IMAGE TECHNOLOGY holds the potential to dramatically change the way financial services providers go about their business. But while many scratch their heads in puzzlement, trying to understand the business case for the use of imaging in paper operations such as check processing, others are making headway chipping away at the paper mountains that amass in the file rooms and storage facilities that support their operations.
First American Title Insurance Co, is a case in point. A leading real estate title insurer with operations in 50 states, Santa Ana, Calif.-based First American is using image technology to support operations at its 22 mid-Atlantic branch offices. And although the company is only about one year into what executives refer to as a "five-year plan" for converting paper files into computer- retrievable digitized images, key benefits of the conversion already are being realized.
"It cuts an enormous amount of time and cost out of the process to be able to bring something up on a computer screen" rather than having to hunt through paper filing systems, explained Anthony P. Schembri, regional vice president for the firm's mid-Atlantic region, based in Fairfax, Va.
In fact, said Steve Payne, regional data processing manager, the office has become so efficient that it now claims to be the largest title insurance house in the region.
"It gives us the capability to be more competitive by reducing prices and increasing productivity," Mr. Payne said of First American's use of the technology, referred to as file folder imaging. "We can provide our services much more quickly than before."
Title insurance is a labor-intensive and paper-intensive business.
Before a title insurance policy can be issued on a property, a search must be performed of all records, maps, and other documents related to the real estate in question, to ensure there are no liens or other encumbrances affecting it. Typically, these searches are performed at courthouses.
Depending on how often a piece of property has changed hands, a search can last a few hours to a few days. Once the search is completed, the title company prepares a report dictating steps the lender must take to secure a policy, such as releasing the previous deed of trust and recording the new trust. Then, after the transaction is settled, and all necessary documents are signed and recorded, the title insurance policy is issued. Then, if legal ownership is ever challenged, the title company defends the owner in court.
If a company previously has issued a policy on a particular property, ostensibly it can reduce the time it takes to perform a title search, since it retains the documentation on all properties for which it has performed searches. But in a paper environment it could still take hours, if not days, to locate a file on a property. That can really eat up staff time. And file storage can consume a good deal of space and financial resources.
First American, for example, maintains four separate warehouses of deeds and files associated with the title insurance policies it issues - one in Virginia's rural Shenandoah Valley, two in Stealing, Va., and one in downtown Washington.
"We can't afford to keep piling paper in warehouses," said Mr. Schembri.
The company's files consume about 40,000 square feet of warehouse space, he said. Once the task of converting existing files to images is completed, the millions of files that now consume that space can be stored in a few cabinets.
The real estate savings are no pittance. According to Steve Ledford, senior vice president of Global Concepts Inc., an Atlanta- based consulting firm, real estate often ranks as one of the biggest cost factors in running a financial services business.
"People underestimate how much real estate costs," said Mr. Ledford. "This is an area where the paybacks from imaging are real."
In the case of First American, the downtown Washington office takes up 25,000 square feet and costs $30 a square foot per month to rent; about half of that space is dedicated to paper files, Mr. Schembri said. Rent on the three Virginia warehouses is significantly less - approximately $110,000 for about 14,000 square feet combined.
Total cost of the hardware and software that now supports First American's imaging endeavors, Mr. Schembri said, was about $1 million.
The imaging system First American is using to store files uses software from Cincinnati Bell Information Systems Inc., driven by a Unix-based system from Santa Cruz Operation, a Santa Cruz, Calif.-based technology firm.
More than 100 PCs and terminals spanning 22 branch offices access the Unix-based imaging system via IBM RS/6000 workstations located at the regional headquarters in Fairfax. Four workstations in the regional office perform the scanning and transmission of imaged documents to branch and customer offices.
The Santa Cruz system, noted Mr. Payne, provides an open architecture that enables the company to link otherwise disparate components to the imaging system, including PCs running on DOS, Windows, and Unix. In addition, it makes it easier to upgrade the hardware used to access the system, said Mark Royle, industry marketing manager for Santa Cruz Operation.
"The beauty of this is two years from now," if the Dell Computer Corp. PCs First American uses aren't powerful enough, "they can go out and buy more hardware and hook it to this," he said.
For First American, the key is being able to provide quick and easy access to documents, sometimes by more than one person at a time, using PCs and terminals scattered throughout a four-state area.
It is not uncommon, said Mr. Payne, for an insurer to receive a title request on a Monday for a transaction scheduled to close that Friday. In the past, a request like that would have been seen as an arduous task; today, with near instantaneous access to imaged files, the necessary reports can be generated without breaking a sweat. That makes for a competitive advantage when vying for title insurance business.
"It's a great marketing tool for us in this market to say we can get a title search done in three days or less," he said.
Paper doesn't lend itself to quick and easy access - files, must be tracked down, copied, and often sent via courier to the requesting party. And while it is impossible for more than one person at a time to work on a paper document, that can be achieved with imaging.
"Once the paper is digitized, you can do things you couldn't do before," noted Mr. Ledford.
At First American, that means providing the means for headquarters personnel to locate requested documents, view them on a computer screen, and print reproductions. Today, Mr. Payne said, it takes four people to perform the document retrieval function at the regional headquarters. In the past, he said, it was a 10-person job.
Not all the paper associated with First American's services has yet been digitized. Mr. Payne estimated that about 100,000 files are now stored on the imaging system; it will take about four years to scan an estimated 650,000 other files that remain backlogged, he said. Most documents that are being created, meanwhile, are imaged from the start rather than stored in paper form.
It's a mammoth undertaking. But the rewards for success also are huge. "We want to cut operating costs and labor costs, and we want to pass savings on to our customers," said Mr. Schembri.
And that, he suggested, should help First American remain No. 1 in the mid-Atlantic market. At a Glance First American Title Insurance Co. Headquarters: Santa Ana, Calif. Assets: $692.9 million Employees: 4,000 Number of new policies per month: 1993: 3,000-3,500 1992: 2,000-3,000
