Addressing multiple needs: Straight-through processing allows insurers to concentrate on agents as well as customer self-service and claims processing. (Technology).

Straight-through processing may not currently be viewed as a top priority by many insurance business or technology executives. These executives may question the importance of the elusive goal of straight-through processing, in light of the large catastrophic losses, rising rates, policy coverage changes and security issues insurers are facing.

But the events of Sept. 11 revealed the significance of being able to rapidly respond to an influx of claims and customer service requests. In addition, the ability to maintain a centralized electronic repository of policies to enable ongoing business and claims processing when paper files are destroyed is increasingly critical. And being able to help producers rapidly learn of new pricing and coverage via online processes and transact business easily with their markets has more consequence during challenging times when personal contacts may be difficult.

Straight-through processing may not be the panacea for insurers' current situations, but it does provide valuable approaches for addressing a number of critical needs in both the short and long term.

Straight-through processing doesn't necessarily require achieving one comprehensive process from the initiation of a policy to settlement of a claim to be successful. But it must be clearly defined by an insurer to achieve a desired objective for a specific process with a beginning and an end involving definable performance measures.

Each insurer should define its straight-through processing initiatives to complement its distribution approach and enhance its value proposition to create a distinct competitive advantage. Straight-through processing perspectives may differ by stakeholders as customers, producers, suppliers, regulators and insurers have different processing requirements.

A policyholder may not care how quickly they receive a physical policy, but increasingly they expect real-time quotes and approvals, as well as rapid claim processing. Agents care how fast their sales commissions are tracked and earned. Supporting producers' core business-processing needs is providing the biggest paybacks from straight-through processing for most insurers as existing processes are enabled via online services on a lower cost, high availability and enhanced value basis. Straight-through processing is generally easier to implement when it involves an intermediary who is accustomed to processing business via electronic data interchange vs. directly with an end customer.

Straight-through processing is also valuable in strengthening insurers' various functional information flows and overall business management through the deployment of middleware to integrate various systems.

Standards--such as extensive markup language, Java 2 Platform, Enterprise Edition--and emerging approaches--such as Microsoft's .net or Sun's ONE Web services--are the transmission enablers for straight-through processing, especially with third-party entities, such as producers, claims adjusters, and for broader insurance industry solutions. But proprietary processing for an insurer's business-management and production systems need not wait for industrywide solutions to achieve internal benefits. The technologies for processing in a secure online environment, integrating legacy systems to operate in conjunction with one another and building collaboration databases are readily available. An initial step frequently involves establishing a database so agent, customer, policy and claim file information can be collaborated and documents managed among those systems.

Insurers are frequently acquiring state-of-the-art comprehensive systems to pursue straight-through processing. The implementation of many of those complex systems takes years to provide tangible benefits, and only a fraction of their functionality is ever used. Insurers implementing more targeted solutions generally find they can more rapidly achieve their desired results.

There often are internal political and cultural obstacles for insurers to overcome in pursuing straight-through processing. An important success factor is having clear business and measurable objectives--such as lowering costs, faster processing, improved risk management or better claims handling--for pursuing an initiative to align the organization's efforts. In addition, building a realistic business case for the straight-through processing investment will focus the organization on benefit realization.

The more important question today is not whether an insurer should be pursuing straight-through processing but, rather, where an insurer should be pursuing straight-through processing. Both near- and long-term competitive success will be determined by how well an insurer is meeting critical stakeholder-processing requirements while driving down costs, especially during these turbulent times.

Steven Landberg is a founding partner and managing director of Alpha Financial Services Consulting in Greenwich, Conn.