Recently I met with an agency that had a state-of-the-art computer system. The system did everything, and then some! ACORD certificates, binders, and applications were handled through the system; no longer was it necessary to maintain supplies of any of these forms -- or even of typewriters. Rating was built into the system, obviating the need for rating manuals in most cases.
In short, the agency found the system so good that it became totally dependent on it -- as should be the case.
Then a disaster occurred. A recurring system problem turned into a hardware breakdown, and the server had to be shipped to the system vendor for repair. Meanwhile, the agency did not have a backup server to use. The repairs took more than a week, so the agency had to deal with a number of problems:
1. It had no way to do basic processing.
2. It had to make arrangements to obtain personal computers for a few days.
3. It had to obtain ACORD forms to use in the typewriters.
4. It had to rate all Personal Lines clients manually, which meant the agency had to obtain updated rate manuals.
You can imagine the impact this had on the agency. No processing could be done! Everything came to a halt, and what little work that could be done had to be redone in the system once it was operating again.
This type of disaster happens from time to time, but we should not condemn the automation system. Rather, we should plan better. In this case, a stand-by processor would have been very helpful.
Purchasing a system requires planning. It's a long-term project requiring a long-term commitment. Once the decision is made, you are more or less locked into making whatever you bought work, so it's worth taking the time to do it right the first time.
Even so, you will encounter many totally unanticipated problems. This article will focus on:
- What to look and shop for in a vendor and a system.
- How to determine what you need in a system, present those needs to a vendor, and anticipate future needs.
- How to prepare for a demonstration of the system, both on your premises and on those of a user.
- Making a decision.
- Preparing for installation:
A. Physical plant requirements
B. Installation activity requirements
C. Preplanning, indoctrination, and training prior to installation
D. System training
E. Data conversion, which involves converting:
1. Data manually into the new system
2. Existing system data directly into the new system
3. A combination of 1 and 2 into the new system
- Post-installation training.
- Maximizing the use of the system.
- Anticipating future needs.
What to Look and Shop For in a Vendor and a System
Many system vendors are out there -- you only need to read the trade magazines to realize that. Make sure you deal with a reputable firm. You want to access technical assistance in case of a problem.
Leasing might make more sense than purchasing for some businesses, and most vendors have leasing facilities available.
Talk to other agents, both large and small, about what they're using. No agency is too small to consider one of the major systems, and smaller agencies need basically the same automation services as larger agencies. Cost is relative, since smaller agencies need fewer workstations. Also, your agents association should have some information about systems being used by member agencies.
Contact local vendors. Most will conduct demos in your office. Keep in mind, however, that it's better to see a system in action in an agency. An in-office demo will be conducted under ideal conditions: You will see what the system can do, but not under stress conditions. You might also ask four or five vendors to set up a demonstration in a local client's agency.
Before requesting a demo, prepare a 'shopping list' of functions that you would like your system to perform. Obvious items are: Prospect file management, active client file management, ACORD form capability, apps, rating, download capability, file maintenance, networking, accounting, report capability, word processing, electronic mail, Internet access, transactional filing, imaging or CD-ROM capability, fax, and communication and proposal writing. Remember that you can normally add on options at a later date, or use them as bargaining chips in your negotiations.
Reports should be in a format that will allow you to compare current periods with past periods, current actuals with the budget -- and all should provide variance information on both a dollar and a percentage basis.
Project your growth for three years so your vendor can match the system capability with growth and the resulting transactional activity. Aside from normal premium growth, bear in mind that new business and improved renewal retention will increase the number of transactions you'll be handling, as well as the number of workstations and processing people. Also, since you will be increasing your prospect database constantly, you must anticipate the number of workstations that will be needed.
Have the vendors bid on everything you propose (your 'dream' setup), and then choose options based on your budget allowance. Obviously, all of the vendors should bid on the same package, so you can compare 'apples with apples' as much as possible.
Next, be sure you understand what modifications your office will need to accommodate the system. For example, most systems require cabling. Ask the vendor whether or not your current system cabling can be used (if you have one). If you don't, an additional expense will be incurred for cabling, which can be costly. In a small office, with only a couple of workstations this expense is not significant, but in a large office with many workstations (25 or more), this can be a substantial cost.
Your system must be able to handle all of this client and prospect data. When systems get overloaded, they can usually still handle the processing, but at a much slower pace -- and that affects your productivity. Let's say, for instance, that moving from one screen to another normally takes less than one second and the time is increased to 10 seconds. This might not sound like much, but when you factor in the time involved over a period of a year at 25 workstations, the lost productivity time could become substantial.
