insurance insights

8/9/2019 Insurance Insights

1/20

Web Enabled Channel Rationalization

Insurance Market in Asia

The Next Big Wave:

Location Intelligence in Insurance

Straight-Through Processing and its

Application in the Insurance Industry

INSURANCEINSIGHTS


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Table of Contents

Editors Note3

The Next Big Wave:

Location Intelligence in Insurance

By Govind Seshadri

5

Insurance Market in Asia

Improving Effectiveness of Bancassurance --

An IT Perspective

By Suseel Kumar Kammara & Saumyajit Ray

13

Straight-Through Processing and its Applicationin the Insurance Industry

By Lawrence T. Gillick, Sr., & Bhavesh Mandlas

17

Web Enabled Channel Rationalization

By Satyashree Sai Rout & Manik Vinnakota

9


3/20

INSURANCE INSIGHTS 3

The Cognizant insurance practice welcomes you to another edition of Insurance Insight, a journal that aims

to share our view of emerging technology and business trends in insurance, as well as best practices in

harnessing and deploying IT in the insurance sector. At Cognizant, we have always prided ourselves on the

fact that our primary focus is to better understand our customers business needs. This journal underscores

this core belief by focusing on four distinct areas: distribution, transaction processing, location intelligence

and Bancassurance.

In the current article, we focus on four themes:

n Insurers spend approximately 25% of their development budget on improving and streamlining

their existing distribution process. However, achieving suitable economic value from that

investment remains elusive. With the drive for more creative IT products and management in the

insurance industry, e-wholesaling and enhanced agency portals bring a new perspective and

solution to improving the traditional distribution process.

n Conventional transaction processing encompasses multiple steps. Straight-through processing

(STP) is a method of adopting automation as a processing goal. STP brings automation to all steps

in the transaction process, from the initial request to its completion. The concept is readily

applicable across all lines of business and activities.

n More insurance companies are relying upon analytics technology to promote faster and moreeffective decision making than ever before. We evaluate location intelligence (LI) technology for

the insurance domain for different scenarios, such as catastrophe modeling and mapping

services, customer self-service portals, claims management, etc.

n Bancassurance has emerged as an important new channel for the distribution of insurance in

Asia. In this article, we discuss the different drivers for Bancassurance, the various models of

Bancassurance and the key IT enablers.

We hope Insurance Insight is both informative and enriching to you in terms of the thoughts and ideas it

presents. We look forward to your feedback and suggestions to help us focus and highlight the themes of

interest to you.

n Insurance Insights

Editors Note


4/20


4 INSURANCE INSIGHTS www.cognizant.com

The Next Big Wave:

Location Intelligence in InsuranceBy Govind Seshadri

It has been boom time for Business Intelligence (BI) vendors and solution providers in recent years. More

insurance companies are relying upon analytics technology to promote faster and more effective decision

making than ever before. While the leading BI platforms have proven their efficacy in helping translate raw

data into actionable intelligence, many scenarios exist where two-dimensional spreadsheets and reports

remain in use but often fall short of the mark. This happens especially when users are dealing with relativelylarge data sets. The result is more of a human shortcoming than a technical one. Scientific studies have

proved that our short-term memories are generally considered to have a capacity for seven elements at a

time. So, if you are trying to analyze a report with tons of rows and columns, it does not take long before

you feel lost!

The other equally significant factor to consider is that much of the data present within these generated

reports pertains to location -- the spatial environment in which a given business transacts business and

interacts with its customers. This location-sensitive data can pertain to anything that can be associated with

a place on a map, be it a person, business, geographical entity or even natural phenomena like a tornado

or earthquake. Given the location context, it could be a lot more intuitive to visualize and query the data

using a location intelligence platform rather than report-based BI products.

Which brings us to the question, what exactly is locationintelligence?

