Photograph by Jim King
The pastoral setting of Lancaster County Pennsylvania Dutch country belies one locally based carrier's commitment to steering its agents toward Y2K compliance.
From the rural farmlands of Pennsylvania to a board room overlooking downtown Seattle, January 1, 2000, is a date that no one can postpone.
While each independent agency must ultimately develop its own solution to the Y2K puzzle, getting help can only make things easier. In this article we hope to make it easier for Rough Notes readers by looking at some steps already taken as well as plans underway in a variety of agencies.
The agencies we talked to for this article represent carriers that have taken the lead in assisting their agents. One carrier is Goodville Mutual, a $23 million A-rated P&C company with its office in rural New Holland, Pennsylvania. GMCC writes personal, light commercial, church and farm accounts through independent agents in nine states. The other carrier is the recently merged Safeco/American States operation. Based in Seattle, Washington, Safeco is a $4 billion, A+-rated P&C company.
Agent concerns about the Y2K problem come in all shapes and sizes, from large multi-million dollar revenue agencies with multiple agency automation systems and sophisticated users with a variety of needs to small agencies with a single PC.
The agents we spoke with for this article expressed four areas of concern with respect to the ability of their own agency computer systems to meet the Y2K challenge:
1. Their agency automation systems (and other software)
2. Their computer hardware
3. Other computerized systems in use in their agency
4. That those they exchange data with are Y2K-compliant
There has been a considerable amount of activity at the industry level in dealing with this problem. Insurance companies, agency automation system vendors and consultants have all been working to help put this problem in better perspective for independent insurance agents. In fact, the IIAA has launched a massive effort called Countdown 2000. It has pulled together more than 30 independent agency system companies--providing individual Countdown 2000 kits to more than 35,000 agencies. In addition, consultants have been crisscrossing the country--and companies have been working with their agents, often providing seminars to help them gain a better understanding of the Y2K issue.
Goodville Mutual contracted with consulting firm Arthur Andersen to conduct Y2K seminars for Goodville agents. Goodville CEO Herman Bontrager explained why the company has given leadership to this area: "We are a small company. We enjoy a special relationship with the 100 independent agencies that represent us. Out of our close working contacts, especially in strategic planning, we heard a clear message from agents, 'We need help.' With Y2K, the biggest hurdle is obtaining clear and accurate information. In 1997 we began sending Y2K information. We contacted the IIAA to obtain their excellent Countdown 2000 materials to send to our agencies. Early in 1998 we initiated these seminars. More recently we have made available the PIA's Year 2000 Survival Manual. To assure momentum in readiness planning, Y2K is now part of our regular discussions with agency principals about our agency-company agreement."
Do agents really need all of this information to deal with the problem? We asked several to find out.
When asked about the value of the Goodville Mutual seminar she attended, Renee Fjelsted, president of Gordy Insurance Agency, Inc., an agency in Milton, Delaware said: "The seminar was excellent. We had professionals who knew what they were talking about. They covered everything you could think about in terms of problem areas and how to deal with them. It gave me the ability to go back to the office and know--this is where I'm going to start and this is what I need to do. We put together a plan, got everything prepared and we're ready to go. This includes sending letters out to the vendors that we deal with."
While it is clearly possible to achieve success in dealing with Y2K, for many, the road to compliance has taken some unexpected twists and turns. When it comes to looking at an agency's computer hardware, Goodville agent Ralph Clemmer, CPCU, president of Evans, Hauseman & Richard, Inc., an agency in Pottstown, Pennsylvania, said: "I would recommend to agents that they check every single piece of hardware. For example, all of our workstations have been upgraded--but we have a comm. server, fax server and our e-mail. When we set those up, we took the oldest computers we had and used them. Now we realize that while it's nice to use an old computer, we may not be able to keep them because they're not Y2K compliant."
Goodville Mutual's office, above, was one of several Pennsylvania sites for the company's Y2K preparedness seminars for its agents conducted by Arthur Andersen. GMCC traces its strong partnership with agents back to when Mennonite business and community leaders chartered Goodville Mutual Casualty Company in 1926. The company's Farm Cover program targets family farms operating in three states. In 1998, farm business was the fastest growing line for Goodville.
Equipment concerns don't end with agency automation. Dennis Zubler, CIC, principal of the Hornafius Insurance Agency, Inc., an agency in Elizabethtown, Pennsylvania, made the point about checking other computerized equipment in the agency: "We were fairly fortunate in that we had replaced and upgraded a number of computers not long ago. But Goodville Mutual's seminar helped me think about other equipment I needed to check out--such as the fax, the copier and the phone system. The meeting stressed the fact that you need to take a look around your agency and see what you're overlooking that may eventually be a problem. Most of our equipment checked out, but we did have the unexpected expense of installing a new phone system."