In other words, one workstation wasting 10 minutes per hour due to system slowness means 80 minutes wasted per day. That's 400 minutes per week, which translates into 20,800 minutes per year. That means more than 346 hours (or eight work weeks) are wasted each year at each workstation. Multiply this by the number of work stations, and you get the picture.
One agency installed a system only to find out less than a year later that it was very slow. The agency had to re-cable for the system and add capacity to get the speed back up to an acceptable level. Although the vendor was sympathetic, he did not feel responsible for selling the wrong system and cabling in the first place.
The point is that you need to ask the right questions, view the system operating under actual conditions, and evaluate accordingly.
When things don't work out as expected, many vendors will say that the problem can be resolved with new technology, which they will sell to you. Try to get some sort of guarantee in writing. Set processing standards, and if the system does not perform to standard, the vendor should be willing to make it work as promised.
Another important consideration is the current database. How can it be converted to the new system? In converting, you will face one of three situations:
- Manually converting all file information in the existing database to the new system.
- Converting some of your file information and manually inputting the rest into the system.
- Automatically converting all data in your current system into the new system.
All three are expensive and will require a period of time devoted to 'clean up' of existing file information before it is input, as well as a clean-up period after inputting.
Most good systems have several ways of measuring the value of an account. This should be an important factor in your search, especially now and in the future, when costs are increasing and revenue is shrinking due to commission reductions, etc.
How to Determine What You Need in a System, Present Those Needs to a Vendor, and Anticipate Future Needs
The first question to ask yourself is what your current system does that you want and like. List these functions, and then decide what you would change if given the opportunity. List the changes as well.
Let's say that your current system provides gross commissions on reports, but you would also like it to calculate and display the producers' share of commission. Decide what new areas you would like to have added. Using the previous example, you might decide to learn how you compare on a year-to-date basis with the previous year, or how actual production compares to the amount forecast.
Once this is done, highlight the items that you consider to be high priority. This should become the minimum criteria for any vendor to meet. It will also provide you with a working evaluation list.
Then order literature from a number of vendors. They'll want to follow up with a sales visit and demonstrate their system, or they might send you a CD or download that shows some of the features and activities performed by their system.
Ask vendors to give you sample copies of their major management reports. You might also want to form an in-house automation committee that can help you with the lists and the evaluation of the vendors' presentation material.
If you choose to go the committee route, consider the members. The most computer-literate person should be on the committee, as well as one principal. Then ask for volunteers, or select the persons you want from four major areas: Commercial Lines CSRs, Personal Lines CSRs, administration, and one person from your management team.
Before you schedule any sales visits, review all of the vendors' materials and compare them to your needs list. Chances are good that their system will include everything on your wish list.
Avoid considering any system that is in bits and pieces -- rating from one vendor, proposals from another, and the rest from another. Choosing a 'single-key entry' system, which provides all functions in one system, will enhance productivity immensely.
Next, look at your agency's growth during the past few years and the current trend. This should provide an idea about the growth levels you can expect if things remain as they are.
After installing the system, calculate what sort of growth you can expect over and above normal. If this rate is higher than 10%, forecast your growth expectations for three years. This will give you the basis on which to approach a vendor.
How to Prepare For a Demonstration of the System
Narrow the list of vendors to no more than four. Contact each of them to schedule a demonstration on your premises. At the same time, have them provide you with three user agencies reasonably close to you, who aren't direct competitors and would be willing to let some of your automation committee members visit their office and observe the system in operation. Don't visit any agencies until after the vendor demo in your office. Be sure that the vendor provides only agencies that are similar to yours in size and make-up.
Before the demo, have the vendor ship a set of training and information manuals to you, so that you can look through them before the meeting. The vendor can take them when they leave. This will give you an opportunity to look at report formats, processing flow, and so forth in advance of the demo.
During the demo, encourage committee members to ask questions and, if possible do some hands-on work.
After the demonstration, have a debriefing meeting to discuss likes, dislikes, strengths, weaknesses, and observations about the system. Appoint one of the members to take notes, organize them, and give each member a copy to review.
Now you're ready to look at the system functioning in a real-life environment. Don't send the entire committee to each actual agency demo; the agencies probably wouldn't like it, and it would be overkill on your part. Send one or two to each agency, and then go through the same debriefing drill.
Making the Decision
Take all of the findings and lay out the major items on a matrix, grid, or spreadsheet. Compare each system on an 'apples-to-apples basis.' List the strengths and weaknesses of each.
You should then be able to solicit proposals from each vendor that you've selected.
Notice that we haven't mentioned price yet. Even if you've selected only two serious candidates, request a proposal from the third one on the list.