Location intelligence (LI) can be defined as the capacity to organize data and analyze complex phenomena

through the use of geographic relationships inherent in most information, as well as by leveraging

technologies like global positioning systems (GPS) and Web 2.0. By combining geographic and location-

related data with other business data, organizations can gain critical insights, identify a trend or recognize

a pattern among customer and demographic information, to power better decision making. In fact, this is

the most common application of location intelligence, as indicated by Ventana Research, a leading advisory

services firm (Figure 1).

LI platforms typically use a map-based dashboard for visualization. They also provide the ability to create

enterprise mashups, providing business users the ability to overlay seemingly disparate layers of location

data onto a map-based dashboard. The data being mashed up can also be the output of conventional

analytics engines beyond public sources of information, such as census data feeds, etc.


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Another key feature is the support for spatial queries. For instance, the 9/11 attacks on the World Trade

Center brought into focus the challenge for property & casualty insurers to more quickly and effectively

understand their risk exposures in the immediate vicinity of the attacks. With LI supported spatial querying,carriers can simply click on a specific target address on a dashboard map to fully understand their exposure,

not only within that building but also within an indicated radius.

LI technology is perfectly suited to the insurance domain, as demonstrated by the following scenarios:

n Catastrophe Modeling and Mapping Services: Using LI software, underwriters can examine

a specific area or catastrophe zone thats historically prone to floods, hurricanes, earthquakes,

wildfires, etc. on a digital map to see how much business is concentrated within, say, a 25-mile

buffer zone. This gives them a clear picture of the potential risk. A risk can be pre-screened by

the underwriter by simply plotting it on the map-enabled dashboard. If the risk falls in the area

shaded red, it means there is already a concentration of risks, and they cannot write it based on

the current guidelines.

If a picture is worth a thousand words, then a map is worth many more! In a homeowner insurance

underwriting scenario, for example, visualizing property information on a map makes a world of

difference, especially as it relates to properties located on the borders of different counties. For

instance, without a visual perspective, it is impossible for underwriters to avoid inadvertently

insuring too many properties within a high-risk zone that may overlap multiple counties.

n Customer Self-Service Portals: LI services can be directly integrated within customer self-

service portals to increase customer satisfaction. For instance, consumers can be directed to an

agent who is located near their residence by enabling them to perform a search based on their

postal code or home address. Providing an intelligent agent locator service online can

substantially reduce the amount of phone calls received by the help desk. A carriers self-

service portal can also help a policyholder find the nearest authorized auto body or glass repair

facility, including contact information for each shop and step-by-step driving directions.

n Claims Management: The timeliness of claims processing is always an important differentiator

among P&C companies, but especially so when major disasters such as hurricanes occur.

Figure 1: Common applications of location intelligence

Most Important Use of Location Intelligence

n Very Important n Important n Somewhat Important nNot Important

Analyze customer anddemographic information

Analyze location patterns acrosslocation and non-location data

Understand location-relatedpatterns in operational data

Present many sources of contentand data on one screen

Identify locationrelationships

Provide directions or navigationto employee or customer

Analyze employees

and office locations

Collaborate via threadeddiscussion group on location

45% 26% 21% 8%

42% 29% 14% 14%

43% 30% 16% 10%

41% 34% 16% 9%

41% 31% 17% 10%

37% 30% 20% 12%

14% 24% 33% 29%

11% 15% 28% 46%


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This is exactly what Cognizants Insurance Technology Consulting Group (iTCG) has done. Our solution,

Cognizant Location Intelligence Platform Services (CLIPS), is a SOA/SaaS platform built from the ground up,

enabling organizations to enrich their data with location intelligence. For example, each of the tiers shown

in Figure 2 on the previous page is fully interchangeable with open source and commercial components,

allowing a highly flexible architecture.

CLIPS solutions can be accessed by conventional browsers or smart mobile devices like iPhone and gPhone.

Figure 3 below, shows an Auto Garage locator accessed from the iPhone.

ITCG has also created numerous POCs using CLIPS for many of the scenarios described below.

We invite you to explore CLIPS and realize the power of location intelligence.

