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In the insurance market, successful distributors adapt as quickly as their clients.
FORM, Nov. 1999In the mid-1980s, one of Jerre Creske's insurance clients purchased more than 30,000 printed forms. Now, it uses fewer than 3,000. That fact won't have document management pros dancing in the street, but distributors who stay ahead of the curve can remain profitable in the insurance industry. "This market is constantly changing," says Creske, president of Lyons Data Products, a distributorship in Dublin, Ohio. "In order to be successful, you have to be ready to change with it."
Large volumes and a wide variety of forms enticed many distributors to target insurance firms in the '70s and '80s. In recent years, however, the market has become more complex. Insurance companies were among the quickest to convert from multipart continuous forms to laser cut sheets, leading to a decrease in preprinted forms. "Let's put it this way," says Ben Harper, president of Professional Business Printing Inc., a distributorship based in Richmond, Va. "Anything an insurance company can do on its laser printer, it's going to do."
Also, many insurance firms-especially ones with regional and national headquarters-have in-house capabilities, complete with web presses, full binderies and DocuTechs™ for variable, on-demand printing. On-demand forms are increasingly important to customers in every market because they eliminate document storage and reduce printing costs. "If one word needs to be changed on an insurance policy," Creske asks, "a client is not going to want to throw away his entire inventory."
Changing on the Run
Insurance documents often need to be reworded or redesigned because state regulatory boards audit insurance companies frequently. Auditors check for compliance to regulations that dictate documents' sizes, designs and verbiage. The challenge for distributors is that regulations vary from state to state. The District of Columbia, for example, enacted a law earlier this year requiring insurance firms to print fraud warnings on applications for claim forms. A benefits statement in Texas may need to incorporate a different font than a similar statement in Idaho. (For details on each state's rules, visit the American Insurance Association's Web site and click on "State Insurance Commissioners.")
Five Web Sites to Use 
American Insurance Association site provides updates on financial services laws. Insurance Information Institute site answers frequently asked questions on personal insurance and provides industry statistics. Health Insurance Association of America site includes a scrolling update of news pertaining to the private health care industry. Society of Insurance Research site allows users to discuss insurance topics with researchers. The Certified Professional Insurance Agents Society site provides insight into topics important to end users. "Each time a law is passed or a rule is changed, a form needs to be updated," says Debra Romoser, account executive at Megabyte Express, a distributorship in Austin, Texas. "Because [one insurance client] has offices all over the country, we have to constantly be on our toes so we can provide the proper documents to our customers as quickly as possible. When that happens, it needs to be done very fast."
National Graphics Company had less than a week to update forms for a title insurance customer that was changing its state of incorporation. The client, which uses approximately 350 different forms, needed 25 essential documents updated and distributed by Aug. 1. Bob Langfield, vice president of administration for the Denver-based distributorship, learned about the situation on July 25. "It was quite a massive undertaking for everyone here," Langfield says. "They were chomping at the bit to get their legal people taken care of. It was like, 'Katie, bar the door. We have to get this stuff done now.' We were flexible enough to get it done on time, and it made them think highly of us."
Langfield says distributorships that succeed in the insurance market offer services not tackled by competitors. National Graphics Company, which is owned by Mail-Well, runs a pick-and-pack operation for more than 900 agents of one insurance client. When the customer realized the benefits of the distributorship's fulfillment and distribution capabilities, Langfield says, "they were thrilled. We had something that distinguished us from others who keep knocking on their door. Instead of taking bids, they got rid of a 10-person department and outsourced to us."
Changing Client Perceptions
Despite in-house capabilities, many insurance companies turn to distributors when they decide it's more cost-effective to buy printing than to produce it. Print shops mean labor, depreciation, storage, materials and maintenance costs, Harper says, "and that's why it's not the panacea everybody thinks it is. Especially because this market is so cost-conscious, a lot of companies have sharpened their pencils, looked at it and said, 'Forget it. We can let someone else do this for far cheaper.'"It makes sense to explain to insurance clients how they can save money. Distributors say purchasing departments in the insurance industry can be conservative and controlling. The reason, perhaps, is that print buying is something these companies can control. Insurance firms' income can take a downward spiral when hurricanes, tornadoes and other unexpected catastrophes become prevalent. According to Insurance Services Office Inc. and the National Association of Independent Insurers, net income of U.S. property and casualty insurers dropped 16.1 percent in 1998, largely due to Hurricane Georges. In a recent survey of more than 300 insurers, 91 percent expected the industry to be less profitable in 1999 than it was last year.
