Main Driver Behind STP Initiatives Today Is Ease Of Doing Business
Freeing the Underwriter
Accordingly, carriers need to liberate underwriters to focus on new market risks and liaison with agents for business development. "Even if you start off by automating 20 percent of the process, it's a good thing as long as you continue to ask, 'Why am I touching this,' and 'Am I adding value when I touch it?'" says Jim Klotz, SVP and CIO for PMA Group ($2.7 billion in assets), a Blue Bell, Pa.-based multiline P&C insurer. "If the answer is 'No,' then you look at how to automate it further."
Though he doesn't think the market has grasped the real benefits of true STP, he believes the growing acceptance of service-oriented architecture (SOA) will drive enlightenment about how STP can drive intelligence and impact more than just basic needs. "We first have to break down silos and the hand-offs to enable messaging, queuing and the capabilities of Web services to move us toward configurable services that don't require a lot of custom coding," says Klotz. He notes that the ability to pursue best-of-breed solutions under SOA will empower insurers to choose systems for different parts of their processes without fear of being locked in to proprietary solutions that don't scale or integrate with growth. "Now that we can treat applications as a service, we can pick and choose more wisely," Klotz adds.
Those choices and the resulting improved power will bolster insurers' abilities to automate more and more of the underwriting process, eventually getting to the point of automatically handling policy changes, endorsements, cancel/rewrites and out-of-sequence processing.
"We are on a mission to enable our underwriters to concentrate on more-complex risks, new market opportunities and distribution forces, which drives us to automate as much of the repeatable underwriting process and logic as possible," explains Darryl Catts, VP of Zurich North America's (Chaumburg, Ill.) Business Technology Integration (BTI) group. (Zurich North America's parent, Zurich Financial Services, has $4.5 billion in net income). The organization defined a program in January 2005 called Commercial FastFlow to automate as much as 90 percent of Zurich's small commercial business underwriting, he relates.
With the majority of submissions handled in a truly zero-touch environment, Zurich's underwriters concentrate solely on exceptions, according to Catts. "We make sure in those instances that underwriters have completed files in front of them," he says, noting that all the "dirty work" for data validations and extensions is now handled through interactive Web services connections that link directly to ISO, the DMV and others, providing information relating to driver and automobile data. Web services links, Catts notes, help propagate functions out to multiple systems.
That capability has resulted from arduous up-front statistical electronic data interchange (EDI) work that has paid off by reducing underwriters' evaluation time from what used to be days to just hours, in most cases, Catts says. The time savings is, in large part, due to the fact that underwriters no longer have to do the searches for third-party data, he adds. To further its EDI work, Zurich's BTI group is planning to foster stronger collaboration among its distributors and its underwriters. "We're currently helping the agents, many of which have never done anything like EDI, to receive XML documents through a TCP/IP connection," says Catts.
Zurich's work is just one example of the increasing number of STP initiatives in small commercial lines and business owner policies (BOPs) to fully automate the processes around new business and renewals. Northbrook, Ill.-based Allstate ($157.5 billion in assets) also has been moving down the STP path with a series of initiatives that began in 2002.
"You have to examine the processes in detail," says Matthew Osborn, CTO of Allstate's workplace division, which first embarked on STP projects for new business -- the impetus of which was improving the ease of doing business through an electronic application tool. In order to reduce the number of touches necessary to process an application, Osborn made use of Six Sigma methodology to assess and document the entire process the organization wanted to streamline.
According to Osborn, after implementing document imaging, Allstate took a deeper look at the workflow processes. "We had to evaluate how many times work items changed their status, and who was touching them and why," he says, noting that places for modifications in the workflow process were found through metrics and data analytics. Allstate employed a business intelligence tool -- a subcomponent of an image and workflow system -- and automated analysis wherever possible.
The company also created rules and tables of variables that grew with each iteration of the project and helped identify repeatable processes in pricing and risk assessment, Osborn continues. "The proliferation of Microsoft [Redmond, Wash.] .NET and Web services is finally delivering what had been promised back in the COM [component object model] world," he says. "We can now drive efficiencies and scale in a way not possible with custom coding."
As a result of the work, Allstate underwriters touch policies only when absolutely necessary, Osborn relates. The zero-touch processing in new business has helped Allstate identify other areas for streamlining business processes, he adds.
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