Over the past several years, insurance carriers have engaged more and more in Straight Through Processing (STP) initiatives. I see many different areas where STP can play a significant role for carriers:
- New Business
- Billing and Collections
- Policyholder Services
Early adopters honed in on the imaging of paper documents as the starting point for STP automation. The focus should be less about imaging of documents and more about capturing data in electronic format, then using the data in the life cycle of a policy from underwriting through the claims process.
As I work more and more with our clients on these initiatives I often hear the following:
“Our STP initiative is focused on the automation of our new business process, utilizing electronic policy data from our agents/agencies to feed directly into our Policy Administration System”.
I am not in complete disagree with this statement, in fact I am in favor of it. But, I do not believe that this is the best starting point. The underwriting business process and the underwriters are where STP needs to start in order to drive efficiency and consistency throughout organization.
Why do I believe this?
For one key reason – the ultimate objective of STP is the ease of doing business with agents and policyholders. This starts with new business, which is rooted in the underwriting process. New business cannot exist without underwriting, so why start with new business? You must start with the foundation of new business – Underwriting.
The goal for carriers then, is the optimization of the underwriting process, because it sets the foundation for the issuing or declining of policies. Key objectives of insurance carriers is to consistently work with their agents and brokers to give them the products they need, AND streamline the issuing process to be more efficient and cost effective.
Too often in my analysis of current underwriting practices at P&C and LH&A carriers I see underwriters handling every policy that an agent or agency submits. I often ask “Are you adding any value when you touch it?” If the answer is “NO”, then I say automate! If you start with a goal of automating 25% of the underwriting process and an average underwriter handles 50 policies a day, that equates to 12 policies taken off the hands of the underwriter. These policies go through the process with little or no human intervention – the ultimate goal of STP.
Now, you maybe asking “What do I automate and when?”
Great question and one that has been asked many times over. You begin with four developmental points:
- Develop or purchase a “Business Rules Engine” to add and support your underwriting rules. Start small, with a select group of easy to automate products, such as Term Life or Auto insurance;
- Incorporate the ease of electronic submission;
- Establish or improve your agent or agency interfaces for faster and more efficient uploads and downloads of electronic data and;
- Create a real-time policy decision process, and put it in the hands of the agents (accept, pend or decline).
Figure 1 below depicts the process of using an Underwriting Rules Engine as the driver for the new business STP process.
The underwriting engine houses all the underwriting rules for those products you have selected. The engine then impacts 4 critical areas in your STP process:
Supports on-site policy issue by allowing underwriting rules to be downloaded to an agent or business rep’s laptop;
Utilized by your administration system for further evaluation of a policy;
Supports one central location where underwriting rules are stored, and;
Allows the business owners and not IT to update the rules engine in a fast and efficient way, leading to a quicker turnaround on new or updated products.
In helping clients move forward with their STP initiatives I will consistently start with a detailed analysis of their underwriting process and build the foundation from the underwriting perspective.