The shortest distance between two points is a straight line. And in processing their business, insurers have found that progressing from point A to point B typically involves a straight-line approach.But there's a hitch: While the line might be straight, there's a great deal of manual redundancy and human error that lurk in the middle. By identifying technology that supports automated-or straight-through-processing (STP), carriers and their affiliates are ferreting out inefficiency and embracing a simpler method to execute transactions, billing and claims settlement.
So far, the early adopters of automated processing have seen impressive results, particularly with notoriously complex new-business applications and claims.
Processing workers' compensation claims, for example, is renowned for its time-consuming tendencies. Through the implementation of advanced analytics and decision-management tools, carriers can quickly settle a greater percentage of intricate workers' comp claims-assigning them to a specialty queue for review. In the meantime, basic-level claims can be automatically pushed through with little or no human intervention.
"We've helped clients develop an automated and virtual bill review department, dramatically reducing operational costs and losses," says Chris Shannahan, vice president of license bill review, at San Rafael, Calif.-based Fair, Isaac & Co. "Then by applying decision-management and rules-based systems on the back-end, a majority of claims can be auto-adjudicated."
Leveraging its technology competencies along with those of HNC Software-which it recently acquired-Fair, Isaac's exception-based claims management technology can identify the "20% of claims that contribute to 80% of the costs," says Shannahan. The result: Early-adopting insurers have seen bill review productivity improve by 400% in some instances, he adds.
"This helps organizations to better manage their high-cost, high-risk claims more effectively and to better apply their expert resources to the claims that need it most," Shannahan relates.
Too many touches
Insurance processing has long been saddled with a multitude of touch points that inhibits overall workflow. The solution is to eliminate the extraneous steps that undermine the process.
That's easier said than done. While a growing number of insurers are awakening to this concept, others are having a hard time letting go of manual processing.
But industry observers insist they will have to change this outmoded thinking. Automated processing is viewed as a powerful tool to attract new customers. For policyholders, carriers are providing unfettered access to contract data, bypassing a customer service representative in the process.
This is a boon to insurers as well because "when a policyholder makes a call to resolve a billing question, the service cost can range from $15 to $25. But, if the customer can go to the Web and get the answer, the cost to the carrier is about $1," says Matthew Josefowicz, senior analyst at Boston-based Celent Communications.
Automated processing is also a power-leveraging component used to attract independent agents who seek convenience and simplicity in processing new business.
Over the past few years, Hartford, Conn.-based Travelers Property Casualty Corp. launched automation capabilities designed for its commercial and personal independent agency network. Billed as real-time E-services SEMCI (single entry, multiple-company interface), Travelers is "creating a new dynamic for agents within a Web-based non-proprietary operating environment," says Patrick Gee, vice president operations, personal and small commercial lines for Travelers.
The capabilities are both transactional and service oriented. Travelers has launched automated new-business SEMCI for agents, and is now expanding that functionality with additional e-services.
The latest is Electronic Policy View (EPV), which enables independent agents to access, view, print and save commercial lines policies in real-time, directly from their agency management system. This saves the agent from having to locate paper files or log on to a separate company Web site.
Once new business is on the books, EPV displays commercial insurance policies issued through Travelers' various systems. Policy files are received from multiple policy issuance systems, then converted into electronic images using the latest industry technology.
EPV was first made available to agencies for commercial policies earlier this year via the Travelers agency portal, the company's online doorway to systems, forms and applications independent agencies use on a daily basis.
"E-services is a huge workflow advantage," Gee explains. "In addition to quoting new business, agents can currently leverage these services for many types of data requests, including loss runs, claim status, billing inquiries and first notice of loss. To participate in this new e-service capability, agents simply need to call Travelers and ask to be activated, a process that takes only a couple of minutes."
Now, agents can obtain policy information for a customer while the customer waits on the phone, rather than having to call the customer back with the information, Gee says. These capaibilities are currently available with University Park, Ill.-based Applied Systems, an agency management software provider.
Travelers also offers the capability for SEMCI real-time business owners policy quoting through the AMS AfW platform and plans to soon offer these e-service transactions with AMS as well, Gee adds.
Control freaks
The good news for insurers is that a growing number of the technologies that support automated processing are designed from robust Web platforms that are easy to implement and make back-end systems integration a non-issue.
"The hardest part of automated processing isn't system integration, but corporate mentality," says Fair, Isaac's Shannahan. "Automated processing does just that-it automates the process. It's difficult, however, to convince a claims adjuster they don't have to examine every last element of every last claim-that they system will account for it instead."
With Fair, Isaac's solution, insurers can automate a vast majority of their processing functions, meaning low- or no-touch involvement. The other minority work files can be passed along to specialists for review. Premium invoices are routed through the system onto a single, unified platform. As they come through the system, an insurer's business rules are applied.
"The people in an organization who adopt automated processing discover they can assign specialists-not generalists-to the complex claims, and in doing so spend five times more time reviewing those 10% of bills that need specialization," says Shannahan.
On the acquisition side, life insurance processing-like workers comp claims-is marked by a series of cumbersome steps and procedures.
A writing agent must accumulate reams of personal data from an applicant during an interview process. Typically handwritten by the agent, data is keyed into an agency management system, where it probably has to be rekeyed by another person in the processing stream.
In the end, application processing can take weeks before binding. "It takes 38 days on average to issue a life insurance policy," says David Miller, vice president, industry solutions for InSystems, a Markham, Ontario-based insurance software provider. "More complicated policies take longer. That's why only 11% of all life applications are 'jet-issued.' We have to find a way to address the remaining 89%."
To help streamline the process, InSystems recently introduced a new component of its eXterity software. Targeted toward the life insurance segment, New Business eXterity (NBX) enables the automation of traditional paper-based manual processes.
Using NBX carriers can reduce errors, accelerate processing times, improve life placement rates and increase agent retention.
NBX features a reflexive, interview-style data-capture module that facilitates a natural dialog between agents and applicants. It electronically captures required data through the use of business rules. "Agents are not required to re-ask information that is already known," says Miller. "Interview data and data from complementary systems are easily integrated with underwriting and third-party systems, accelerating processing times across a carrier's front and back offices and resulting in faster delivery of policies and commissions."
All in all, insurers are getting their feet wet with automated processing not in a grandiose way, but by sampling the low-hanging fruit first, says Celent's Josefowicz. "You see this in the transaction-oriented solutions that eliminate a middle component that doesn't add much value to the process. In the end, these programs are faster, cheaper and decrease delivery time. The electronic gathering of data, such as for a life insurance application, is another practical application."
Applying automated processing to a carrier's core competencies is going to be a tougher sell, he says. "Using automation to streamline decision-making, such as underwriting, is a work in progress. That touches at the heart of a carrier's core competency. It's all part of corporate culture and retaining control. Insurers still can't rationalize relinquishing that control."
