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Roger Eigsti: Technology and Ethics at SAFECO

Roger Eigsti is chairman and CEO of SAFECO, an insurance and financial services company with some $31 billion in assets. He has been employed at SAFECO for 26 years and has been CEO for the past seven. By far SAFECO’s largest insurance operation is property and casualty, followed by life and health. SAFECO also has a large commercial-credit operation and a large mutual fund operation, managed by SAFECO Asset Management Company. SAFECO has a trust company that manages investments for high net worth individuals, and a real-estate operation in the process of being sold.

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Ethix: How has technology impacted your business over the past ten years?

Roger Eigsti: Years ago, our property and casualty insurance agents personally collected the premiums and sent them to SAFECO. It was a paper intensive process with a lot of duplication. We have gone through several phases increasing the use of technology. We started with the huge mainframe boxes back in the 50s. We are known in our industry as leaders in technology, although in the beginning we were just mechanizing our existing processes.
Every day we are moving more from paper toward completely electronic records and transactions.
Today, all agents are directly connected on-line in our computer system. Much of our business uses expert systems where, if certain criteria are met, there is an automatic write; exceptions are kicked out to the underwriter: in the case of claims files, agents have access to information which is downloaded to them so they have a simultaneous record. There is a free flow of information going back and forth which we are absolutely dependent upon. Everyday we are moving more from paper toward completely electronic records and transactions.

Why do you do this? Is there an advantage to it?

First, there is an obvious expense advantage with decreased duplication and printing of paper records and communications. Second, the error rate is also dramatically decreased. The system will flag input that doesn’t make sense. Third, we also perform customer service on behalf of our agents—we have all the information and expertise to do it much more efficiently. One of the biggest concerns customers have about their agents is that they never hear from them. Here the technology can enable an agent to more easily create a newsletter with hints on how to increase savings, insurance or investment ideas, and so on. Tickler systems can automatically remind agents to call or e-mail clients to be of better service to them.

Fourth, we are now actually selling mutual funds over the Internet; our customers can check their account balances directly, without an agent intermediary. Fifth, we are now doing data mining to help us know more about our customers—and this kind of research is likely to increase in the future. One of our questions of course is about peoples’ right to privacy. Where do you draw that line?

Have you ever asked your customers what they think of you doing data mining on them?

The data mining we do is just with our own factual information at this point. For example, we might have a small business person as a client—but some people in our company won’t know the size of his family, his household profile, whether we cover his home or his car, whether he has life insurance policies or mutual funds with us, and so on. Basically our data mining is bringing all of that information together. We are getting a better and better customer information base but it doesn’t include anything that the customer has not already submitted to us.

You have talked about what technology has done for you—but are there any disadvantages that come with technology?

The lack of privacy in a technological society can leave us very vulnerable. Even unlisted phone numbers can be found fairly easily. Others who are interested can find out what candidates got your political contribution. Almost everything you do can be known by almost everyone. One of the most interesting current assumptions is that technology will be a timesaver; but in practice we have less time. There is also an assumption that when a new technology comes out, everyone will be using it. But people have to be selective. For example, you can now do all your plane reservations. That sounds easy—but you can spend the whole evening setting up a trip!

Won’t the same technology that collects data, builds profiles, and monitors customers also be used by supervisors to investigate and monitor agents?

We do monitor our agents’ activity, business, and results. In the past, everything they wrote was reviewed, redone, reentered … going back and forth in the mail … Today’s review can be issued much quicker. If it fits the mold and the guidelines, we will be hands off. But there is still an awful lot of interaction between agents and company underwriters.

One of your ads recently said, “When you call us, you get a person, not an answering machine.” So obviously you are thinking about the personal part in this world of technology. Do you have discussions about where you should and shout not use technology?

There are certain transactions that don’t need a personal contact, a live person on the phone. If someone calls up and wants to know what their currently mutual fund balance is, they don’t really need to speak to a live person.
There must be a balance of personal contact and impersonal interaction with technology.
There must be a balance of personal contact and impersonal interaction with technology. When I am calling internally I usually don’t like to use voice mail. I hang up and send an e-mail. It takes so long to get through all the various option menus. When we have off-campus meetings and someone happens to mention the phones, the whole crowd goes crazy. Everybody gets furious and wants to talk about how other people misuse the phone system. We talk about customer service everywhere in our organization but misuse of technology can undermine such service.

The same goes for internal company communication. People need to meet and talk with each other, just to build trust; and then they can go out and work fine in remote locations.