Figure 2: CLIPS Architecture

Visualization

Mashup Server

Geo Analytics

Analytics Server

Security

EnterpriseDataAdapters

Security

E

xternalDataAdapters

Data Services

Data

Data Server

About the Author: Govind Seshadri heads the Technology Consulting Group for Cognizant's Insurance

practice. His responsibilities include driving the technology strategy and consulting agenda for the

practice as well as fostering key CIO/CTO client partnerships. He can be reached at

[email protected].

Figure 3: CLIPS Garage Locator Application accessed via iPhone


8/20



Web EnabledChannel

RationalizationThe challenges faced in conventional product distribution require innovativetechnology solutions to optimize cost, rationalize channel structures and

enable more targeted customer segmentation. In this article, two forward-

looking solutions are recommended.

By Satyashree Sai Rout & Manik Vinnakota

The global insurance industry is facing serious challenges with respect to the traditional policy distribution

process. Insurance distribution is undergoing a structural change, with commoditization of insurance

products and fragmentation of consumer segments. Insurers spend approximately 25% of their development

budget1 to improve and streamline their existing distribution process, but achieving suitable economic value

from that investment remains elusive. Moreover, distribution-related costs are rising over time, as can be

observed from Figure 1 on the following page.

For insurers to realize the highest value from distribution, they must reexamine how they refine key functional

areas. Also, insurers must approach distribution with a technology solution that is flexible and cost-effective.

In this article, we will discuss e-wholesaling and enhanced agency portals as two potential options to

streamline operations using Web-enabled solutions.

E-wholesaling

Insurers have been working to get advisors to consult and sell better, but returns on these investments

have not materialized. In fact, the increased expenses in the layers of wholesalers and advisors are

undermining insurers profitability. At the same time, customers -- mostly in the high net-worth individuals

(HNI) segment -- are not able to find any differentiation in services offered to them.

In the conventional mode (Figure 2A), internal wholesalers of the insurer share knowledge and key details

about the products only with designated external wholesalers. External wholesalers, in turn, spend most

of their time in field visits to educate consultants and brokers (i.e., financial advisors) on various available

products.

Figure 2B on the following page presents a distribution model where internal wholesalers are equipped

with Web-enabled communication tools and are actively involved in providing product information to

financial consultants with speed and convenience. This, in turn, frees up time for the external wholesalers

1.Improving Insurance Distribution Profit Margins with Modern Technology by Tower Group


9/20


to work more efficiently and exclusively on improving relationships with current and potential producers. It

also saves travel-related costs. These external wholesalers can also reach out to the HNI customer segment

in conjunction with financial advisors and thus play a key role in improving customer management.

To develop an effective e-wholesaling strategy, the firm must first finalize its distribution objectives. It also

requires adopting an IT strategy that is more holistic in nature and allows functions across the supply chainto access technologies that work in conjunction with each other.

E-wholesaling: Level 1

An e-wholesaling solution should be developed and implemented in a phased manner to target customer

needs in different segments. Level 1 should be geared toward strengthening marketing channels for the

mass market of retail investors that account for 90% of investors but 10% of the assets. At this level, e-

wholesaling will provide speed and access to a mass market that does not require a high degree of

sophistication in support of commission sales. It will comprise the following elements: collateral (e.g.,

prospectus, marketing materials, etc.); call desks (webcasts, PowerPoint presentations, email

communications, more timely and robust performance updates, etc.); sales desks (targeted customized

sales support, etc.) and Web-enhanced conventional wholesaling.

E-wholesaling: Level 2

The next level of e-wholesaling should be more focused on the advisory practice. It should be geared toward

10% of the investors who have 90% of the assets and who are far more discerning and sophisticated.

These tools will greatly reduce the labor intensity for high-level comprehensive expert advice. Moreover,

the barriers to entry for financial advisors to provide high-level advice will be removed. It should comprise

the following tools: Electronic Asset and Liability Study; Estate Planning Optimization; Electronic

Investment Policy Statement; and Electronic Performance Monitor.

A study by Financial Research Corp. that examined 19 mutual fund houses in the U.S. found that e-

wholesalers average three times as many sales contacts with banks and broker-dealers per week as field

wholesalers. The average cost per presentation for an e-wholesaler is $44, versus $372 for a field wholesaler.

