Good, but not good enough. That's not usually what insurers striving for success want to hear. But, it can work in some cases. Take, for example, paper-free operations. Completely paperless processes may not always be possible, but many insurers are inching toward eliminating paper with each small step they take. Some insurers start in the claims department; some start in the underwriting department; some start by eliminating paper sales and marketing materials. But most know it can't all be done at once. "Carriers have already done a pretty good job of getting rid of the internal paper process," says Jeff Goldberg, senior analyst in the insurance practice of Boston-based Celent. "The days when companies would print out documents to store are fewer." Now, though, the challenge may be convincing outside parties to adapt to paperless activities. "Even companies that have significant investment in online applications still have paper coming in the front door," he says.
The insurance industry has a long history of paper use, but paperless is possible. "In terms of processing transactions, they certainly can be done without paper," says Phil Hargrove, insurance technology adviser at Conyers, Ga.-based ImageRight Inc. "Straight-through processing is still in its infancy, which means there are still paper documents. But once those are entered into an imaging process and can be converted to electronic, you're not dependent on paper."
Using an imaging system on the front end to scan in documents can start the paperless process. But, to become truly paperless, you need more than just technology, says Adrian Brown, CIO, Greenville, S.C.-based Canal Insurance Co. "You need a structure for filing, and you need a process," he says. Canal implemented ImageRight's document management and workflow solution more than four years ago in its underwriting department, which employed 28 people just to manage filing. From the fourth day with the system, all new policies and anything that was pulled from the files would be scanned, cleaned up and sent through the system, and documents would route electronically.
Canal's paperless underwriting department quickly caught the claims department's attention. "The claims department paid claims on policies, which meant they had to use ImageRight to look at the policies," Brown says. "The claims department is now using a brand new system as opposed to paper cards."
OUTSIDE INFLUENCES
Canal's work was done on the front end, imaging incoming and existing documents. "While a completely paperless environment should always be the industry's ultimate long-term goal, the industry can achieve a largely paperless environment over the next three to five years," says Scott Morrison, VP of product strategy and market development for Sircon Corp., Okemos, Mich. "The key to achieving a completely paperless operating environment is adoption and use of technology throughout the producer lifecycle - from carriers, to agents, to state departments of insurance and all stakeholders in between - and setting realistic expectations."
But what does an insurer do if those third parties don't want to adapt? Goldberg agrees that the reluctance of third parties is much more daunting that the technology issues. "When you think about what technology is available today, insurers could have entirely paperless processes," he says. "However, the question is whether you want to force people to be paperless or allow other options. Insurers are stuck making that decision in a number of areas. Some are making the decision that they've built an online application channel, and are not going to accept policy applications unless they come through that channel because that may be the only way to make the business profitable. We'll be seeing more of that in the future when it's more accepted than it is now."
Chubb Group of Insurance Cos. started its first paperless initiative with the personal lines division in 2003, turning off paper copies to the agent. It started with Download, according to Judy DeLaRosa, VP, Cross Commercial eBusiness Manager at the Warren, N.J., insurer. "We were already downloading policy detail to our agents. In order to really go paperless, you have to send more information than you ever thought you needed to. So we went through a massive undertaking to recertify all of our personal lines downloads with all of the agency management system vendors." Chubb then built the capability to notify agents via e-mail when paper was issued. After receiving the e-mail notification, agents can go in and look at the paper and, for those agents who want a copy, they can do a real-time inquiry through their agency management system and save a PDF version.
Because Chubb's personal lines were so successful going paperless, its commercial and specialty lines divisions are looking to follow suit. Specialty lines, though, has been difficult, due to a lack of ACORD XML standards, says DeLaRosa, who has worked closely with ACORD to get standards implemented. "We've got a number of lines sent so far, and are working to implement them,"she says. "It's a progressive effort."
The insurer is going to build a system for commercial lines on its extranet and provide agents the option to enroll, "so they can tell us they want to turn off the agent copy," DeLaRosa says. "We're still going to send the insured copy to the agent's office and send the agent's copy via activities and notifications."
Penn National Insurance's paperless efforts also included agent participation. The insurer began its paperless efforts almost seven years ago within its claims department, creating electronic workflows to mimic paper workflows and backscanning files through ImageRight. Commercial underwriting soon went paperless, followed by the bonds division and Penn National's TPA. "Most recently we got our HR division to back scan all our HR documents," says Tim Caskey, senior applications development at the Harrisburg, Pa., insurer. "The only division that hasn't gone paperless yet is accounting/finance. That may come some day."
Caskey says the company used to print a copy of the policy and sent two copies to the agent (one for the agent, one for the insured) and then print an additional copy and send it to the branch office that served the customer. "We eliminated one whole copy when we went with imaging, which added up to more than a million pages the first year," he says. "We take the electronic copy for our internal use off our mainframe and put it into ImageRight. Then, we provide online access to these documents to our agent's via the Web."
Yet, insurers can't control whether or not agents print out policies and can't manage the amount of paper delivered in the mail. Canal could be an exception. In addition to imaging the claims folders, the claims department didn't want to have to scan, index and route claims documents, Brown says. Canal employees set out on a campaign to educate third parties on how to conduct business electronically, he says. The campaign required Canal employees to inform their contacts to type a code anywhere in the text and include the claim number after it. "We parse the e-mails and verify the claim number against the claims database to make sure it's accurate. We start a workflow for the claims adjuster, and send them a message that they have mail. We went from 13.5 postal buckets every Monday morning to 1.25."
