On the Fast Track.

More agents are getting wired to the Internet to comply with the requirements of carriers.

Insurance companies invariably wave a carrot--not a stick--to prod agents who are behind the technology curve to catch up with the pack. Rather than tying technological know-how to higher commissions, the carriers tend to make it a condition for doing business in the first place.

While technological savvy doesn't seem to be lacking in larger agencies, it can sometimes be in short supply at smaller firms, industry observers say. When that happens, the carrier could walk.

"Some insurance companies won't make an appointment unless the smaller agency has the technology to conduct business via the kind of big system that the company is using," said James A. Masiello, chairman of the Strategic Independent Agents Alliance, an independent agents' network based in Swanzey, N.H. "Look at the State Farms, the Nationwides and all those major insurers. They have prepackaged programs. Their agents are absolutely required to use the technology that is available, and that's what makes it expedient for them."

Incentives Offered

For years, Masiello added, insurers have been encouraging independent agents to make greater use of technology by offering some choice incentives. In the mid-1980s, for example, a carrier presented Masiello with a computer accompanied by a request that he use it in his business, he said.

Madelyn Flannagan, vice president, education and research, of the Independent Insurance Agents of America Inc., agreed that carriers can draw from an array of incentives "to get agencies automated if they're not properly automated," she said.

Flannagan, whose organization represents more than 300,000 agents and agency employees nationwide, also said that she knows of companies "that are making pretty stringent connectivity requirements, but they're giving something like 18 months to meet those requirements. So you'll see companies that say, 'OK, in order to work with us online you need to have a T-1 line or you need to have broadband and you need to have all your work stations wired. And you need to do that within 18 months.'"

Most agencies rise to the challenge, she added. "I haven't heard one agent come back and say 'I can't do this,'" she said.

The IIAA is so interested in this topic that it has been conducting a technology study in recent months, querying 120 companies, a random sampling of agents and some consumers about Internet use. A key question in the survey asks insurers if they have dropped agents or changed the way they've dealt with agents because of an agent's lack of knowledge about technology, Flannagan said. At the same time, the researchers have been asking agents for their perceptions about insurers' approaches to technology

"We've also put the consumer piece in there to make sure the agents and companies are doing what the consumers want Online," Flannagan said.

The results of the survey are expected to be released in October in advance of the IIAA's annual meeting beginning Oct.27 in Hawaii, Flannagan said.

So far, Flannagan has found that carriers are usually willing to foot the bill to bring agents into the technology age--spending the time and energy and providing the software to make agents more technologically adept. This is "much more readily available even today than it was a year ago," she said. "The ability to buy those services and bring them into your agencies is much easier today."

Carriers "create the software," Masiello said. "All you have to do is plug into it. And what it does is allow you to be automated with that company for rating, for claims reporting. You write and bind a policy and it's almost seamless. And about the only paper that ever shows up is the policy itself."

Providing Solutions

One of the more active insurance companies on this front is Hartford Financial Services Group Inc., which has an e-commerce unit that offers technology assistance to agents across the country. Kim Cramer, a director in the e-commerce unit, heads the 1-year-old unit that is charged with helping Hartford's agents grow their business. Hartford's business technology solutions managers are veteran staff members in each of the company's 14 regional offices who spend most of their time providing high-tech solutions to agents in the field, she said.

"We provide Hartford agents and brokers with specialized expertise and local resources," she said. "We're there to help agents use technology to work more efficiently. We think that helps them be better positioned to grow and compete."

Her recent forays outside company headquarters have shown Cramer that use of the World Wide Web is accelerating among agents. "Two years ago, not everyone in every agency had the Internet," she said. "Now, we find usually everyone in the agency has Internet access and is using it frequently."

Access is one thing and astute use of this avenue is another. While some agents have embraced the Internet in many of their business transactions, others "don't really know how to use the Internet to attract" new clients, Cramer said.

Still, the IIAA, which reviews first and second-tier insurance company contracts for its member-agents, said that technology does not appear to play a big part in the commission picture, but other accomplishments do. "Preferred agents get a little bit different commission packages based on their production, based on their loss ratios, based on their longevity with the companies," Flannagan said.

One of the perks of Hartford's VIP program for its top agents is an internal spending account that amounts to crediting each agency with an allotment of money from which it can draw to pay for a number of agency improvement programs, including Web-site development, said Tyler Vartenigian, director of VIP Strategy and Management.

Instituted in 1986, the program offers rewards and recognition for agents' accomplishments with the company "What we really try to focus on with the VIP program is to find ways to continue to make the agencies successful with the Hartford," he said. Along with the spending account, the program offers an incentive bonus arrangement based on sales volume and profitability, plus an annual trip to a fir-flung locale that also gives agents high-level entree to the company s senior management.

Out of some 7,400 agencies that have contracted with Hartford, 225 had been admitted to the VIP program as of August 2001. To join the program, an agency has to have achieved a significant prearranged level of commercial lines or personal lines production with Hartford. The agency also must maintain an acceptable profitability level, Vartenigian said.

Raising the Bar

For its part, SIAA recognizes that agents need to use the technology that is available and requires this in its agreements with smaller agencies, Masiello said. For example, a captive agent who decides to convert to independent-agent status may start

Out with a small agency having only a couple hundred accounts, but is eager to make a commitment to it. That agent has "got to be automated," he said. "And that simply means all he needs to have is a computer, the Internet, a scanner and the software that's available, and basically it's an automated agency. So it's not much. And the whole idea is to be able to service customers and not to be pushing paper.

"We have certain criteria that we expect them to participate in relative to the technology if they are going to become a member of a Master Agency," Masiello said. SIAA's Master Agency is a distribution system involving a large retail agency of 10 to 30 employees. This operates as a wholesale unit for smaller member agencies, with up to nine employees. Agencies that opt to become strategic partners receive turnkey operations and systems training with the mission of building a regional distribution network in their own territories.

Full Automation

SIAA has what it calls an "electronic back office," which is a turnkey Internet-based management system and procedures designed for the Master Agencies, Masiello said. It is specifically aimed at letting the Master Agencies manage all aspects of their networks electronically, including accounting, placement, compliance reporting systems and procedures.

The Iroquois Insurance Group Inc., based in Olean, N.Y, tells agencies that want to join its network that "they pretty much have to be Web-enabled to work with us," said William "Twig" Branch, group president. "But they don't necessarily have to have an agency management system," he added. "We can pretty much work with all levels."

Branch said his network is finding that insurers' Internet applications are fairly easy to navigate.

"I think insurance companies are trying to make this much more intuitive," he said, "and, to a great extent, it's become easier to work with them."