Agency Portals

The next tool available to insurers to optimize operations using the Web is agency portals. Carriers have

to take their agency portals to the next level. Technology advances are showing financial professionals that

Figure 1: US Life Insurance Market Distribution Cost Analysis, 2002-07 (2002 Baseline Year)

nAcquisition Expenses n Gross Earned premium

2002

Acquisition Expenses Rising Faster Than Income

Index

2003 2004 2005 2006 2007

0

100

105

110

115

120

Source: ACLI Life Insurers Fact Book


10/20


it is possible to make business processes more efficient. This has led to a new set of needs from agents

and brokers on carrier-sponsored portals.

Easy integration through open standards

The top area that causes anxiety among many distribution partners is dealing with proprietary company

systems or Web sites. Agency and brokerage professionals yearn for the ease of doing business. It'sbecome an increasingly important factor in their decision to place business with a carrier. As the 2006

AUGIE (ACORD-User Groups Information Exchange) Agency Technology Survey results point out (Figure 3),

insurers need to build their agency portals on open industry standards.

Real-Time Processing Capabilities

As real-time inquiry capability has matured, and more and more agents and brokers are taking advantage

of it, the industry needs to focus on real-time processing that includes new business processing, change

request processing and quoting (Figure 4).

Quoting or sales illustration systems should become more than just a tool to help life insurance agents

meet regulatory truth-in-selling rules. Many carriers still use standalone sales illustration tools as a partof their sales presentations to customers. Going forward, quoting systems should be able to integrate new

business modules with advisory components to provide customers higher levels of insight during the

decision-making cycle. The same solution should be integrated further with other policy administration

systems for comprehensive customer management.

Overall, the real-time processing should be in line with straight-through processing (STP) norms to ensure

that resulting systems are based on industry standards and achieve paperless transactions. Going paperless

will drive considerable benefits to the producer and insurer in a number of ways, including but not limited

to customer service, sales focus, time savings and increased productivity.

Technology-aided solutions such as e-wholesaling and new-generation agency portals provide ample

opportunities to rationalize the distribution channel. The real challenge is how quickly insurers sense

changing business dynamics and re-align their business objectives to introduce the right solution at the right

time. It is not recommended to bring in every possible solution to achieve some competitive advantage; a certain

amount of deep introspection at each layer of the supply chain is required to identify which one(s) should be

targeted. The solutions described above should be approached in a phased manner, keeping the IT and

operations strategy in mind. All solutions may not be economically viable for medium- or small-level enterprises.

Figure 2: E-Wholesalers integrated into the insurance distribution channel

InsuranceOrganization

ExternalWholesalers

InternalWholesalers

FinancialAdvisor

Customers HNIs & InstitutionalCustomers

Relationship Building

Sales & Marketing

Web-enabled Tools

Level 2 Tools

Level 1 Tools

Retail Customers

InsuranceOrganization

ExternalWholesalers

E-Wholesalers

FinancialAdvisor

Figure 2A Figure 2B


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Collaborative capabilities brought in through Web technologies in information, operations, sales and

marketing can establish distinct distribution advantages over competitors. This will help insurers build a

rationalized distribution channel and realize higher value through:

n Improving operational efficiencies.

n Decreasing distribution channel management costs.

n Expanding into new markets quickly.

n

Reaching new distribution channels easily.n Increasing agent retention (captive agents) and distributor loyalty (independent agents).

n Driving more revenue to agents and insurers.

Satyashree Sai Rout is part of the Cognizant Business Consulting group with expertise in the Life Insurance

domain. He has been part of a number of consulting and business analysis engagements for North American

clients. Apart from Insurance, he has good knowledge in ITIL framework and IT Infrastructure Management.

He holds certifications from LOMA and AAPA in addition to a Masters degree in Management.

