Insurance companies are under constant pressure to acquire new business to respond to market demands and competitive pressures. Insurers realize they must improve the efficiency, scalability, and flexibility of their new business processing applications. The IT infrastructures of most insurers are not geared to handle these improvements, being minimally integrated, minimally automated, or both.Many insurance companies are now embracing the concept of straight-through processing (STP) for new business. STP applies enabling technologies such as document imaging, rules engines, and workflow to automate new business processes.
Insurers, however, should investigate pragmatic process models that can help them transition IT systems to new business STP.
The new business cycle
Policy administration systems share a number of common process components across lines of business, such as: application processing, which involves application data receipt and data capture; underwriting, which includes requirements verification, risk classification, and premium calculation, and issue & delivery, which includes policy assembly and policy printing.
These three main processes in turn encompass a six-step cycle of activities:
* Information receipt.
* Assimilation into the system, such as association to an existing case or person, or creation of a new case.
* Transformation of unstructured information to structured data.
* Data validation.
* Assessment of case/person in light of newly arrived information.
* Request for additional more information, which triggers the cycle to repeat.
One way to look at this cycle is as an "engine" for new business case processing that is completed when the information needed to underwrite, issue, and deliver the case has been received and processed.
The optimal solution would be paperless, "touch-free" straight-through processing. But touch-free solutions may not always be practical, and a given insurer may not wish to invest in the complex architectures entailed in "pure" STP solutions.
Insurers should consider models that can be used as templates to improve the efficiency of their new business process.
One such model is an exception interception model (EIM). EIM provides for human intervention in the new business case processing flow to resolve exceptions. Exceptions in a new business automation scenario may vary. Highly automated processes rely heavily on system validation and such systems need to include a sophisticated exception-handling strategy.
For example, consider a new business requirement for minimal front-end validations during data entry. This requirement would transfer the validation responsibilities onto a back-end workflow-based system. Such an implementation might include exceptions like incomplete or inaccurate application data, or absent or inconclusive medical information.
This model must be adapted to blend human and machine workflows. A real-world EIM for new business may also require human intervention to accomplish tasks such as data entry, verification of image integrity, assessment of borderline cases during underwriting, and signature verification when digital signatures are not used.
Another model for consideration could be termed a role-player interception model (RIM): a human workflow model in which control of the new business case flows from one role-player to another.
The process flow for a new business engine based on this model includes features such as a workflow manager, who implicitly drives the new business engine; a role player who, through his/her actions, sets the state of the case processing flow, and a routing control mechanism that is facilitated either directly by a role player or by the system.
Any of the six steps in the new business cycle noted above may cause exceptions. Each exception may be resolved online or deferred to another user/role-player. Real-time or scheduled automated integration interfaces may or may not exist with internal and external legacy systems, and the flow of information may be image-based or paper-based.
Of course, these models must be adapted to suit practical situations. The EIM is better suited for the comparatively simpler underwriting processes of auto insurance and annuities. The RIM would be suitable for specialty insurance lines-of-business. In most cases, however, the optimal solution will be a combination of the two models.
Two ends of the spectrum
Straight-through processing has potential to increase operational efficiency of a new business process, but insurers should take a practical approach to implementing it.
The EIM and RIM solution models described above are approaches at two ends of the STP strategy spectrum. A real-life solution can be adapted to progressively transition into a well-automated EIM-like approach, thus providing a framework for the insurer to implement STP on a phased-basis and realize its benefits over time.
Gururaj Rao is a solutions architect with Patni Computer Systems, Cam-bridge, Mass.
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