Producing results: producer lifecycle management can improve recruiting, contracting and appointing agents.

Key Points

* The largest share of the property/casualty and life/health segments' IT budget will be devoted to agent/distributor initiatives, such as producer lifecycle management.

* Web-based recruitment and appointment solutions incorporate three principal elements that lead to faster generation of revenue while cutting costs: electronic forms, work flow control and electronic signatures.

Some successful producers are frustrated with their carrier partners. The most effective producers find the paper-bound system of contracting and appointing far too slow. Carriers are beginning to realize just how much revenue they risk if their agents perceive them as unresponsive, indifferent or inflexible.

Carriers are competing for two kinds of customers: the policyholder and the agent/producer. Both are crucial to top-line and bottom-line results.

Over the years, carriers have focused on numerous ways to reach and better serve their policyholders. However, until recently, many have never inspected closely what the producer experiences when working with them. This is true despite the fact that attracting top producers and signing them up quickly can provide a vital competitive advantage.

Some executives have concluded that they've been recruiting and appointing producers ineffectively, using slow, impersonal, paper-based methods that cross departmental lines. Some of these inefficiencies might not be tolerated in other segments of financial services.

Recruiting and retention challenges add complexity to an already competitive environment where carriers must expand their producer channels. For example, one carrier recently said, "For every five producers we recruit, we ultimately contract only one, and for every five that get started, we will lose three to lack of performance or other attrition." Delays in bringing the best producers on board mean the carrier is losing policy revenue those producers would generate during the weeks or even months they are waiting for paperwork to creep through the system. The producers themselves are becoming far less tolerant of this paper chase and simply move on to carriers who make it possible for them to sell sooner.

For example, a packet of recruiting documents may contain as many as 50 pages. Once the producer fills out this array of applications, regulatory forms and other paperwork, the packet is sent to the carrier's district or regional office along with packets from hundreds of other prospective producers. If the staff finds errors, then it's back to the producer for corrections. Over time, faxes become barely legible, and shipping charges keep mounting. Ultimately, the packet makes its way to the home office for appointment processing, where--for successful candidates--the carrier manually enters the information into a compliance database and passes an acknowledgment down the line.

Producers also report they are handed off from department to department, introducing the potential for more errors and delays. It's not surprising, therefore, that producers have become less patient in their selection of carriers. It's tough to boost revenue if the distribution team lacks enthusiasm or suffers eroding commitment.

The best producers have considerable leverage. They can sell products from any of several carriers. In effect, a carrier competes for "shelf space" in the minds of its producers. The preferred position is characterized by high awareness and strong satisfaction where the agent will push forward a particular company's product first. The key to having satisfied producers is to make life easier for them.

To complicate the challenge, carriers often have no straightforward way to determine where recruiting bottlenecks occur or to measure the overall effectiveness of each step in their recruiting operations. The producer's information is normally stored in commission systems, contracting systems or spreadsheets--none of which was designed with the entire lifecycle in mind. The paper pile keeps growing.

Fixing the problem may start with an executive declaration along these lines: "We will do the best job of taking care of our producers. We will be the firm they prefer to work with."

Reflecting this attitude, one major life company keeps detailed metrics on how well it responds to questions and problems from producers. It publishes its goals and results for all, including agents, to see. Speed of response is the competitive edge and a source of great internal pride.

Another large carrier provides a single point of contact for producers during the entire process.

Some of the most impressive improvements have been made by carriers who have turned to Web-based solutions. These methods can dramatically improve on the tedious and error-filled paper-based recruitment process. More importantly, they enable carriers to manage the entire producer lifecycle, from recruitment through appointment, license renewal, continuing education, address changes, all the way to the point of termination. This new approach is called "producer lifecycle management," or PLM.

Celent LLC estimates that total insurance information technology spending devoted to e-business will be $1.6 billion and likely will grow 5% annually for the next two years. Not surprisingly, in both the property/casualty and life/health segments, the largest share of the IT budget will be devoted to agent/distributor initiatives, such as PLM.

With electronic PLM, the carrier gains even better control and insights about the producer lifecycle. Perhaps the most significant opportunity offered by electronic PLM is the potential for completing the process in a fraction of the time, while enforcing strict adherence to a specific work flow and eliminating errors.

Web-based recruitment and appointment solutions incorporate three principal elements that lead to faster generation of revenue while driving costs out of the process: electronic forms, work flow control and electronic signatures.

Online forms can replace all paper documents. Producers can complete these forms in just a few minutes online and e-mail them to the carrier in seconds. The carrier receives an integrated set of electronic documents that can be easily managed. The time and costs of shipping and faxing are virtually eliminated. The forms themselves can retain the exact look of the carrier's paper documents, but they are completed securely over the Web. Repetitive information such as an address can populate many different documents automatically.

With manual approaches, it is difficult to handle documents in precisely the correct order, moving from location to location in the proper sequence, or work flow. The electronic process ensures every document moves to its proper location, but only after every field is complete, eliminating the need to return documents to the producer to complete missed steps. Furthermore, the work flow is tracked and recorded every step of the way, producing an audit trail of when a document was sent, received, signed and delivered at each phase of the process and by whom.

Another key component of electronic PLM is the use of digital or electronic signatures. They offer producers, recruiters, agent coordinators and the carrier marketing office a way to "sign" documents online without needing to print, fax or mail them. Decision makers can share a document packet electronically across the entire range of approval steps without converting it to paper. Coupled with e-mail, electronic signatures remove the great majority of barriers to rapid appointments and licensing. Digital signatures may take the form of PIN, mousepen, digipad, voice or click sign.

Web-based recruitment and appointment can reduce the entire application and approval process from weeks or months to a single day. Since all the data provided by each producer is maintained in electronic form, the same information can be shared with other internal applications with no need to manually re-enter the data. Access to online recruitment forms even can be provided through the carrier's own Web site.

Online solutions enable carriers to measure their effectiveness, see how rapidly they are responding, evaluate how well they are attracting the best producers, and identify bottlenecks so they can be resolved quickly. Using these metrics and the increased visibility of the process, carriers can reduce their costs and also simplify the way they work.

In a research study conducted last year, The San Francisco Consulting Group found that most carriers initially perceived the benefits of an automated solution to be in cost reduction. As they dug into it however, they discovered the real payoff was in increased revenue, a far more compelling benefit.

There are at least two growth drivers. First, new producers start selling sooner. Effective PLM reduces the drop-out rate of producers and creates a strong first impression. For every day the process is shortened across the entire population of recruits, revenues could be impacted by millions of dollars. Second, PLM can contribute to the retention of the best agents long-term.

PLM brings other advantages as well. For instance, it helps ensure that the agent continues to focus on sales without unnecessary administrative interruptions such as tracking their continuing education credits. Similarly, it informs producers of pending license renewals to be certain they can continue issuing new business without disruption.

In the end, PLM makes everyone happier. The carrier eliminates costs and gains a strategic advantage by bringing the best producers on board earlier. The producers or their agencies encounter fewer hassles, get started sooner and gain a most favorable first impression about the carrier.

Matthew Josefowicz of Celent, commenting on a recent study, said it "showed that service, support and technology narrowly edge out price, product and commissions as the dominant factors in agent choices of generally preferred carriers."

Because of their ability to improve relationships between carriers and prospective producers, online operations can reshape the industry. As carriers and agencies improve their processes for growing producer channels, PLM solutions will become the strategic delivery platform.

Starting six years ago, the shift from paper to electronic forms revolutionized how carriers submitted appointments to state regulators. This shift was primarily motivated by reducing costs. Now the same opportunity has grown to encompass the entire producer lifecycle. Higher revenue and a competitive edge are the payoff.

Contributor Robert A. Nero is president and chief executive officer of Sircon Corp.