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Insurance agencies are under pressure to quickly adopt new technologies in order to keep up with competitors, according to a newcomer to the insurance industry who is now positioned to help agencies do just that.

Reid French, the new CEO of the technology firm, Applied Systems, also believes agents should expect their applications to continue to make it easier for them to work with their carriers while also improving the experience of their customers.

French, whose appointment was announced last month, is a technology veteran but an insurance rookie. Yet he believes that there is a “huge opportunity” in the insurance industry around technology.

“I think you’re going to see the marketplace adopt it at a more rapid pace than in the past,” he told Ãå±±ÂÖ¼é in a . “I think the reason for that is there have been changes that have occurred relative to the likes of Progressive, GEICO and some of the direct-to-consumer models that have really embraced technology, advertising and things of that nature. I think that has put pressure on the independent agency market in order to respond.”

In one of his first forays into the world of insurance technology, French recently attended the annual conference of Applied Systems Client Network (ASCnet), the user group for Applied Systems, where he was able to speak with agents one-on-one. The experience confirmed his belief in the significance of technology to this industry.

“When you talk to them [agents], it’s amazing. The ones who are the most forward thinking around technology and the most embracing of technology also tend to be the more profitable agencies. That’s probably not a huge surprise, but I think you’re going to see more and more folks really embrace it and take it on,” he said

The insurance agency applications market is fragmented with no single vendor dominating. Several rankings place Illinois-based Applied Systems as the second largest with just under 8 percent of the market and, according to one analyst, just over $100 million in revenues. Applied Systems says it has about 11,000 customers and 130, 000 users.

(Vertafore, with revenues reported to top $130 million is ranked first with about 10 percent of the market. Vertafore claims more than 15,000 agency customers and 500,000 users.)

In 2006, Bain Capital acquired a majority stake in Applied Systems from Vista Equity Partners in a buyout that was reported to be worth $675 million. Long-time Applied Systems chief executive Jim Kellner retained a major stake in the company. Kellner had also remained as CEO until last month when French was handed the keys.

Ãå±±ÂÖ¼é recently spoke with French about the future of Applied Systems and the future of agency technology.

Just as insurance carriers and agencies face challenges growing in today’s economy, so, too, do vendors like Applied Systems. Typically, these vendors enjoy deep customer loyalty-it’s rare to lose an account unless a merger is involved. But it’s not easy to grow organically in a recession or in a market where agencies and brokerages continue to consolidate. According to a 2010 report by the Independent Insurance Agents and Brokers of America and Future One, there are about 37,500 agencies in the U.S. now, compared to 44,000 in 1996-although the number has been stable since 2006 as a new agency is being formed for every one that goes the way of a merger.

Expansion Plans

Applied Systems has enjoyed modest growth in its customer base the past few years but would like to grow even more -by expanding into other geographic markets, selling additional business services to existing customers, upgrading customers to the latest applications, attracting more larger accounts and, of course, developing new insurance products.

French says Applied Systems is looking to each of these avenues for growth.

Thanks in great measure to its newest offering, Epic, the company is “growing very nicely organically right now,” according to French, but he is open to growing through acquisition as Applied Systems did this past spring when it acquired Artizan, a provider of Web-based and outsourced customer service and claims technology for agencies wanting to offer 24 hours a day/7 day a week services.

Today Applied Systems operates mostly in the U.S. and Canada but French sees that geographic profile changing. “I think our long-term vision is ultimately to operate in other countries, other Commonwealth countries like the UK, Australia, New Zealand and things of that nature,” he said.

Applied Systems’ main customer base is small and midsized agencies with its The Agency Manager (TAM), DORIS and Vision systems. However the company believes that its Epic management system, released in 2008, is a market changer. Epic is an Internet-based — or cloud— application that is scalable to agencies and brokerages of any size. It is helping Applied Systems make inroads with larger brokerage firms. Since its introduction in 2008, Epic has attracted 10,000 users including thousands from large brokers Willis and Arthur J. Gallagher. Applied would like to reach more in this market while also hanging into its core constituency of mid-sized agencies, according to French.

New Services

Epic and cloud computing are a major part of the company’s strategy. French does not see any major changes to the company’s existing agency management product line-up but the company will accommodate agencies as they gravitate toward web-based solutions and it will be offering additional, web-based business services to agencies as part of its own growth plan.

“The reality is that we have very dedicated users for all of those different products… I don’t think you’re going to see any major revolution in terms of us changing the lineup dramatically. I think what’s probably the more likely outcome is seeing us bring to market additional services for our customers that are software that are delivered as a service. We remain a software company, but I think you’ll see us bring some additional value to our customers. My hope is that they’ll embrace that.”

