Firing up the paper chase: the world of insurance is built on documents, and a river of paper runs through it. After years of cost-cutting in the soft market, that flood of paper represents one of the few areas that insurers have left to cut costs. That has traditional document-handling vendors, and new entrants, looking at an old problem as a source of new profits

While many industries produce hard, metal objects, from automobiles to airplanes, insurers and reinsurers produce paper--a lot of paper. For decades, insurers and reinsurers have looked for ways to cut down on the money they spend printing, handling and distributing paper. Stemming that flood of paper not only offers improved efficiency but also the potential for higher profits.

"We've seen dramatic shifts in the last year or two from an exclusive focus on cost-cutting--trying to get profitable--to where there is now a lot of emphasis (by insurers) on how to grow their business, albeit grow it profitably," says Neil Betteridge, director of marketing for document-handling company InSystems Corp.

"This is driving insurers to get new products to market quickly," he says. "That translates into them taking a much harder look at their document systems in terms of are they a help or a hindrance in bringing out enhanced or new products."

The new willingness to invest in new document-handling systems has newcomers and established vendors jockeying for position in a market that's suddenly heating up. Not surprisingly, this is creating a new mix of players in the market.

"All these companies have looked to broaden their suite of products--they've looked at it and said, 'Why are we only in this particular aspect of the document? Can we handle the document through its full life cycle from start to finish?'" says Neff Weiss, director of insurance products at content-management company Mobius Management Systems Inc.

Document-handling companies such as InSystems, Docucorp International Inc., Document Sciences Corp., Exstream Software Inc. and Group 1 Software Inc. have been seeing competition from content-management firms such as FileNet Corp., Hyland Software Inc., Mobius and Vignette Corp.

In addition, bigger technology players such as Adobe Systems Inc. and Hewlett-Packard Co. also have come into the market, although from a different perspective that more often has them striking partnerships with smaller niche firms.

"There's a slew of vendors in this space, and each one does certain things really well. Some are working very closely in partnership. Others are trying to address needs in adjacent markets," says Cindy Saccocia, senior analyst at the consulting firm Tower Group.

Adobe, for instance, is seeking to leverage the ubiquity in the business world of its Acrobat Reader software for creating and reading PDF documents, while Hewlett-Packard is relying on its technology prowess,

RELATED ARTICLE: Streamlined workflow spurs growth.

Columbia Insurance Group, which offers commercial, farm and personal lines of coverage through its network of independent insurance agents in 10 states, was growing rapidly and facing increased competition. To help sustain its growth, the Columbia, Mo.-based company sought to streamline and automate its workflow and publishing process.

"We spent almost a year researching what was out there in the marketplace to serve as our backbone," says Dennis Roth, Columbia's vice president of change management. "We had an overall goal that everything had to fit together. We didn't care which vendors or software we used, just so long as we didn't have to enter data more than once."

After months of research, Roth's internal task force selected Docucorp International for its one-source solution for publishing, archiving, imaging and document workflow needs. Docucorp's policy production technology provided Columbia with the ability to create, produce and distribute personalized policy documents.

By automating policy production, Columbia can better manage creation of policies and correspondence as well as enhance customer service. Columbia cut costs for materials, postage and mailing, and shortened its nightly printing cycle by using duplex laser printing and batch mailing. Because Columbia no longer needs to manually sort, fold, staple and stuff policy documents, insured and agent letters are mailed sooner.

All of Columbia's homeowner declarations, bureau and company forms were converted into an electronic format and stored in a document library system. Columbia employees are now able to view policy information from their desks and reprint declarations and invoices on demand to send to claims adjusters and agents. By archiving all policy information, Columbia saves the time previously devoted to maintaining paper files, and finding misfiled documents, and also saves the cost of storing paper files.

Columbia has already realized significant savings. Recently, the insurer needed to mail an additional notice that involved printing more than 50,000 letters for more than 46,000 envelopes, with some recipients receiving more than one letter. With the new automated system, Columbia estimated that it had realized a 98 percent reduction in postage, handling and envelope costs and an overall cost reduction of 71 percent.

"We're now utilizing 5 percent less people than we did when started the project, and I expect that percentage to increase," says Roth. "It's had a big impact. The majority of the labor savings is coming from the Docucorp software, and we expect that to continue as we utilize all the functionality." particularly in the document-printing area, to help companies manage the flow of data and documents on an enterprise level.