We require much better educated, self-starters in today’s workforce
That’s right. We meet on a regional basis, a divisional basis, a national basis—in sales seminars and council meetings. No matter how much information technology seems to allow or even encourage less personal interaction, the corporate culture still needs and wants interpersonal interaction. At Bill Gates’ CEO conference last year; a panel of CEO, including Gates, responded to a question about working at home versus coming into an office building. A few years ago everyone though office buildings were a thing of the past. I leaned to the person next to me and said, “For Gates’ answer, just look at all the cranes outside, adding to the Microsoft complex. They still need that day-to-day interaction.”

Don Tapscott’s book, Paradigm Shift, argues that information technology is transforming the whole gamut of corporate activity. Hierarchies are being flattened and there is more of a participatory team orientation. Technology is changing the whole “corporate culture.”

Our hierarchy has flattened out tremendously. We used to be a sort of triangle with the CEO at the top and the very bottom, the widest part, people with high school educations or less, doing the data entry work, filing documents and so on. Today, our organization is more like a diamond shape, an increasingly flatter diamond. Compared with ten years ago, we probably have only 25% as many of those lower level employees today. We require much better educated, self-starters in today’s workforce. Our employees have been given a lot more responsibility all the way down the line. Also, we have fewer secretaries today because so many people (even attorneys!) have their projects right there on their computer.

Hasn’t technology—along with increasing competition—“raised the bar”? For example, we are now expected to do things very quickly. You send an e-mail and expect an answer in ten minutes.

I agree. So, has technology succeeded? I believe it has: everybody is more productive, but demands on their time have increased greatly. Our employees sometimes complain that they are working harder than ever but don’t have time for personal interaction like they used to, and they miss it. Employees are expected to be much more productive in our new technological environment.

Does SAFECO have an ethics statement or ethics training for its employees?

We have an ethics statement that all employees must sign annually. Much of it concerns what you can and cannot accept personally and what you can do outside of your job. SAFECO has published a self-study book entitled Ethical Insurance Practices: Foundations of Business Ethics.

Have technology or changes in the business climate or the culture resulted in any modification of your company’s ethics?

I don’t think technology has been as influential here as changes in the broader culture and new government regulations. Gifts have always been an issue, more now than ever, because of the influence they can have on buying decisions in particular areas. Insider information is always a big issue: not sharing it, not having anyone in your family trading on it.
Someone who is deficient in one ethical area is much more likely to be deficient in others.
You have to have complete confidence in those you work with, that they are performing ethically and correctly. If your colleagues are cutting corners in certain areas, or they are rationalizing, it affects every facet of their lives. I don’t agree with those who think our leaders ought to be judged only by their narrowly defined professional or business activities. Someone who is deficient in one ethical area is much more likely to be deficient in others. So, I think we must hold ourselves accountable to the highest standards.

You personally have made statements about how important ethics is. Where did you get your strong interest in ethics?

I believe it started as a child. I grew up in a Christian home where honesty, high morals and ethical behavior were taught by my parents. My father operated a service station where I started working as a young boy. My father was my role model and I observed how he treated his customers in a highly ethical manner. Honesty was expected, dishonesty was unacceptable.

Is there a special danger for those in leadership positions to get isolated because of their power, authority, and capability and then lose sight of basic values and accountability to others? We have many public examples of leaders who became a law unto themselves and thought the rules didn’t apply to them. How do you deal with that yourself?

First of all, we don’t want “yes people” around; we encourage people to speak their minds. A dictatorial approach will drive away your good people if you are doing things that are unethical—and then things will get even worse as those who will now fill those positions are people who will compromise. This is something we always have to work on, to challenge ourselves, asking some point-blank questions one-on-one: “I want to hear your thought.” I don’t want to sway them, I want to hear what they think.
We also constantly preach and emphasize five values at SAFECO: diligence, decency, empathy, integrity, and discipline.

Are today’s workers getting the right kind of values training?

No, I don’t think so. Our culture has had a big impact, mostly negative. I am very concerned about how the media condition us to find violence, cheating, and other undesirable acts acceptable today. I am convinced that many of the shooting we are having are partly because we have become callous to violence and death—whether from watching children’s cartoons where everyone is getting killed or movies where everyone is getting blasted and nobody really cares. This has a tremendous effect on society. In certain areas it is expected that you will cheat—on your income tax, or on your spouse. Our culture has changed slowly but dramatically over the years.

That is the same society from which you draw your work force. What can be done to restore an acceptably high level of ethical values?

We can’t leave it to chance. We have to continually live it and breathe it and make it a habit for people. That is why we make our employees sign an ethics statement every year. Signing a statement does not ensure compliance, but every year they will be faced with committing anew. It calls attention to something we consider very important.

We also constantly preach and emphasize five values at SAFECO: diligence, decency, empathy, integrity, and discipline. It is very encouraging when we see employees using those phrases. I just returned from our agents’ annual “Conference of Champions” where during our opening video each of these principles were spelled out.

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