Many insurance agents are embracing straight-through processing (STP) to help them quote new business quicker, slash paper and postage costs, reduce not-in-good-order (NIGO) rates and reap other benefits. Yet, others are resisting change, and before STP can truly catch fire, the three partners involved - the agency, carrier and agency management system vendor - have to be in lock-step in their drives to boost automation.
Hardly discouraged, carriers are swarming to join industry efforts to increase real-time offerings and embrace standards, while agencies are choosing carriers based on their STP services, and are awarding agents who adopt STP. STP growth has been brisk, even at a time when many carrier initiatives have stalled. For instance, Download transactions from carriers to agents, and real-time transactions from agents to carriers, increased 17% and 21% respectively in the past year, according to Stamford, Conn.-based IVANS Inc.
WORKING SMARTER AND BETTER
When William B. Parry & Son Ltd., a nine-person agency based in Langhorne, Pa., started using straight-through processing about six years ago, eight carriers in the industry and just two carriers (Ohio Casualty and Progressive) with which the agency worked offered STP. Today more than 180 carriers have STP, and six of the eight carriers with which William B. Parry & Son works are offering real-time transactions, explains Lisa Parry-Becker, VP of William B. Parry & Son.
With STP, William B. Parry & Son can bind a personal auto or home application, or business owners' application with its management system in real time. The agency sends information to carriers, such as Ohio Casualty, that goes through their rating engines, and then returns real-time quotes back to William B. Parry & Son. The agent then quotes the coverage and issues the quote. The download populates William B. Parry & Son's system the next day with the policy numbers, forms and endorsements, and coverage information. All told, the agency has the policy in hand just days after the application was submitted through the system.
"Using real-time processes has enabled us to be an independent agent again, to serve our clients and to meet the volume requirements of our carriers," says Parry-Becker.
In the past it took her personal line customer service representatives more than 80 minutes to quote new auto or new home coverage for just one line of business. Now, this can be done in about 15 minutes.
"It has enabled us to work smarter, better, and we have instant access to information," says Parry-Becker, a fifth-generation agent at William B. Parry & Son. "It's fabulous. I don't know how we would run our agency without it."
OTHER EFFICIENCIES
Straight-through processing initiatives have led to improved efficiencies in areas such as paper and postage costs for Liberty Mutual Agency Markets, according to Peggy Scott, assistant VP and manager of marketing information management for the firm. A unit of Boston, Mass.-based Liberty Mutual Group that offers personal and commercial insurance through independent agents throughout the United States, Agency Markets received the Industry Leadership for Straight-Through Processing Award from Pearl River, N.Y.-based standards body ACORD for three straight years (2006-2008). The firm won because of its regional companies' use of ACORD XML standards and real-time processing to improve workflow and productivity for appointed agents.
Agency Markets' regional companies have released - all in real time - commercial lines quoting for business owners policy (BOP), commercial auto, workers' compensation, general liability; commercial property; first notice of loss; and inquiries for policy view, billing, claims and loss runs. Safeco Insurance, Agency Markets' personal lines carrier, offers real time quoting for auto and home through comparative raters, and also conducts inquiries for policy view, billing and claims. Both the regional companies and Safeco now offer commission statement download and claims download, as agency management system vendor capabilities have enabled such implementations.
Carriers are often wary of sharing ROI figures from STP implementations, and some metrics can be difficult for them to track in-house. Still, the benefits have been palpable. In-good-order rates are now 75% for members of the Insured Retirement Institute (IRI), a Washington, D.C.-based organization that espouses STP standards for providers of annuities and retirement products. That said, NIGO rates were 75% just a few years ago, according to Rick Heil, director of standards at IRI (formerly known as NAVA).
With STP, Hannover Life Re America's automated underwriting clients are seeing not-taken rates below 3%, whereas without STP, they saw rates exceeding 10%, says Mike Reeves, the company's assistant VP of marketing. Hannover Life Re America is a part of Hannover Re, which is based in Hannover, Germany.
Patni Computer Systems, Ltd., a global IT services provider headquartered in Mumbai, India, has been able to reduce unit costs for clients in claims and new business by 30% to 35% through STP, while reducing penalties meted out on clients for not having paid a claim in a fixed period of time by 50%, explains Mark Daley, VP of insurance of Patni. The vendor's insurance customers include Genworth and Hannover Life Re America.
While concrete metrics enable STP proponents to justify expanded real-time processes, these often are not the central drivers behind such investments for insurance providers. "Having these capabilities, being able to deliver them to our agencies, and more importantly, enabling agencies to use their agency management systems to really drive their business processes and practices, is the true value of investing in this work," says Scott.
