Chicago — Like a walk toward the horizon, the prospect of straight-through processing (STP) for insurers has seemed to recede in spite of a considerable amount of effort.
Yet, a new research report contends that insurers have better reason than ever to make the trip. Rachel Alt-Simmons, research director, insurance for Needham, Mass.-based TowerGroup Inc. and author of the report, says a new reference architecture model from the National Association of Variable Annuities (NAVA) is a big leap forward and provides a consistent reference platform for insurers, distributors and vendors to accelerate STP initiatives.
While the reference model, developed by NAVA, the Association for Insured Retirement Solutions and IBM, is a start, it must be paired with an enterprise service oriented architecture (SOA) strategy in order to succeed. Thus, insurers must take a long-term view of an STP undertaking and not expect a quick return on investment. “This is going to require a lot of time, a lot of investment and a lot of commitment,” Alt-Simmons tells Insurance Networking News.
Accordingly, Alt-Simmons says only a few leading insurance companies are currently positioned to take advantage of the reference model in the short term. “Insurance companies that are ahead in this process are going to have some advantages,” she says.
However, Alt-Simmons sees a combination of causes spurring others to invest in STP initiatives. The first is the sheer size of the annuities market. With an estimated $17 trillion in retirement assets in play, a functional STP arrangement will better position insurers to grab a piece of the pie.
A more immediate incentive may come from annuity distributors such as Merrill Lynch, Fidelity Investments and Morgan Stanley. Indeed, Merrill Lynch is scheduled to be the first distributor to “go live” with annuity STP in January of next year. “If you are an insurance company and you want to be on Merrill Lynch’s platform, you had better be participating and upgrading [your] technology,” Alt-Simmons says.
What’s more, as insurance companies continue to see their bottom lines sullied by the soft market, STP gives them a chance to achieve operating efficiencies. “One of the ways you trim an operating budget is to make a process more efficient, and that requires an investment,” she says.
Source: TowerGroup Inc.
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