Ask the vendors to provide a purchase or lease option. There are some advantages to using a vendor with an in-house leasing or financing facility, but that's not the most critical item to consider.
Once you get the proposal, review it and get any clarifications you need from the vendor. Tell the vendor that you won't make a decision until all proposals are in and all questions answered and comparisons made.
Any future contact between you and the vendor should be made by the vendor, unless you need a further point clarified.
Contact your CPA or tax adviser and determine the best way to approach the buying or leasing decision. Then negotiate. If vendors contact you, stay noncommittal but tell them they're 'in the game' and that negotiations are underway. Take no more action until they contact you again.
At this point, don't hesitate to ask for concessions, additions, etc. If you have heard the Roger Dawson tapes on negotiating, put his principles into practice. Aim for getting the concessions you want and for about three price reductions before you are through.
Be fully prepared to shelve the entire project for a short period. The key is not to want a particular system so much that you're willing to concede your negotiating position.
Other areas to consider when negotiating are the down payment required, length of the service agreement, on-site training time, training follow-up time, the future date when payments are to start, hardware items, added-charge software items to be included at no charge, and so forth.
One final tip: Consider the financial ramifications of offsetting expenses. For example, you might have current automation expenses. With the new system, you will have expenses as well, but they will only impact your budget by the amount that they exceed your current expenditures.
Once the process is complete, select the vendor and order the system.
Preparing for Installation
Depending on the type of system you buy, you will either have a central processing unit (CPU) or a server, which will need to be in one location. Also, cabling is a consideration. In many cases, new systems won't use the same cabling as the old one, which means that you'll be putting in cabling for the new system while trying to continue to do business. Normally, you will leave the old cabling in and install the new around it. The salvage value of old cable is generally not worth the cost of removal.
Probably the best way to handle this is to prepare a floor plan and locate workstations, printers, cable hook-ups, faxes, and other needed equipment. Once they are located on the drawing, use this as your working physical plant plan.
With software installation, consider two broad areas: 1) preparing for installation, and 2) loading your database on the system.
1. Preparing for installation: The vendor will normally send someone to install the system, test and run it, and possibly do some basic training, or have a trainer follow up shortly after installation.
Appoint a staff person (or two) as your automation 'guru.' This person should attend vendor-site training and then conduct basic training for the rest of your staff.
After off-site training, the vendor may send trainers to your agency to expand and focus the training. After this, the vendor should assist you with going 'live' on the system -- working with your own database.
Take advantage of every bit of training time available.
Be prepared when the trainers arrive, so that they can focus on problem solving and advanced applications. The worst thing you can do is not be prepared so that when the trainers arrive, they have to show you how to turn the machine on.
2. Loading your database on the system -- converting your data: This is a very important item, and it's expensive. Making a mistake or not thinking this out as carefully as you should can have a negative impact on your operation for a year or two.
There are three ways to load the database:
1. Convert data manually into the system.
This is the least desirable, since it means that all file data will have to be manually input, line by line.
One option is to start at a specific date and, as new business is written and renewals are processed, put them into the system. Once an account is entered, all subsequent changes would be done on the system.
2. Determine whether or not the data can be converted from your existing system to the new system.
Some vendors might be able to do this for you, but if they can't, they can direct you to a firm that specializes in this activity. If it is determined that the data can be converted, you need to know what is going to be converted. If line of business codes from the old system will be expanded and changed, you will have a problem with lines of business codes and the premiums applicable to those codes in the new system.
You will have to weigh the value of the data to be converted in relation to the cost to convert it and the cost of having it input instead.
3. The third option is a combination of both manually inputting and conversion, taking into account the points made above.
Post-Installation Training
Training must be ongoing. Set a regular schedule of training sessions to be conducted fairly frequently. As staff becomes more proficient on the system, they'll need less training time.
Consider a follow-up training session by the system vendor trainers. After you have operated for a month or two, having trainers return for a day or two might work wonders for your staff and productivity. Generally, they can focus on nagging problems, recognize system problems (yes, they will occur), and show the staff some refinements in the system.
Maximizing the Use of the System and Anticipating Future Needs
You didn't make the investment in time, money, and stress to end up not using the system to its maximum potential. As you and your staff become more proficient, focus on finding ways to use your automation system more effectively. Evaluate the data constantly and look for ways to measure, evaluate, and improve it.
Keep informed about improvements in automation. Read industry journals and magazines. Make the agency's appointed automation guru responsible for providing staff with current changes in systems. The vendor manuals might also offer suggestions for future improvements.
Automation is a wonderful medium through which we are able to collect the kind of information needed to manage methodically and efficiently!