“When Chinese President Hu Jintao visited the oil giant Saudi Aramco last year he didn't need a translator,” writes Afshin Molavi of the New America Foundation. “Plenty of Chinese-speaking Saudis were on hand. A few years earlier Saudi Aramco had sent dozens of employees to study in Beijing. After all, China, not the United States, represents the future growth for Saudi oil exports.” What is dubbed the “New Silk Road” is no longer our old, slow boat to China–the rest of the world now looks east, not west.

When this writer visited China 23 years ago, it was a rather backwards place, but was eager to join the 20th Century. Our Chartered Property & Casualty Underwriters Society group held joint seminars with officials of the People's Insurance Company of China. They were anxious and eager to hear what we had to say, and we were eager to hear of opportunities in China. The big deal then was “joint ventures.” It won't be long until they own the joint! The U.S. is already mired in debt to China.

Wal-Mart and the Flat New Economy

Friedman points out Wal-Mart and other American firms as an example of world flattening. A Big Mac in Beijing may look a little different than in Topeka, Kansas, but the golden arches are the same. Wal-Mart is big in China, because China is the “new economy,” a new market for capitalism and consumer goods of all sorts. After all, there are a billion of them (and another billion in India), and only 300 million of us. Thus Americans are rushing to do business in China and India and Indonesia, for these places want what we have: high tech toys, hip-hop music, and gangster movies! And we want what they make: our clothing, our televisions and computers, our auto parts, and just about anything else one can find in a Wal-Mart store in Topeka. But they don't want our gas-guzzling autos, our speedboats, or mobile homes. They're too busy becoming wealthy by their standards to have time to go boating or camping.

In one PBS documentary shown several years ago, U.S. manufacturers explained that in order to keep up with the low-price demands of Wal-Mart, by then the nation's top retailer nationwide, they could no longer remain in the United States, paying U.S. wages and taxes, and adhering to U.S. environmental and employment practices laws. In effect, they were forced to move their operations to Asia with its slave-labor-style wages and working hours, thus leaving millions of textile and manufacturing workers in America jobless. Yet the Walton family tops the charts for American billionaires. “Go figure!”

Let Technology Do It!

Technology could save millions of dollars for insurers, predicts Brian S. Cohen, president of Clear Technology of Westminster, Colorado, in the February issue of Best's Review. He suggests that automating the work adjusters do now could “unleash human potential.” He says, “We can use technology to leverage the productivity and strengths of people, so humans can handle more complicated jobs that require judgment, while the vast bulk of routine work is automated. With most of the grunt work dispensed with, employees would be free to think, make decisions, and serve customers.”

Cohen suggests that technology “can bring efficiency to linear processes, but fails to do that when it comes to non-linear work.” That, he says, is what adjusters should be doing. “They know how to manage a file–a labor-intensive process that includes filing bills and images, reviewing policy coverages, and obtaining information from databases.” He adds, “The industry's most common solution is the assembly-line approach. Like manufacturers, they have tried to turn people into machines.” He comments on “super-workers,” those who “take certain shortcuts that produce the best results faster. Today's technology can capture their expertise and encode it in software.”

While Cohen did not exactly clarify what he meant by linear and non-linear processes, he appears to be referring to the steps of confirming coverage, obtaining the facts, assessing the damages, and issuing a check as linear tasks. Non-linear would be the evaluation and negotiation steps, factors such as setting a correct reserve, evaluating the coverage and liability, persuading the claimant or insured regarding settlement, and recognizing potential fraud (a factor that Cohen appears to have failed to take into consideration in his computerization of some claim processes).

Undoubtedly, Tom Friedman would shout “Hooray!” at Cohen's suggestions. Use technology to speed up things and eliminate busy work. Undoubtedly much of what Cohen has suggested is already commonplace in many insurance companies, permitting downsizing of claim office staff and faster access for insureds and claimants to the cash.

But it was only a few years ago that this columnist cited a California labor-relations case involving adjusters who maintained that they did not spend at least half of their day “on duties that involve thought, creativeness, and the use of discretion and judgment.” [The Court's wording.] Therefore, these adjusters argued in court that they should be non-exempt employees, paid for overtime.

Putting the Customer in Charge

Cohen also suggests that insurers make a mistake by not allowing customers to control their own claim experience. He cites as an example the “first notice of loss. The customer has to call and answer a lot of questions. And at the end, the customer still doesn't have all the answers about the claim.” Instead, Cohen suggests that the customer might “get on the insurer's web site and use a browser-based application that takes the customer through the claim process. It would confirm coverage, provide choices of where to get the car repaired, and authorize a check. Now the policyholders are driving the transactions and the solutions instead of waiting hours for someone to show up. They are doing it in their time and at their own pace. Their experience is better because they control it.”

He suggests that the “self-adjusted” claim is “extremely cost-effective. It is the customers who are entering the first notice of claim, not armies of phone operators.” They will like it, he says, “because they feel in control and are assured that their information will be entered accurately.” It would be like that little Australian lizard that sells insurance. “Do it y'self, Mate!”

Flat-worlders may have a better idea for those who earn their living in claims: eliminate the jobs entirely and let a machine do the busy-work, and send those tasks involving “thought, creativeness, and the use of discretion and judgment” to India. While a few of us old-timers might also fear that such automated handling is really an open door to fraud, undoubtedly safeguards could be put in place to prevent that. Technology is the wave of the future. Many more of us will be doing the nitty-gritty of life's routines such as reporting claims, booking airline or Broadway theater tickets, making restaurant or hotel reservations, and other tasks that once required us to actually talk to a human being, by logging onto a web site. A flat world will be a do-it-yourself world. We can already check ourselves out at the grocery store or at Home Depot, and anyone can buy anything on eBay.

Advantages of Agency Relationships

One of the surprises Friedman discloses is how one corporation can respond for another. He cites a foreign television manufacturer who used to have United Parcel Service (UPS) pick up a set that was being returned for service to ship it to their overseas factory, where it would be fixed and returned to the customer a few weeks later. Now they simply have UPS pick it up and take it to a special UPS unit that fixes it immediately on the manufacturer's behalf and sends it back to the customer within days. That is the sort of innovation that Friedman says is possible in a flat world.

Actually, that is not really new. It is similar to the concept used by many insurers who “unbundled” their various services–claims, engineering, investigations–for their self-funding clients. Even the insurers use similar processes, where an outside adjusting firm may be the voice at the other end of a claim-reporting line on a 24-hour basis, answering for whatever insurer uses their service. The actual claim may be reported to the insurer the following day, or may be handled by the adjusting firm directly with the insured being unaware that he or she is not dealing directly with the insurance company.

The concept is not really new. One party has acted as an agent for another for thousands of years. The law is full of agency issues and decisions. While the modern terminology is “outsourcing,” the principle is certainly not new. What is new is the technology involved.

It is always interesting to me to ask where someone is located when I call a corporation about something. I know if I am calling my local insurance agent who and where he is, but when I call my bank or my airline, I may be talking to someone in India, Texas, or Utah–rarely my own hometown. I'm happiest when at least I can talk to a human. What I dislike is talking to a computer, and that is becoming much more common in American business.

What I hate even more is being told that I have to do it “on our web site.” The Internet is great, but why do I want to spend my good time doing the job of those with whom I'm doing business, when I could accomplish the task in half the time if I could just get someone to answer their phone. Maybe the X-Gen guys might like Cohen's notion of doing it ourselves, but I don't. I still like my world with a bit of a curve in it.

Ken Brownlee, CPCU, is a former adjuster and risk manager, based in Atlanta, Ga. He now authors and edits claim-adjusting textbooks.