Traveling the Long Road to End-To-End Processing
Evaluating Auto-Underwriting
At West Bend Mutual Insurance Co. ($300 million in assets, West Bend, WI), a personal lines P&C carrier, the idea of using auto-underwriting is still being entertained. ""We have considered moving towards an automated underwriting set-up,"" says Christopher Zwygart, project manager, West Bend. ""It requires understanding, evaluating and rating all of the policy information immediately. We have been working with Staffware Corp., Arlington, TX to help us build the rules for the underwriting.""
Besides automated underwriting, West Bend already has an intranet portal called West Bend Connect, where agents can submit new applications. ""The information goes directly into the policy administration system,"" but, admits Zwygart, some data still needs to be re-keyed. ""Soon, all data will go directly into the system,"" Zwygart adds, referring to Tower Technology's IDM, Web-enabled, document processing system and content repository.
The next phase of the automation will include auto-service capabilities for agents and policyholders. ""We want to leverage the Internet so policyholders can look up policy information, and agents can view declarations and endorsements,"" resulting in fewer calls and lower operating expenses for West Bend, Zwygart says.
In fact, says ARC's McCarthy, automating customer service can produce some of the largest cost savings for carriers. ""Carriers are being very aggressive in automating the customer service areas,"" he says. ""Saving money in the service center is much easier if customers are finding their own data on the Web. For insurance executives, rather than increase revenue, it is much easier to decrease costs because there is so much inefficiency.""
However, carriers are still nervous about completely automated underwriting and claims processing systems. ""Straight-through processing can also be applied to certain claims, especially when it comes to a lot of the manual tasks in the back office,"" says Kuljit Bawa, CEO of Staffware, a workflow automation provider. ""Many times claims can be processed automatically, without cost, but this is for simpler cases only.""
However, over time, contends Ramesh Natarajan, founder and CTO at Bridium, a Norcoss, GA-based claims software developer, market pressures will force companies to become more comfortable with STP. ""Money talks. Any automation and streamlining of the claims cycle will produce financial results,"" Natarajan says. ""Carriers need to get comfortable with limiting the number of 'triggering' activities,"" or reducing the number of times an adjuster handles a claim.
""The best way to get a carrier to trust an automatic claims system is to make the carrier feel comfortable with a limited amount of automation,"" Natarajan adds. ""Once they see the results, take them to the next level. I anticipate that some carriers will go to an automated solution within the next two years.""
Along with a general trend to increase efficiency and reduce costs, many carriers are being driven by an even larger force—the company's stock price. ""As more companies go public, they need to go beyond just comparing expenses,"" Navisys' Roe says.
David Miller, vice president of industry solutions, at InSystems, (Markham, ON), a relationship management solution provider, says, ""With demutualization, the pressure is to reduce operating costs.""
One thing is for sure: If a firm demutualizes and then places an emphasis on cost cutting, any STP initiative had better be supported from the highest levels. ""Executive level support is huge,"" says Worldinsure's Kryza. ""The CEO has to step up to the plate and get behind it. That is one thing we look for when we are determining the flavor of the company's culture.""
Top-Down Support Required
With executive-level support, CIOs will have an easier time implementing a solution across the many different departments involved in a transaction. ""The carriers that will have the most success are the ones where there is a common vision across the enterprise,"" Kryza continues. ""STP is so complex and there are so many different owners that have to come together.""
Integrating solutions across different groups is one of the most formidable challenges of end-to-end processing, says Ken Lang, president of Innovative IT (Lansing, MI), a software applications and e-commerce services provider. ""There are so many systems and groups involved in the process,"" he says. ""Simply navigating the systems is hard, not to mention building a consensus"" among IT, business, legal and regulatory leaders, to name a few.
Barring a sudden and seismic shift in the insurance industry, implementing the initial stages of an enterprise-wide end-to-end electronic processing initiative is going to involve managing and streamlining existing operational practices, cultures and traditions—namely paper-based processes.
""The power of our workflow system lies in the imaging of all incoming files,"" West Bend's Zwygart says. ""When the paper comes into the office, it is sorted and scanned. There is no more paper in the workflow process."" Once documents are scanned into the system, the documents are routed using Tower Technology's IDM to Staffware's workflow solution. The next step towards STP, Zwygart says, may be using optical character recognition (OCR) to read text on forms and enter it directly into the proper system. ""We are not using OCR at this time, because it really doesn't work all that well yet.""
With most transactions still initiating on paper, the limitations of OCR are a major stumbling block. ""We've looked at OCR, but we are not using it yet,"" says Dave McMahon, vice president of customer care, information technology, at UnumProvident (Portland, ME, over $38 billion in assets under management). ""We envision that OCR will come into play in 2002,"" when UnumProvident plans the next major release of its workflow system (powered by Staffware). The system automatically accepts and images incoming documents and routes the images ""using some intelligence rules to distribute the documents in an automated way,"" says Dan Hayes, vice president, reengineering, customer care. ""It gets the information into the hands of decision-makers, so it can be processed faster.""
Currently UnumProvident's efforts are focused on reengineering the claims process, but other parts of the company already are offering services over the Net, including billing and policy issuance, says Don Boutin, vice president, customer care. ""We are focusing on claims to offer better service and to drive down costs,"" he says.
UnumProvident decided to implement the workflow system after it watched one of its subsidiaries, Colonial Life & Accident Insurance Co. (Columbia, SC, over $1 billion in assets under management), drastically cut operating expenses. ""Colonial implemented the basic imaging system and experienced a 10 to 15 percent reduction in operating expenses,"" says Boutin. ""Translate that to a company our size, the savings would be in the range of $20 million to $30 million dollars a year. We anticipate smaller returns this year, but we'll show substantial savings in 2003.""
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
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