While dealing with Y2K is an on-going problem for agents, those taking the necessary steps are finding a certain level of confidence in the future as Barry Layman, CIC, president of the Colony Insurance Agency, Inc., in Newport News, Virginia, explains: "We read the 'Big I' white paper last year. That first got our attention. Goodville was the company that formally introduced us to the problem and helped us put a plan in motion. Early on in 1998 we went through a major hardware upgrade and we've upgraded our agency automation system. We're still working to make sure that all our vendors are Year 2000 compliant--going through the process of sending out letters and getting confirmations. While the expense was more than I bargained for, it was worth it. I'm now confident that we have the network, hardware and software in place to take us into the year 2000."
In addition to helping agencies assess their readiness needs, Goodville has clarified the coverage issues and implemented endorsements as needed. Goodville has also informed its agencies and policyholders of the company's Y2K readiness plan.
While some aspects of the problem might be difficult to fully understand, one thing is perfectly clear: Y2K is an equal opportunity challenge.
We have already seen that smaller agencies value the assistance they receive in exploring the more hidden areas of technology.
But while they may have more resources at their disposal, larger agencies often have larger problems in dealing with Y2K. In preparing this article we also had an opportunity to participate in an agent round table discussion hosted by Safeco in Seattle. Following its recent merger with American States, Safeco's agency count has increased to more than 8,500 agencies of all sizes across the entire country. Safeco is a leading participant in IIAA's Countdown 2000 program--getting the word out to all their agents--large and small.
In the words of Lance Cornell, Safeco vice president for P&C Marketing: "This is all part of a company-wide effort to be as straightforward and as helpful as possible with respect to Y2K. We have been very clear with respect to our own internal efforts. We have also listened to our agents and have provided them complete disclosure on the coverage issue. They know exactly what to expect."
Safeco's Seattle, Washington, headquarters was the site of a Y2K readiness round table discussion that brought together representatives from a number of large agencies from the vicinity. Safeco continues to monitor vendors and service providers to ensure Year 2000 readiness and compatibility. The company also has developed a checklist to help agents assess their systems and decide where to direct their Year 2000 automation readiness efforts.
Safeco agents participating in the round table agreed. Here is the way Glen Williams with The Unity Group Agency put it: "Safeco told us in August policy by policy what coverages do or do not apply, what the exclusions are and exactly what endorsements are going to be attached. They've done an excellent job in laying it out so simply. They are way ahead of others and it makes a big difference for us."
The Safeco round table participants represented large agencies in the Seattle, Washington, area. In addition to Glen Williams, The Unity Group was also represented by Robb Dale. Bonnie Reyes spoke on behalf of Parker Smith & Feek. Jan Allen was the representative for Sedgwick of Washington and Sue Knobeloch participated on behalf of Bratrud Middleton.
In a wide-ranging discussion, these agents talked about the scope of the Y2K problem with respect to their agency automation. They also addressed some of the broader aspects of Y2K. The following are excerpts:
Sue Knobeloch: "We started on this several years ago. At the time we were in the process of changing agency automation systems. So, naturally, we were looking only at systems that were Y2K compatible. I'm glad we made the change when we did since it put us well ahead of the game. Right now we're focusing on download and the carriers--making certain it all works. While we're in good shape, it's been an expensive project. Our total anticipated cost is in the neighborhood of $550,000."
Glen Williams: "Our agency was already on an upgrade path so we're on the other extreme. While we're not spending any extra money for the upgrade itself, we are expending a good deal of 'people money' on the problem. Even though I know it's completely impractical, there are times when I think about all those really small agents and how smart they were to stay with paper."
Jan Allen: "In addition to the actual cost we've incurred, I often think about the indirect costs--what our programmers (working out of Memphis) can't get done because they're working on Y2K. Specific ways we could be more efficient--but can't. We just have to wait. This is important for a large brokerage and for the insurance carriers as well."
Robb Dale: "My biggest surprise (and frustration) with Y2K is that there are no clear-cut answers about anything. Nobody will commit. I understand the reasons why, but you can't get anybody to say 'Yes, it will work,' or 'No, it's not going to work.' That's frustrating. There isn't any cookie cutter approach to dealing with this issue."