"Insurance companies are always looking for ways to save a buck," says Michael Luckett, owner of Luckett Communication Papers, a distributorship in Columbus, Ohio. Because many clients think they can buy more efficiently from direct-sellers, Luckett says, it's critical for distributors to tout their ability to adapt. "I've been able to stay in insurance accounts for two reasons," he says. "The first is that I can guarantee competitive pricing. More importantly, I can move my business with my customers'. I can get products from any source nationwide, and that's especially critical in the insurance industry because so many things change in this market."
An Industry of Ups and Downs
Insurance firms' income is largely affected by losses due to catastrophes. Distributors say one reason print buyers in the market seem conservative is that many purchasing departments tightly administer things they can control. Here is a look at insurance companies' total catastrophe losses (in billions of dollars) for the past 10 years, plus a rundown of the 10 costliest U.S. catastrophes:
10 Costliest Insured Events, United States
Event
DateInsured Loss
(billions)Hurricane Andrew August 1992 $15.5 Northridge, Calif., earthquake January 1994 12.5 Hurricane Hugo September 1989 4.2 Hurricane Georges September 1998 2.9 Hurricane Opal October 1995 2.1 20-state winter storm March 1993 1.8 Oakland, Calif., fire October 1991 1.7 Hurricane Fran September 1996 1.6 Hurricane Iniki September 1992 1.6 Tornadoes in 16 states May 1999 1.5
Luckett's largest insurance client has a document services division with Xerox, IBM and Océ equipment, as well as a web press. In order to remain in the account, he expanded his product offerings to include thermal labels and roll products. To help the customer track shipments, Luckett provides 4 x 3-inch labels with two Code 39 bar codes, a human-readable number and permanent adhesive that adheres to corrugated boxes. "You have to be diverse in the insurance industry," Luckett says, "or they'll find someone else who can be."
When Luckett's client wanted to convert its agents' expense reports to e-forms, it needed a way to include paper receipts in the process. Luckett proposed a solution: He could have an envelope manufacturer produce custom envelopes, ship them to a business forms plant to add bar codes on the bottom left corners, then ship the envelopes back to the client. When agents complete electronic expense reports, they can key in human-readable numbers from the bar codes and place receipts in the envelopes to send to the home office. "It was the most viable solution for the customer," Luckett says. "It showed just how flexible we can be."
Changing Corporate Images
Just as many companies in the document management industry want to be known as printed communications firms instead of forms distributors, companies in the insurance industry want to be known as financial services firms instead of, say, auto insurers. William T. Hadley, executive director of the Insurance Marketing Communications Association, says insurance companies are trying to enhance their images by using more commercial printing, mulitpage booklets, multicolor brochures, folders and binders. ID cards and direct mail are also big businesses in the niche.People who buy insurance purchase an intangible product, often represented only by a claims statement and ID card or a declaration page. Company colors, slogans and images such as The Hartford's deer or The Travelers' umbrella, are sometimes all that people identify with the insurer. Anyone can place variable data on a white sheet, distributors say, but that doesn't tell anyone who you are. "Insurance companies have lost a little bit of identity," Creske says. "Everything seems to be black and white. Everybody's insurance form looks like everybody else's. Smart distributors are taking cut sheets and selling them with some personalization."
Both types of insurance firms—ones that sell directly through commissioned sales forces and ones that work with independent agents—need marketing materials. Creske sells 4-color brochures, folders, letterhead and envelopes to an insurer that uses agents. "The more help those agents get with marketing materials, the more business they can place for the company," he says.
Creske developed a system in which agents fax a form directly to Lyons Data Products when they need updated materials. The distributorship typesets and imprints the forms on its own equipment. The forms are sent to the client's purchasing department. Creske says he receives between 14 and 20 orders a week this way. "What it does is take paperwork out of purchasing's hands," he says. "The more you can do that, the better off you'll be."
Romoser sells an array of commercial printing to a life and health insurer, but says most distributorships aren't immediately considered for 4-color work because insurance firms are more apt to use graphics studios or art houses. "We know our job is to make the insurance client's stress level go down," Romoser says. "Our ability to be diverse and our commitment to quick turnarounds has enabled us to do that."
Megabyte Express recently provided the life and health insurer with 1,000 training manuals. The manuals included a 4-color cover with a marble background and illustrations of statues. "Clients in the insurance industry want to know how adaptable their vendors are," Romoser says. "When they need a rush order, or when they need to change a form because state regulations call for it, we have a chance to show customers how customer-oriented and flexible we can be."
Darin Painter is assistant managing editor of FORM Magazine.
Inside Insurance Minds
The Insurance Information Institute recently conducted a survey of more than 300 property and casualty insurance and reinsurance firms.
Here are their responses to four questions:
QuestionPercent
"Yes"Compared with 1998, do you expect the industry to be more profitable in 1999? 9 Will we see more consolidation among primary insurers in 1999? 92 Will the Internet pose a major challenge to the traditional insurance distribution system over the next five years? 61 Will insurers be successful in marketing banking services? 31 Online Ordering System Takes Off for Distributor
Ben Harper's largest insurance client wanted its approximately 70 branches to be able to order printed products online. "I didn't back away from the challenge," says Harper, president of Professional Business Printing Inc., a distributorship based in Richmond, Va. "Instead, I took advantage of technology and used a hands-on approach to help the customer succeed."Harper gave one of the insurance firm's decision-makers power to decide which system the distributorship implemented. After meeting with several companies, the client selected TopForm® Software, Norcross, Ga. Approximately four months later, the insurance firm's branches began ordering products online from Professional Business Printing.
Employees at the distributorship check online orders at 10:30 a.m. and 3 p.m. daily. The insurance firm's branches can order hundreds of stock and custom documents online and also proof them. Harper says most branches use the system to order high-volume stock products, such as remittance forms, routing slips and business expense envelopes, or documents that must be reworded or redesigned frequently. In the insurance industry, laws that dictate documents' sizes, designs and verbiage change constantly and vary from state to state. "You have to be able to provide complete inventory management if you're a distributor today," Harper says. "This system helps us do that."
It also simplifies billing for the client. Prior to ordering online, branches type in their department code. Instead of sending branches separate bills each month, Harper gives one summary bill to the firm's headquarters. "The customer is happy because now they have less hassle and headache," Harper says.
Approximately 30 percent of Professional Business Printing's orders now come through a modem. "One thing that became obvious to us is that an online ordering system only works from a customer's perspective when it is driven from the top," Harper says. "People are creatures of habit. Some don't want to mess with the software unless they're told they have to." Harper has flown to Philadelphia, Washington, Memphis, Tenn., and other cities to show the client's office administrators how to maximize the benefits of online ordering. "It has absolutely been worth it," he says. "Our business has grown exponentially."
The Power of E-forms
Distributors say few industries have embraced e-forms as openly as insurance carriers, which increasingly seek to streamline operations to improve profitability.With e-forms, insurance firms can revise documents quickly to accommodate ever-changing regulations. The same basic design can be used for forms whose text varies to meet differing state laws. Sales representatives like them because all information, including a policy holder's signature, can be captured in laptop computers and downloaded by modem to a corporate computer. E-forms can be programmed to transfer common information, such as a policy holder's name, address and account number, to multiple documents.
Distributors say the key to installing e-forms in the insurance market is designing and creating multiple electronic versions of the same form because many must be printed on demand, while others may be put on the Web or faxed to agents or customers. Because of this and the insurance industry's need to update forms as regulations change, distributors who offer forms management often create electronic libraries for their clients.