WRING PROFITS FROM PAPER

Now that insurers have wrung all the costs they can out of other areas, they're left with seeking ways to squeeze extra profits from excess paper.

"Eliminating paper, eliminating that manual work, eliminating the errors within a process are some of the few things that our customers have left to drive profit," says Nicole Kealey, senior product marketing manager in financial services for Adobe.

And there is still a lot of paper out there--from regulatory filings to policies and claims.

"Unfortunately, the paperless office is a myth," says Craig Weber, senior analyst at Celent Communications, a consulting firm. "It's not the cost of paper and ink--it's really the cost of handling those documents, touching them, mailing them, filing them, printing them. Insurers are drowning under paper, and they now get that pretty clearly."

On top of that, insurers and reinsurers have thousands of different forms to track, manage and keep updated. Kealey cited the case of one manager at an insurer who is in charge of overseeing 30,000 different forms.

"The best way to describe it is patchy automation," she says. "You might have the first couple steps automated, and a couple steps at the back end automated, but the middle is still people walking around the office with interoffice envelopes and paper." As they seek to stem the flow of paper throughout their business, insurers also have to deal with problems left by earlier moves to automate document handling. In many cases, different departments within a single insurer have bought or developed their own systems, and insurers now face the task of integrating or replacing those systems.

"The friction left over from legacy systems is keenly felt still," Weber says. "Most carriers have at least two or three--and sometimes many more--document systems in place."

Insurers also have to face the fact that the people who designed or maintained those old systems may now have retired or left the company altogether in earlier rounds of cost-cutting.

"What our clients are finding is that a considerable amount of time and money is being spent maintaining those systems and increasingly, they have less in-house expertise to handle this," says Jill Davidson, product manager for InSystems' Calligo software.

For its part, Hewlett-Packard sees those competing systems as an opportunity for both itself and for insurers.

"You can actually save costs now by collapsing the number of document systems the company has and integrating them and moving them into a central service that can be shared across all departments and even subsidiaries," says Richard Holling, director for the insurance industry for Hewlett-Packard.

WAY BEYOND DOCUMENTS

For insurers and reinsurers, getting a handle on the documents, both paper and electronic, within their business means they can improve customer service, speed up policy applications and introduce new products more quickly.

"The bottom line is that they are able to deliver better service, faster and cheaper," Kealey says.

For instance, insurers might face problems in customer service when callers have a question about a certain page of a document.

"To this very day many companies ... can't actually see the same identical document that the customer has holding in their hands," says Mobius' Weiss.

On top of the impetus for improvement demanded by their customers, insurers also have faced stepped-up regulation that makes it absolutely necessary to get a tighter rein on documents.

"We're starting to see now with customers a drive to be able capture, at any one time, everything that a customer would know--both in terms of structured data and in unstructured data. One of the reasons around that is ... being driven by the regulators both in Europe and in the United States," Holling says.

In addition to traditional paper-based documents, companies now have to face an enormous number of electronic documents such as e-mail, as well as the handling of audio and video content. That has led to the idea of enterprise content management.

"We've gone way beyond documents. Now we're in things like rich media, and we're in things like e-mails," Weiss says. "Content was a better way of describing all of the information--whether it's pure data that's living in tables on a database or a video file or a deposition that's on a Dictaphone," Weiss says.

As the document-handling market shakes out, however, it is unlikely that any one company will be able to take a dominant position because of the vast opportunity out there and because carriers select very specific, customized systems, Tower Group's Saccocia says.

"I don't think any one (company) is going to lead," Saccocia says. "There's too much opportunity for any one company to lead. Insurance companies tend to buy what works for them. I don't think insurance companies tend to follow the biggest deal maker, or who's licensed how many deals. That doesn't really matter to them. It's, 'Where am I going to get the right level of products and services for what it is that I need?'"

While the content may be changing, one thing remains constant: insurers and reinsurers are always looking for someone who understands the complex nature of their business.

Those technology vendors that can leverage their knowledge of the industry, or bring in the right expertise, stand the best chance of winning business in the insurance market.

"Frankly, it's never just about the technology and the tools, it's always the blend of people, process and technology," InSystems' Betteridge says.

MICHAEL FITZPATRICK writes frequently on technology issues for Risk & Insurance[R]. He can be reached at riskletters@lrp.com.

--William D. Barry is senior vice president of sales and marketing at Docucorp International

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