The Financial and Labor Impact of Cybernation on the American Republic Insurance Company

Abstract

The problem. Few studies of cybernation have been conducted on one specific company without any comparisons drawn with another company in a related industry. The problem of cybernation and its impact upon a single firm has not been well studies in economics, and this study seeks to remedy this gap in econmoic literature. Procedure. The research procedure consisted of personal interviews with personnel in top management, middle management and some lower management. A guide composed of questions was prepared for these various levels in order to insure that a uniform procedure would be followed during the interview. The information obtained covered the period immediately preceding the introduction of the computer into the firm as well as the period of time during which the computer was used and also the immediate future. Findings. The insurance industry was ready for computers. The most economical method of determining whether or not to implement a computer system was to have a feasibility study conducted. The results of this study showed that such a system would enhance the firms competitive position and would help secure a continued profit growth. It was cheaper to rent the computer system than to purchase it. Structurally, the operating costs of the new system were about the same as those of the pre-electronic data processing systems. Salaries, supplies, and equipment costs were somewhat higher because of higher skill requirements, greater quantities of material and more sophisticated machines. More cost was involved in unproductive time initially but decreased considerably over this period of time. Clerical costs decreased through a reduction in the clerical force. The computer saves not only all of the costs of separate file maintenance, but also the costs of clerical people needed to conduct search and transfer which existed under the old system. Conflicting and overlapping services have been eliminated. The productivity of clerical operations has increased through greatly improved processing techniques. Greater operating efficiency has been obtained in data processing through increased speed, improved accuracy, and decreased equipment idleness. Expense is reduced because of faster billing procedures. There is more flexibility for the expansion of the firm's data processing capabilities as growth occurs. More timely decisions can now be made by management. More control of information and strengthening of the organizational structure has resulted. There has been some displacement effect on the clerical level. The supervisory and managerial levels have remained unchanged for the most part. No problem of old-age versus young or skilled versus unskilled has existed. There has been an upgrading of the skill levels of computer-affected personnel. Departments have become more functionalized. Cybernation enables a firm to handle larger volumes of insurance without requiring a substantial increase in employment. In summary, cybernation has been a good investment at American Republic.