Bonnie Reyes: "In addition to non-committal answers from everyone there are the questions that keep popping up. One person in our office spends time collecting all the information--both internal and client. It's like wrestling with cotton candy. Each day we plug away at it, cross something off the list and then re-prioritize as new issues come up."
Jan Allen: "In our office we've had a big effort with respect to our clients. We've sent out information, had meetings. We see positive implications in all of this. Every time you can proactively contact your clients about something that's foremost in their minds, it's a plus."
Glen Williams: "I think of this as being similar to a risk management issue and look at it from that standpoint. First for your agency, but then go out and look at it that way for your own customers. You're going to them on more of a consultative basis. You're not trying to sell them something, but saying 'Here's an exposure you might have, and here are some alternatives you have--and they don't necessarily involve insurance.'"
Robb Dale: "There is so much written about Y2K. Yet we still don't know whether it's going to be the doomsday some people say it is or really just a non-event. Looking at it realistically though, we are the ones who must take steps to make sure that it is a non-event. We really have no choice but to keep at it."
Sue Knobeloch: "If there are any agents out there who have yet to take this seriously, my message is simple: Take your head out of the sand! Work with carriers and vendors for opportunities to create solutions. The more you work together, the easier the problems are to solve."
The total scope of the Year 2000 computer problem is unknown. While estimates of its effect vary widely, one thing is certain: To minimize its effect, action must be taken. Most independent agents have limited resources and limited time to address computer problems. When agencies purchased computer systems, they did so to make their lives easier and more manageable--not more difficult and complicated. Unfortunately, "the Year 2000 computer bug" is an apt description of the problem agents are dealing with. Like any kind of "bug" it can be hard to find and even more difficult to get rid of. But the problems can be solved. As the agents we talked with for this article have shown, knowledge, persistence and the necessary resources are effective weapons against the Year 2000 computer bug. *
The author
Bill Jenkins has worked extensively with independent agents for the past 13 years in the areas of marketing, advertising, communication and technology. As an IIAA consultant he helped create and implement their Countdown 2000 effort and is the director of IIAA's Agents Council for Technology.
Safeco's Year 2000 preparation effort encompasses the operations of the property and casualty insurance companies, life insurance companies, mutual funds, asset management and financial services companies, and other subsidiaries including the American States family of companies. As the new millennium approaches, Safeco anticipates it will be Year 2000 ready well in advance and the transition will be smooth and efficient.
Safeco's Year 2000 project began in late 1994 with a comprehensive plan and assignment of key personnel to coordinate the project, timeline and budget. The company anticipates that 90% of the applications tracked will be Year 2000 ready by January 1999.
More than $6.4 million has been expended on Year 2000 remediation efforts to date. Another $600,000 will be spent to complete coding, testing and implementation. In addition, in the same timeframe, Safeco will spend about $10 million to replace or significantly upgrade crucial systems for other business reasons, but which will incidentally make them Year 2000 ready.
Safeco has developed a procedure to specifically track and report on those few critical systems--whether Safeco or vendor supplied--that are not yet Year 2000 ready. The last mission-critical system is scheduled to be ready in August 1999.
Safeco has a core Year 2000 team in place, consisting of:
* Two enterprise-wide Year 2000 project coordinators who administer overall activities, review progress and periodically report to senior management. That information is summarized quarterly for the Board of Directors.
* Designated Year 2000 leads in all information systems departments.
* Year 2000 representatives in all major branch and regional offices to identify non-mainframe issues and help expedite the communications process.
* Representatives from corporate legal, public relations and other functional specialties as needed.
Insurance coverage issues surrounding Year 2000 risks of policyholders have been analyzed and communicated to agents. Safeco has decided to use clarifying endorsements on all commercial property policies and to sparingly use exclusionary language on commercial liability policies.
Safeco continues to identify and survey critical vendors and service providers to determine their Year 2000 status. The company intends to work with them as necessary to ensure mutual Year 2000 readiness and compatibility.
Safeco has developed a checklist to help independent agents assess their systems and decide where to direct their Year 2000 automation readiness efforts. This was first published in the May/June issue of the Safeco Agent magazine. The checklist was also included in the IIAA Countdown 2000 mailing to all Safeco agents.
Business continuity plans for Year 2000 contingencies are being prepared.
Safeco is looking forward to the next century and intends to provide outstanding financial services for the next 100 years.
For more information contact Jeff Moorman, Year 2000 coordinator, (206) 545-5017.
©COPYRIGHT: The Rough Notes Magazine, 1999