be applied to developing new processes or shortcutting old ones. Do you have CSRs who might enjoy becoming outside producers? Do you have a producer who could make a great operations manager? “You have to analyze [your numbers] to figure out how to improve, but don’t spend too much time looking backward,” Cunningham says. “We should all really be looking ahead.”

Susan Hodges (hodgeswrites@aol.com) is an IA senior contributing writer.

Join the Real-Time Revolution

Broad segments of the industry have come together and taken the unprecedented step of forming the Real-Time/Download Campaign to promote agents’ ease of doing business. The participating agents, brokers, carriers, vendors, user groups and associations have seen how real time and download benefit agency workflows, customer service and bottom lines—and they want to see
more agencies gain these advantages.

The campaign’s goal is to double the number of real time transactions over the next year. Right now, about 20,000 real-time transactions take place each business day through the agency management systems, and this does not count the number of real-time quotes generated through the comparative raters. Even more important than the numbers is the fact that each real-time transaction has enabled some agency employee to save time and be more responsive to his or her customer.

Here’s what independent agents and brokers specifically can do to help the campaign succeed:

1. Implement real-time functionality for whatever transactions your carriers and vendor offer. Take advantage of vendor, carrier, user group and association real-time training opportunities. Go to www.getrealtime.org for the “Agency Real- Time Implementation Guide,” AUGIE workflow timer and cost-savings calculator, “AUGIE Commercial Lines Download Agency Start-Up Guide” and vendor- and carrier-specific information. Also visit www.ACTtech.org to run a report on what specific real-time transactions your carriers offer with your vendor.

2. Monitor individual employee usage and provide additional training where necessary. Provide employee incentives to encourage individual usage, such as a free lunch for the employee with the most real-time usage in a week. Use vendor and/or carrier-provided agency employee real-time usage reports when available.
3. Promote the Real-Time/Download Campaign prominently in your office and with your carriers. See www.getrealtime.org for creative materials you can use.

4. When a particular carrier’s real-time implementation is not as fast or efficient, point out the problem to the carrier and work with the carrier to fix it. For example, the use of “screen scraping” technology might be a lot slower than using the ACORD XML standards. The input of you and your employees is extremely important in helping the carriers and vendors continue to improve the agent user’s experience with real time.

5. Use carrier marketing visits, advisory councils and other opportunities to encourage carriers to provide you with real-time functionality for more types of transactions and lines of business.
6. Encourage your national and state agent associations and user group to adopt real time as a prominent part of their advocacy and training agendas.

Internet-Based Systems
Moving an agency management system from in-house to online is another opportunity to watch the savings pile up. Not only can you let your worries about system backups float out the window, Al Diamond of The Agency Consulting Group says you can probably also let your IT manager(s) take a long vacation. “Instead of several sophisticated servers, you’ll need only a small one to manage your fax and printing capabilities,” he explains.

And if flood, wind or fire destroys your physical office, you and your employees still can access all of your data from a computer anywhere. You can also call your telephone company to route all calls for the agency to a cell-phone link during an emergency. Once you’ve made these arrangements, your agency can function any time and from almost anywhere.