INTANGIBLE BOONS
By reducing the number of touchpoints for agents, STP can reduce their workload and shift their energies to more productive endeavors. "Instead of focusing on all the administrative functions by which they're currently burdened, agents can place more emphasis on sales and continue to develop their insurance knowledge," says Michael Rowell, founder and CEO of Efinancial, a life insurance provider based in Bellevue, Wash. Efinancial has created a Web-based platform called ALISS that automates and streamlines as much of the agent's business as possible, Rowell says.
AGENT RESISTANCE
STP's attractiveness has grown such that suitors can now woo potential mates by rolling out STP processes. William B. Parry & Son, for one, chooses its carrier partners based largely on their plate of real-time capabilities. However, while young technophile agents may gravitate to STP, some are less enamored of automating their tried-and-true processes. And foisting STP on agents may not pay dividends for insurers.
"You have to know your distribution partners and your agents well to get a feel for what will work best for them because you don't want to change an agent's selling process; you want to be able to complement it," says Reeves. He notes that life insurance agents are an aging demographic and sometimes are not tech-savvy. "You have to apply new methods and approaches to go after life agents - both the traditional agent and the newer generation of agent who might be tapping into a new market or have a new selling style."
While it strongly encourages agents to use STP, Agency Markets does not require them to do so. Instead, it aims to boost agent usage rates by demonstrating STP's effectiveness. "As the independent agency distribution channel learns the compelling value to them of doing this, and certainly with all of the industry campaign work done around real time, agents are starting to say: 'We like it, we see the value proposition, and can we get more?'" explains Scott. Though neither Agency Markets nor William B. Parry & Son has rolled out incentives to move to real time, some agencies are offering free lunch, gift certificates and other carrots to employees who use the functionality.
HEADY INITIATIVES UNDERWAY
While carrier strategies to drive adoption differ, it is crucial for more agencies to actually implement STP processes because the more agents that embrace it, the more types of real-time transactions carriers will roll out. Indeed, it can be challenging to advance straight-through processes when the agency, carrier and agency management system vendor have to be on the same page.
"We can build it, but the agents have to use it," Scott says. "And in some cases, we can't even support the capability until that agency management system vendor builds it on their half. So much of our work involves making sure that we understand and stay in lockstep with capability delivery as agency management system vendors upgrade and build out that capability for the agency plant."
To this end, initiatives like the Real Time/Download Campaign are important, says Parry-Becker, who is co-chair of the effort started in 2007 by the Agents' Council for Technology (ACT) and the ACORD-User Group Information Exchange (AUGIE) to increase real time and download offerings and adoption by the industry. That campaign has surged ahead. She says campaign presentations, far more carriers, vendors and agents attending say they use real time today compared to two years ago.
In a January 2009 survey of more than 3,000 agents in the industry, more than 50% that use management systems were conducting real-time transactions, Parry-Barker adds. (The chart above illustrates the most commonly used real-time inquiry functions.) The campaign also launched monthly webinars in January 2009 to increase its exposure. To date, more than 2,000 agents have attended the webinars.
Further, the industry is currently beta testing, and will ultimately launch a "21-day challenge" this fall that shows agents how they can transform their agencies by making the use of real-time processing a habit, says Parry-Becker. Guidelines for the transformation are provided on a week-to-week basis.
Meanwhile, IRI, which provides STP standards such as e-signature authentication, content of exchange forms and privacy notices for annuities firms, now has 360 distributor and insurance carrier members to help in its drive, notes Heil.
Agent activism for STP has been crucial in advancing standards - and in spurring carriers to action.
"I can almost guarantee you that the success of ACORD today is driven by the agents," says Lloyd Chumbley, VP of standards for ACORD. "Agents want straight-through processing; they don't want to rekey data. So they continue to strive to try to adopt it and make that happen."
Chumbley believes it's more crucial than ever for carriers to standardize, reducing those redundancies that have them performing the same processes two and three times over. The U.S. economy's move away from the abyss may give STP a much-needed jolt, he adds.
"Everybody kind of packed up their tents and went home for the first six months of the year," Reeves says. "But people are now starting to poke their heads out, and take a more strategic look at the projects that they had in the hopper and are trying to determine which ones are going to net them the most overall efficiency and cost savings. And that certainly hits right to the theme of STP."
Daniel Joelson is a freelance business writer based in Arlington, Va.
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