With a focus on cost reduction and efficiency, insurance carriers are looking to streamline inefficient, manual operations with automated end-to-end processing.
End-to-end electronic processing is called many things. Some call it the Holy Grail or the pinnacle of efficiency, while othersnamely stressed-out IT managerscall it things not fit for print.
But no matter what it is called, processing transactions automatically is coming to insurance. However, the implementation of straight-through processing (STP) is anything but simple, partially because insurance has a large variety of touch points.
Some say STP starts when the transaction reaches the carrier, either via the Web or on paper. Others say STP starts when the information is entered into the insurer's systems, usually from rekeying of data. Finally, the STP purists only consider a transaction to be "true STP" when the information begins the process in a recognizable electronic format that automatically travels among a carrier's systems.
"STP has existed for decades in insurance, but it had primarily been through proprietary networks," says Pat McCarthy, manager, insurance practice, at Arc Partners (New York), a project management and consulting firm. "But most of the time the STP process started...on paper."
With paper being a major impediment to end-to-end electronic processing, says Steve Landberg, director, insurance group at AnswerThink (Miami), a provider of technology business solutions and consulting, "STP is a longer-term objective, rather than a shorter one. One issue is there are no single end-to-end packages available because the carriers' systems are so complex," he says.
K.I.S.S (Keep It Simple...)
Since complex products usually require more systems and handling, many carriers are starting to experiment with STP applications for simple products, such as those that require little underwriting. "There is a lot of focus on products that are commodity oriented, such as auto insurance, simple life products and certain annuities," says Gary Venner, director, insurance practice, Arc Partners.
For instance, MetLife Investors (Newport Beach, CA), a relatively new subsidiary of New York-based MetLife ($302.5 billion in assets under management), sells variable and fixed annuities through non-traditional distribution channels, such as financial planners and banks. "We have the ability to do everything electronically," if the producer wants an electronic transaction, says Ken Jaffe, CIO, MetLife Investors. "Many producers now want the documents electronically for storage purposes. However, 90 percent of producers still want paper transactions."
For e-storage, Jaffe says, MetLife converts documents to PDF files for the intermediaries. To automate the collection of data from the producers, MetLife Investors relies on Docucorp's (Dallas) Documaker product and FileNET's (Costa Mesa, CA) eProcess Service tools for workflow. "After the agent enters the data into the system, they can watch the entire approval process over the Net. That has cut phone calls by two-thirds," Jaffe says.
Similarly, Seattle-based Safeco (over $30 billion in assets) also has begun its STP work on simple products. "We have automated our surety bond business," says Gary Guilland, business analyst, surety division, Safeco. "We have to have a high volume to generate a profit. With the average premium around $100, we had to automate everything to make a profit. Now the agent can go in over the Internet, get the bind forms and complete the transaction in less than five minutes," Guilland continues. "Ninety percent of transactions go through the entire process without being touched by anyone. Only ten percent go to a CSR because they require more information."
The results, Guilland says, are impressive. "Per bond, we are definitely saving a lot of money, but we don't have final numbers yet," because Safeco just launched the full initiative in May. "We are not reducing staff, but are increasing production. The goal is to grow business 400 percent in four years without increasing staff."
Powering Safeco's STP surety operation is a suite of products from JetForm Corp. (Ottawa), including FormFlow 99, an application that enables organizations to design, test and deploy XML-based e-forms; e-Process, a workflow management solution; and e-Forms, a solution that replaces paper-based processes with electronic transactions.
While the less-complicated products are generally the first to enjoy the efficiency of end-to-end electronic processing, pinning down a trend as to which parts of the insurance operation are most likely to be automated first is a little harder.
"The customer-facing processes are being automated first to gain a competitive advantage," says Alistair Lee, corporate evangelist, JetForm. "That is especially true for agents. The easier a company is to do business with, the more agents will want to work with that company."
Concurs Alex Young, vice president, insurance industry, at Tower Technology (Boston), a document processing solutions provider, "The focus is more on the new business or the claims side. If new business is number one, claims is not far down the list at number two," Young says.
With service and efficiency the goals of STP in the insurance companyincluding new business, policy processing and claimsunderwriting is one process that is becoming increasingly automated among carriers, no matter how uncomfortable it may make underwriters feel.
"There can be significant savings by using technology to automate parts of the underwriting process," says Mike Kryza, managing director, US, Worldinsure (Bermuda), a Web infrastructure provider that automates the way medically underwritten insurance is processed. "Everything from the aggregation of data...to delivering it to the underwriter can be done, but the comfort level is not there for STP in underwriting."
Gordon Gaar, CTO at Fort Worth-based INSpire, a P&C outsourcing service provider, agrees. "Automated underwriting is one of our strengths," he says. "The rules engine has thousands of underwriting rules that can be turned on or off, depending on the carrier. However, carriers often do not trust it completely, so initially the rules are used to keep the 'touches' down," or the number of times a underwriter must step in to "handle" a transaction, Gaar explains.
Carriers are even providing some underwriting at the point of sale. "It saves quite a bit of time if the agent is able to access underwriting rules," says Michael A. Roe, chairman, president and CEO, Navisys, an Edison, NJ-based life insurance e-commerce and business solutions provider. However, the final underwriting still is done at the carrier's home office, he adds.
"It's true that it is difficult to hand over the entire process to a computer system," acknowledges JetForm's Lee. "The companies are happy to have systems accept new customers, but they will never let a computer reject a policy," he adds.
Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio