GeneraLife manages 3,000 people with a staff of 14 and some help from the Web
I had never considered the insurance industry a hotbed of technological innovation, so when I first heard about GeneraLife Insurance Co. of America, it was a revelation.
Housed in a modest office on the campus of Southern Illinois University, in Edwardsville, Ill., GeneraLife is far removed--both physically and culturally--from Silicon Valley. From those modest quarters, CEO and founder Michael Conley and his staff of 13 (some of them students) manage more than 3,000 independent insurance agents. Their only help: a couple of ISDN lines, a client/server network, some sophisticated built-from-scratch software, and the Internet.
GeneraLife bears little family resemblance to its corporate parent, General American Life Insurance Co., based in St. Louis. The start-up grew out of a challenge General American posed to Conley four years ago, when the company was trying to resolve conflicts between its in-house sales force and a battalion of independent agents. Calculating that some marriages can be saved only by separation, General American decided to spin off its independent-brokerage business into a new company. Conley, who at the time was General American's vice-president of brokerage sales, would run the start-up, management proposed. And he would run it cheaply.
General American's choice of Conley clearly made sense. Speaking with him at length last summer, I was struck both by his understanding of the big picture and by his embrace of big--even radical--change. I was also surprised that a 21-year insurance-industry veteran was so open to and knowledgeable about technology-based businesses.
Back in 1994 Conley was already devouring everything he could find about virtual companies and this thing called "the Internet." He saw a way not only to cut costs but also to differentiate GeneraLife from its low-cost competitors. Conley reasoned this way: 80% of an insurance company's costs are typically tied up in things like buildings and labor. By operating chiefly on the Web, he believed, GeneraLife could slash those costs to 20%.
Conley's plan for reducing fixed costs turned on two strategies: outsourcing and automation. He began by identifying five functions that he considered core to the business: marketing, operations and compliance monitoring, technological direction, underwriting, and finance. GeneraLife would keep those things in-house. Everything else--from operating Web sites to handling payroll--would be outsourced. In addition all in-house functions would be heavily automated, allowing GeneraLife to do with 14 people what another company might need hundreds to accomplish.
Most of the virtual managers I know never quite grasp that computers are no substitute for human interaction. Not Conley. Even while founding a company on technology, he recognized that the most effective sales agents--particularly for a product as personal as life insurance--are made of flesh and blood, not ones and zeroes. So the sales model he created was a hybrid. An insurance agent contacts the customer and closes the deal; then the customer--or the agent with the customer standing at his or her shoulder--goes to GeneraLife's Web site and completes the enrollment form. Once that information is keyed in, it is immediately available to all relevant departments, which allows GeneraLife to rapidly administer the new policy.
But putting the paperwork on-line wasn't enough; Conley also needed to handle a huge sales force spread across 41 states with the barest wisp of a staff. To do that he needed a mechanism that would permit agents, whenever possible, to help themselves to up-to-date information. Since efficiency is technology's strong suit, Conley decided that recruitment and management would also take place almost exclusively on the Web.
Insurance companies have a long history of automating existing procedures, but GeneraLife was in the enviable position of having no existing procedures to automate. Despite the pressure to ramp up quickly, Conley resisted the temptation to fall back on General American's systems and processes and instead started with a blank slate. He determined the optimal way to do such things as register an agent or enroll a policyholder and then gave life to those best practices by custom designing new software.
I told Conley that his plan sounded risky to me. I've been involved in plenty of "from scratch" software projects, and I know that their track records resemble those of Hollywood movies in terms of budget overruns and blown deadlines. But GeneraLife managed to sidestep the pitfalls by being extremely careful in its choice of consultants and contractors. Conley and his team spent three months interviewing dozens of candidates for the job before hiring five companies to design and deliver the Web-based customer-enrollment and policy-processing systems that would form the heart of the new business. They then subjected those contractors to four weeks of intensive training in the insurance business and in the specific processes GeneraLife planned to automate. As a result the enrollment system was completed in just over six months.
Conley also insisted that the vendors should be willing to work without a fully fleshed-out design in place. That requirement was practical: GeneraLife was creating something new in the industry, so it had no blueprint to guide it. But the mandate was also philosophical--after all, you can't be virtual if you're not flexible. Conley was ready to change course if something didn't work, and he needed contractors that were willing to do the same. Consequently, the company relied heavily on rapid prototyping--for example, experimenting with a variety of user interfaces until it came up with one that agents and customers could easily understand.
On November 20, 1995, GeneraLife opened its nonphysical doors at www.generalife.com. The benefits of the virtual model were felt immediately. For example, it took the company only 9 days to deliver its first policy, compared with the industry standard of 35 to 90 days, and since that time the turnaround has only gotten faster. And while other insurance companies certify agents by mailing them a three-ring binder's worth of paper forms, Genera-Life requires only one form, which is available on the Web site. As a result the certification process now takes hours instead of days or weeks, and the company saves significantly on paper.
After agents have joined the GeneraLife fold, they continue to enjoy the benefits of virtual management. For example, traditional insurance companies run weekly batch programs to provide status snapshots of each agent's customers; by the time that report shows up in the agent's mail it's pretty stale. GeneraLife, on the other hand, posts daily Web reports that provide benchmarks allowing the salespeople to assess their performance. Agents signing up new clients or selling new policies to existing clients can go on-line and check on the status of a customer's "paperwork."
To maximize efficiency, Conley has created office policies that play to the technology's strengths. For example, employees need to key in information only once. (All the company's programs "talk" to each other, so if something about a client or an agent is entered in one program, it is easily shared with all the others.) And rather than swamping everyone with lengthy reports on routine matters, GeneraLife distributes only exception reports, although the information in its entirety is always readily available on the company's network.
By the time I parted from Conley, I was no longer surprised that a company like GeneraLife existed--only that there weren't more out there like it. The message to company builders everywhere: if it can happen in the insurance industry, then it can happen in yours.
William R. Pape was a cofounder of VeriFone Inc., which was sold to Hewlett-Packard. He was VeriFone's first chief information officer and a senior vice-president. Pape has been operating virtually since 1978.