Additional services would go beyond the company’s own apps to hosting or data back-up services that all agencies need.

“[W]hen you talk to an Applied Systems customer, many times it’s a long-lived relationship, going back a decade or more. It’s a trusted partnership. They view us as their technology vendor of choice. We can provide more than just the agency management system,” French said.

French thinks acceptance of cloud technology is good for his company and its customers, although “ultimately they get to make that decision as to what they want to do.” More than 50 percent of Applied’s customers have already decided to hop on the cloud over the traditional LAN-based software. French thinks there is a strong case for the movement:

“I think it is a good thing because I think it allows them to focus on what’s core to them. What in essence that does is that transfers the problem of hardware, of upgrading, of maintaining connectivity and bandwidth, to us, to us as a software vendor. We probably as a company are — I don’t mean this as an insult to the agency at all — but that’s in our core. That’s what we do as a company. We’re responsible for making sure software works in an appropriate hardware environment.

“Well, as an agency, if you’re using it on a LAN, you’ve got to maintain the hardware. You’ve got to make sure that you’ve got the right equipment. You’ve got to make sure that your upgrades happen on time and things of that nature. I’m not going to say that some organizations make the decision that they want to bring in that the right expertise to do that. But I will tell you to take on a LAN system without the proper expertise is probably not the smart thing to do.”

The insurance neophyte acknowledges that he is still learning about the issues of agencies’ real time access to insurers’ customer data and rating and how well that campaign is going. But he has no doubt about its importance.

“Ultimately, as we all know, the greater connectivity that we can make across these multiple players in this ecosystem, from a technology and data perspective, the better off we are in terms of automation. That’s motherhood and apple pie. Who can disagree with that kind of a comment?” he said.

Ãå±±ÂÖ¼é asked French about two particular trends and how he sees agency technology dealing with them: society’s increased mobility and the expectations customers have of agencies.

Mobility

Ãå±±ÂÖ¼é: More and more people work from home, on the road, using various portable devices. The workday is no longer 9 to 5 for agents, carriers, employees and their customers. Do you see innovation coming in agency systems to deal with this mobility trend?

French: “I think that it’s a great trend. It’s one which I think you will see a lot of innovation from Applied over time. I think that certainly when you have a cloud deployment, it becomes more ubiquitous. Through any browser you can access the core underlying functionality that exists within the application. I think you will see absolutely greater push to tablet computers, to mobile phones, things of that nature, to allow people to get to their data because they’re on the move so much more than they used to be. It’s absolutely a trend that Applied is embracing. I think you’ll see some really interesting stuff from us on that front in the years to come.

“Ultimately, this data, the big revolution really is that it’s unlocking the power of data within software systems. We have tremendous data within our agency management systems. Historically, go back 5, 10 years. That was really the purview of the CSR. It was really that customer service rep was the person who really minded it, used it, did transactions with it, etc.

“What you’ll see more and more from us is talking about how we can use this data for producers in a much more cogent way. Producers are more mobile, so how do you present it to them, give it to them in a new and exciting way that allows them to get the most out of their investment in the system? ”

Customer Expectations

Ãå±±ÂÖ¼é: Customers expect that agencies are going to transact and communicate with their carriers efficiently; they take that for granted. What do agencies need to do to improve how their technology meets the expectations and needs of their customers?

French: “I think that’s a great point. This is part of the reason for the Artizan acquisition last year. Artizan really allows an independent agency to have much more touch point to their customers in an offline way. I think that is hugely important to independent agencies to embrace, so that they have that ability for their customers at midnight, when they need information, when they need to print off a certification of some kind, an ID. They have the ability to do that without having to remember to pick up the phone the next morning and call their agent.

“Now with that, I will say that I think that most people recognize still that the agent is really there for the relationship and the advice. We, as a technology vendor, never want to step in between that. We don’t want to degrade that relationship in any way, but I don’t think anyone really picks an independent agent based on the transactions, per se.

“The transactions can be automated, but the relationship needs to be based on personal touch, personal relationship, etc. I think sometimes people actually get a little confused on that and they start to say, ‘Well, wait a minute, am I being disintermediated with this technology with my customer?’ I think the real forward thinking agencies really realize that they’re not. They’re just giving their customer another avenue to get a transaction done faster.”

with Applied Systems CEO Reid French.

Topics Agencies InsurTech Tech