BACK-END INTEGRATION AND BACKUP
While front-end integration is vital, it is only window dressing unless the back-end systems are integrated, Celent's Goldberg says. "You'll end up pretending to be paperless in order to communicate effectively with your agents and customers, but you really won't be paperless until you're able to accept submissions and send out information without having to create the paper on the back end when you're communicating from system to system."
Going paperless required Penn National to perform a "health check" of its networks and back-end storage, and even spurred mail consolidation. "We consolidated all of the mail from our four remote offices to come into the home office, and we have a centralized imaging department," Caskey says, noting the imaging department evolved from just a claims imaging department before the underwriting and bonds departments began their paperless efforts. "All of the mail goes to the home office now, gets opened here, is scanned in and the paper is kept for 90 days before being shredded. We don't have rows and rows of paper files anymore."
Penn National's health check uncovered the need for storage area networking (SAN) technology for better disaster recovery. "We have 32 terabytes of storage on our SAN," Caskey says. "We put our Web site on a warm site that could be up in four hours, because we don't want our agents to be without access to those documents for more than four hours. In the old days, if the claim system went down, they had their paper copies and could then make phone calls and work off of the paper files. The criticality of the imaging system to be up 24/7 and available rose tenfold, so it became evident that your back-end storage had to be rock solid."
Canal's Brown had the same concern with only having paper backups. "If this building burned, what the fire didn't get, the fire department would get with their water hoses," he says. "If we were to go to court and we haven't got proof, who loses? We do. Now, though, it's not only online, it's replicated twice online. I then have it on my tape backups, which are offsite, and as we're scanning, every document, voice file, etc. gets burned on a CD-WORM at the same time. So I have a sequential record of everything we've ever done."
However, litigation spurs some concern over paperless efforts. "One of the big hurdles is e-signatures," says Goldberg. "There are many myths that e-signatures are illegal or non-binding or not secure. The fact is you can use e-signatures in every state. They're really not less secure - they're possibly even more secure - than pen and ink signatures. An ink signature doesn't give you any more verification than electronic signatures," he says, emphasizing that insurers can't go completely paperless unless they accept e-signatures.
GREEN BENEFITS GREAT, EFFICIENCY EVEN BETTER
It's obvious that going paperless produces many "green" benefits. "The insurance industry is a great example of where green IT is not just good for the environment, but good for the bottom line," Goldberg says. "It's always great when you can invest in something socially responsible and realize it's actually saving you money."
However, many insurers didn't begin their paperless initiatives solely for environmental reasons. Penn National began its initiatives in early 2001. However, 9/11 convinced management they were heading in the right direction, Penn National's Caskey says, referring to the companies that lost their only backup files - paper. "We wanted the efficiencies of electronic documents and workflows," he says. "Having all the documentation electronically, and at one's fingertips makes responding to customer requests instantaneous. We've had agencies say we got back to them faster than other carriers, and that's why we got the business."
Chubb is realizing the green benefits as well, but that was not the goal at the beginning of its project. While the paperless effort was started as a cost-savings benefit, DeLaRosa says it is taking hold at Chubb. "We're looking at things that the agents may not want a paper copy of, but may want to see a copy of it."
SMALL STEPS
Goldberg advises insurers to take small steps. "I tend to recommend that insurers don't try to eliminate paper all together, but try to minimize it. A forward-looking insurer will have an entirely paperless process, but paper will also exist as an alternate channel if you're dealing with an important agent who refuses to use those e-channels, or difficult customers who don't have the Web access you want them to have."
Goldberg points to two health care providers that were named "model carriers" by Celent. Those carriers took hundreds of thousands of pamphlets that they sent out every year and converted them e-brochures.
Chubb is investigating something similar, according to DeLaRosa. "We're taking a look at a lot of the content-sales and marketing material and other types of paper and brochure ware - and seeing how we can put that online and enable people to use it electronically. And, a couple years ago, we developed the capability for agents to customize loss scenarios online and create an electronic version they can share with their customers as a sales tool."
E-brochures and similar projects - unlike forms and applications - are not major undertakings, because carriers need a transactional Web site to gather data, verify it and bring it in in-house over a Web channel, according to Goldberg. "That's actually where insurers have done most of the innovation, but they have forgotten to simply stop mailing those 50-page brochures," he says. "There are many wins out there that are waiting to be had and don't require a huge technical leap."
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There are many vendors in the insurance industry that make paperless their business, but there are really three major types of vendors now focusing on getting companies paperless, says Jeff Goldberg, senior analyst in the insurance practice of Boston-based Celent. "The imaging and document management systems try to ensure you take paper coming in on the front end, turn it into an electronic format and can retrieve it much easier than trying to retrieve the actual paper document," he says. "The second type of vendor is the vendor creating new business submissions and agent portals, helping you create that electronic application, and dealing specifically with creating apps and turning apps into e-formats. The third type is the document automation vendor, which focuses on taking content and letting you generate documents on the fly, pushing it through whatever channel you want."
