long played a vital role in many financial service sectors, life
insurers have been slow to harness its significant cost cutting
benefits. This is now changing as technology vendors hone in on the
processing needs of the life insurers. Charles
Davis reports.
Straight-through processing (STP) has long been the unattainable
yet alluring goal of insurers, a technology-enabled utopia that
shrinks the product lifecycle. For years, it seemed the stuff of
science fiction. Then, slowly but surely, carriers began adding STP
platforms a piece at a time until suddenly what was once the stuff
of dreams became almost commonplace.
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This mechanism for automating the life application and
administration process has the potential to transform the way new
business is processed and serviced in the insurance and financial
services industry. It can automate the policy life cycle from point
of sale through underwriting, policy administration and
service.
The concept has been in existence for years. It is firmly in place
in the mutual fund and investment industry, where requirements to
process trades within three days and the goal of one-day processing
make seamless, automated processing a necessity. The banking
industry has also embraced STP.
Now a number of large carriers are implementing rules-driven
platforms that provide STP across the entire insurance policy
lifecycle – from sales illustration to policy administration. The
most popular STP-driven application at present is integrated
process management, which streamlines data capture and workflow and
improves end-to-end policy processing from the first point of
customer contact to billing and beyond.
STP too attractive to ignore
The benefits of STP are simply too attractive for many carriers to
ignore. STP cuts errors because data never needs to be re-entered.
Since there’s no re-keying, and since uncomplicated underwriting
and pricing get handled automatically, there are savings in time
and labour, and that leads to faster turnaround and higher
productivity. There are compliance implications, too: Since the
same data is used throughout, there are fewer opportunities for it
to be corrupted and lower risks of misreporting to regulatory
authorities.
STP also allows insurers to employ new claims segmentation
technologies and processes that can create an electronic fast-track
for basic claims while pulling out more complex claims for special
manual handling. That means huge human resources savings, as
insurers can save the hands-on treatment for claims that require
it.
That’s no small savings, given that less than half of North
American insurers surveyed by consultancy Accenture currently use
any form of advanced claims segmentation techniques to streamline
processing cycles. Accenture found that less than only one-quarter
of US life insurers have integrated their claims systems and
first-notice-of-loss systems; and a full 25 percent still rely on
manual, paper-based claims systems entirely.
Despite the low adoption among US life players, STP is expected to
grow exponentially in the years ahead, as the life sector joins
property/casualty (P/C) insurers that have first-hand evidence of
its power. Donald Light, senior analyst at consultancy Celent,
estimates that in the personal P/C and automobile segment of the
industry, 70 percent or more of all applications are processed
using STP.
Industry-wide STP standards
Investment-oriented life products are just starting out when it
comes to STP implementation, and unlike the commoditised status of
P/C and auto lines, life insurance can be differentiated by service
as well as by product innovation – and both can be fuelled by STP
implementation.
STP also increases agent force productivity, as the salesforce
spends far less time on order processing and much more time on
face-to-face sales. It’s equally important to internal service
deliverers, whether they are agents, underwriters or customer
service staff.
Once viewed as a daunting, enterprise-wide endeavour, many carriers
have worked with vendors to take a scalable, one-step-at-a-time
approach, beginning with real-time billing inquiry or first notice
of loss.
A single STP implementation in the annuities arena could go a long
way toward demystifying a complex transaction. The creation of
industry-wide STP standards by the National Association of Variable
Annuities (NAVA) was a welcome addition and response among carriers
and distributors has been positive. NAVA is working in conjunction
with key distributors on implementing the standards.
Vendors are responding
In the annuities business, with its dizzying array of products and
carriers, standardisation would mean that the competitive
differentiators would be product features and service and
performance – things that really matter to the end investor –
rather than information technology.
Vendors are responding by readying a wide array of STP solutions
for life insurers. Communication Intelligence Corporation (CIC) and
EbixExchange, the largest commercial solutions provider focusing on
automated life and annuity sales transactions, recently announced a
licensing agreement for CIC’s electronic and biometric signature
solutions that raises the ante by combining STP with electronic
signatures in one of the industry’s first end-to-end paperless
processing platforms.
EbixExchange will integrate CIC’s Sign-it technology within
EbixExchange’s AnnuityNet and LifeSpeed platforms for capturing
electronic signatures in the application process. EbixExchange’s
AnnuityNet and LifeSpeed users will be able to complete annuity and
insurance processes without waiting for a physical signature from
the policyholder – thereby speeding up the application process and
eliminating costly manual procedures.
Adding even more speed to the process, the electronic documents are
sent directly to the insurance carrier for processing – thus
eliminating the traditional period spent awaiting the arrival of
paper documents.
Industry momentum, met by such innovative new STP platforms, makes
life insurance adoption of STP no longer a matter of if, but of
when. In the future, STP will be an imperative for insurance
carriers. Streamlining operations to automate the life cycle of a
policy will help process business faster and with fewer errors.
This increased speed and accuracy will enable insurers to remain
competitive in a financial services industry that is increasingly
operating in an automated and/or real-time environment.
