STP and Product Development: Lessons Learned
Celent facilitated another Insurer Peer Networking Event at the headquarters of New York Life Insurance Company. The discussion was the liveliest yet, with every company contributing significant learnings about their experience in straight-through processing (STP) and product development in life and annuity insurance. Here is a brief overview of those lessons.
There was general agreement that companies are experiencing a greater than 65 percent NIGO rate with a paper process. For one insurer who has implemented electronic applications in annuities and for part of their life book, NIGO drops to 10 percent in an automated submission environment.
Most who had implemented in production or in a pilot agreed with one participant that “STP is a journey, not a destination.” A common development approach is to look for what steps can be automated now and build a roadmap that supports continual refinement and technology introduction.
The main key success factors that emerged were:
·Straight-through cannot be technology-led; if it is, it will fail. Support must be championed by the business and reinforced in sales meetings, communications, incentives, design and implementation decisions which are taken throughout the project;
- The STP experience must be superior to the paper experience in order to create the pull necessary for wide adoption. This design philosophy extends beyond the agent to company service personnel;
- The insurance industry is holding itself back regarding e-signature. The legal issues have been resolved;
- The change management issue in the service center is huge and should not be underestimated. One company identified it as their “biggest challenge.” The work change at the desk level for service employees is critical if the benefits of STP are to be realized. Getting staff to work on an exception basis and not look at the full case for every (or most) of the submissions is a significant adjustment.
The group participated enthusiastically in a rich discussion about how to change incentives and performance measures to make a successful transition on both the agent and the company side. The major takeaway was that STP must have a technology plan supported by a change management approach in order to reach the level of success needed to deliver the substantial benefits that are possible.
In the afternoon, the insurers reviewed their product development processes with a goal of identifying what approaches lead most frequently to an increase in speed to market. A few common themes emerged.
First, those reporting the most progress started with measuring the current process. Simple metrics were developed regarding how many departments are typically involved in a major product change, how long (elapsed time) it takes to implement a change, etc. One such review identified that 86 separate teams were involved to some degree in the development and production of a major change—a much higher number than was expected.
Another common element among the insurers who have improved speed to market is a focus on building and improving business analysis skills and tools. One organization discussed their center of excellence for business analysts. Another company described an estimation tool to assess priorities and determine trade-offs. This insurer reported an increase in process flexibility and improved communication between business and IT as a result of the tool.
This blog has been reprinted with permission from Celent.
Mike Fitzgerald is a senior analyst in Celent's insurance practice, and can be reached at firstname.lastname@example.org.
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