Several years ago, the Internet seemed like the third rail in our relationship with the independent agents who sold our insurance products. If we touched it, agents were jolted by high-voltage fears that we were hoping to "disintermediate" them and sell directly to customers.

Today, many of these same agents are enthusiastic about CNA Financial Corp.’s e-business initiatives and can’t seem to get enough information about how to harness online technologies. Why the shift in thinking?

Their attitudes reflect a general increase in understanding of the possibilities of the Internet, of course. But what also happened is that CNA (www.cna.com) figured out how to move into the e-business arena in partnership with our longtime distributors.

The issue of how to pursue e-commerce’s possibilities while not upsetting the existing sales channel has been a complex problem for many companies in recent years. In our case, we had worked with independent agents for the past three decades of our 100-year history to become one of the largest insurers of small and midsize businesses in the U.S. But in the 1990s accelerating change transformed our industry. Specialists were outrunning the once-dominant giants that sold multiple lines of insurance. New distribution channels were opening up, customers’ expectations were increasing, and technology was providing the tools to reassemble the insurance marketplace.

We could see the need to reposition CNA. But we also needed to reposition our agents and help them understand that they couldn’t continue to do business as usual. That was a tough message to get across to these fiercely independent professionals who control the flow of business to our underwriters. In the end, however, agents realized that their biggest threat didn’t come from insurance companies like us; it came from other agents who were using the Internet to take customers away from those who didn’t move fast enough.

Even as we worked with agents, we were putting our house in order with a $150 million investment in e-business infrastructure and expertise that will get us closer to the people who deliver and buy our insurance. Last year, when my senior team and I met with 15,000 CNA employees worldwide to discuss our new direction, one of the things we heard loud and clear was that CNA people were frustrated by our technology. They said that they knew what our agents and customers needed but that our systems prevented them from delivering it. We took their suggestions to heart, so our investments are invigorating our employees as well as our agents.

Because our agents span a broad range on the e-business learning curve, we established a series of e-symposiums for novices and began exploring fuller partnership with those more experienced in e-commerce. We are working with more knowledgeable agents by becoming an active partner in 45 agency-sponsored e-business enterprises. The common denominator was to create an even stronger role for agents in insurance distribution, even as some direct sales are also likely to take place.

Here are a few examples of some partnerships I am particularly proud of:

THE VIRTUAL BROKER. In 1998, Ed Gillman took us up on our interest in expanding our small commercial business. He set up a brokering operation in Atlanta that enabled rural and suburban agencies to sell CNA products. In a year, it was a growing, $1.5 million business, selling through 100 agencies and reaching customers not being reached by our contracted agency force.

To keep up the momentum, Gillman formed AgentSecure.com, whose participating agents have access to products from CNA and other major carriers. AgentSecure describes its business model as "agent-centric," because smaller agencies are able to sell branded products that they wouldn’t have access to otherwise, given the volume requirements of national carriers.

Customers like buying a branded product and having access to around-the-clock service centers. National carriers gain market share without having to create an administrative infrastructure to handle small volumes coming from thousands of producers.

Officially launched in September 2000, AgentSecure says agent signups are 45% ahead of expectations. It was writing insurance in 32 states at year end, and expects to be in 45 by the end of 2001.

THE BUSINESS PROCESS OUTSOURCER. Financial institutions, affinity groups, and others that want to offer online insurance services to their small commercial customers no longer have to build an in-house agency. Instead, they can outsource the agency functions to InsureZone.com, the marriage of a technology-service provider and Higginbotham & Associates (www.higginbotham.net), a major Texas broker and longtime partner of CNA.

InsureZone’s platform plugs into a partner’s Web site to process the insurance business. Live customer service comes from InsureZone’s call center, staffed by licensed agents. InsureZone quotes CNA and other top-rated carriers, and coverage can be provided within one business day. At the end of 2000, InsureZone had contracts or letters of intent with 10 partner organizations.

For Higginbotham, InsureZone is an ideal strategy for establishing business partnerships that expand its prospect base far beyond what it could generate as a bricks-and-mortar agency.

CYBER-SPECIALISTS. MarketScout.com is using the Internet to create an entirely new breed of managing general agency, which is an independent distributor with so much expertise in a particular class of business that an insurance carrier grants it exclusive marketing privileges, along with some authority for underwriting and claims settlement.

MarketScout enables retail agents to gain access to managing general agencies, program managers, and carriers with expertise in specific classes of business or types of coverage. By clicking through the various MarketScout menus, the agent can identify a best-in-class underwriter, send the underwriter an e-mail, and submit an application for coverage.

For each industry category, MarketScout identifies a single best-in-class provider, as determined by service levels, claims payment, financial stability, and market competitiveness. CNA is the chosen provider for human services (the developmentally disabled community) and advanced medical technology.

Leading the way at MarketScout is Dick Kerr, formerly chief executive of Lambert Fenchurch US Holdings, where he was responsible for acquiring, building, and operating insurance agencies. He knew that many agencies don’t want to be consolidated, but they have no choice, in part because they lack access to providers that can meet the specialized needs of their customers. MarketScout fills that need.

MarketScout had registered more than 7,000 agents at year end 2000 and had signed up more than 30 underwriter partners serving 75 industry and coverage classes.

Through partnerships like those with MarketScout, InsureZone, and AgentSecure, we’ve gained a simple, yet profound insight: Despite all the hype about the Internet and e-commerce, technology is not about machines—it’s about people.

Hengesbaugh is chairman and chief executive of CNA, the second-largest U.S. commercial insurer, based in Chicago. He can be reached at marknet@cna.com.