Foresight, and a focus on usability, will help those converting to straight-through processing reap dividends from the process.
The concept of straight-through processing (STP) is an especially enticing one to the traditionally paper-laden and process-bound insurance industry. Insurance Networking News asked Lana Macumber, director, new business development strategy, insurance services at New York-based Depository Trust & Clearing Corp. (DTCC), about the risks and subsequent rewards facing STP converts.
INN: Are there common misperceptions among insurers about STP?
LM: Most companies conceptually understand STP. The problem often begins with the current method of implementing it. Companies often try to automate the process with current system capabilities rather than targeting the ultimate STP environment. The focus should be on reengineering operational process and systems design based on the end-user experience. Insurers also struggle with the varying degrees of readiness exhibited by their many distribution partners. They are forced to support multiple levels of automation or lack of it.
INN: Where should one begin to implement an STP solution?
LM: An STP solution can be focused on one business event, such as commission payment processing, or it may be integrated processes that automate entire business operations. The beginning and the breadth of what a company chooses to implement should be based on factors such as their biggest pain points, their budget, the cost benefits, potential partnerships with a vendor or clearing firm that may already offer automation within their platform, and what a company wants its ultimate sales and processing environment to look like.
INN: Do certain lines of business lend themselves to STP more than others?
LM: The life insurance and annuity business is virtually the last industry to apply STP solutions to its operational infrastructure. This is due largely to product complexity with an evolving array of riders, service features and fund offerings. In addition, the products must have multiple versions based on state regulation. In the third-party distribution space, annuities are receiving the most focus, with life insurance a distant second. Additional products such as long-term care will continue to take a back seat until annuity processing can make significant headway. Collaborative initiatives through standards organizations and industry associations are focused primarily on annuity STP, specifically for new business processing. Due to heightened regulatory requirements for distributor oversight (Rule 2821), companies are allocating budget and resources to the annuity effort.
INN: How can insurers stay on track during project planning and implementation?
LM: Those leading the pack in STP design and implementation must deal with the likelihood that manual and partially automated processes will still exist well into the future. They must face the risk and probability of higher expenses in the beginning that will diminish over time with economies of scale. The focus should be on usability of the solution to avoid simply automating the paper process. Also, the scope of any project needs to be well defined and manageable, and project managers must mitigate scope creep to avoid significant delivery delays.
Industry standards, utility services and affordable provider services should be closely evaluated. Companies should avoid recreating the proverbial wheel and leverage affordable, existing infrastructure tools and services. Our approach at DTCC has always been to provide high-quality, cost-efficient solutions, regardless of whether we build them, buy them or partner with others to deliver them.
INN: What type of ROI can carriers expect? What can agents expect?
LM: ROI will vary amongst carriers based on a number of factors including, but not limited to, their current state of automation, the breadth of business processes the carrier includes in its STP implementation, the number of distribution partners willing to adopt, how quickly the partners adopt, and the percentage of transactions being put through the STP process. Each carrier will need to determine their specific ROI, both from a tactical/quantitative as well as a strategic/qualitative perspective.
Agents can expect their world to change significantly, but, in the end, for the better. They can expect to shift from an entirely paper-based sales process to owning the interactive data entry and scanning processes, responding to electronic rules-based suitability questions and edits based on carrier/distributor rules, securing electronic consent from their clients, etc. This can be a scary concept for agents. Distribution firms will play a critical role in the success of their STP implementations by designing their solutions with agent usability in mind, educating the agents on the new process, and advocating or, if necessary, requiring utilization.
INN: What is the importance of standards in STP initiatives?
LM: Standards are required for ultimate efficiencies to be gained. They are the key to creating economies of scale throughout the industry, and are literally the building block of STP. Without standard technology and process design, expense escalates exponentially, and automation becomes unaffordable and thus unattainable.
INN: Have advances in technology made STP initiatives easier or just added complexity?
LM: Advances in technology have certainly moved STP initiatives forward. At the same time, most insurers have multiple platforms, operated in many system languages, and many have older legacy systems that are not as flexible as needed for Web services and real-time design. The insurers’ existing technology can make the job of implementing a solution across systems, product lines and distribution channels very challenging. The newer technologies do lend themselves to integration capabilities that allow many systems to collectively work together through translation software, but because they are newer technologies, resources must be hired and/or educated, and this slows down the timeline for implementation.
Ultimately, newer technologies, as they are more widely embraced across the industry, will provide for more efficient solutions.