Manik Vinnakota is part of the Cognizant Business Consulting group with expertise in the Life Insurance and

Annuities domains. He has carried out a number of technology and process consulting engagements for

North American insurers and has wide knowledge of insurance operations, policy administration, annuities,

retirement plans and business analysis. His areas of interest are Distributor/ Agency Management,

Requirements Engineering and IT Transformation. He holds certifications from LOMA, AAPA and IBM

Rational, in addition to a Masters degree in Management.

Figure 3: Intermediaries preference to choose a carrier whosesystems are built on open industry standards

Figure 4: Real Time Processing Focus areas

Extremely likely

Very Likely

Somewhat Likely

Not Very Likely

Not at all Likely

28%35%

19% 14%

4%

NewBusiness

Processing

Change RequestProcessing

QuotingReal Time

Inquiry

ChangingNeeds

Real Time Processing


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Insurance

Market in Asia

Improving Effectiveness ofBancassurance -- An IT Perspective

By Suseel Kumar Kammara & Saumyajit Ray

The insurance market in Asia has witnessed significant growth in the last decade. Market reforms across

Asian countries during the late 90s attracted foreign investment, fueling economic development and helpingto improve insurance penetration ratios. Due to deregulation in these markets, a number of new insurance

companies have been established. As the competitive landscape expanded and the cost of acquisition

(through the traditional tied agency network) increased, insurers explored innovative distribution channels

such as corporate agency, Bancassurance, Retail Assurance and Internet direct sales to expand their reach.

Compared with the beginning of this century, when Bancassurance was virtually non-existent, it accounted

for 28% of life insurance premiums and 2% of non-life insurance premiums in 2005. Lured by Bancassurances

low initial investment, insurers embarked on it as a favorable alternate distribution channel.

Drivers for Bancassurance

In countries such as China, India, Indonesia, Japan, South Korea and Thailand, deregulation in the financial

services industry allowed banks to partner with insurers to distribute insurance products (hence the term,

Bancassurance). Banks are increasingly looking at Bancassurance as an opportunity to augment their

revenues with minimal investment in human and physical assets. Insurers are choosing the Bancassurance

route to escape from the high cost of captive agents and reach out to the huge untapped customer base of

banks, at the same time leveraging the existing bank customer relationships.

Bancassurance A Win-Win Proposition

Bankn Alternate revenue source with minimum investmentn Enhanced customer satisfaction though cross -selling bundled products

Insurern Augment revenue using partners existing distribution networkn Reach out to untapped customer basen Leverage customers trust in partner when entering new market


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Bancassurance Models

To effectively leverage the distribution channel, insurers have designed customized products to suit the

banking customers needs. They have also entered into diverse partnerships/ alliances with banks to unleash

the strength of the channel.

JV and fully-owned financial service group models are well-integrated and hence able to sell complex

products, while distribution agreement and strategic alliance models are not. Simple products and bundled

products tied with the financial products (e.g., credit insurance bundled with personal loans) are a natural

choice for the distribution agreement and strategic alliance models.

Integration Key driver behind success!

Studies conducted in Europe indicate that an integrated Bancassurance model leads to greater sales

efficiency and significantly greater administrative efficiency than a non- integrated model.

Level of integration between the processes, systems and cultures of the bank and the insurer improves the

effectiveness of the channel in the distribution of the products and establishing/improving customer

satisfaction. The level of integration also helps address challenges that impact the performance of a

Bancassurance channel. These include banks lack of experience, business cultural differences (demand-

oriented environment vs. proactive sales culture and incentivized compensation); customer ownership; and

divergent regulatory structures and pressures.

While insurers embark on multiple initiatives to improve the level of integration, IT initiatives play a major

role in accelerating time to market, bridging communications gaps and improving customer satisfaction.

IT A key enabler!

During the early stages of a Bancassurance relationship, ITs role is limited, as participants are hesitant to

make significant investments before exploring the channel and realizing tangible benefit. With time, as

confidence in the channel increases, IT plays an increasingly important role in achieving a higher level ofintegration by bringing disparate systems and processes closer to improve channel effectiveness. Key IT

initiatives that help reinforce the strengths of the Bancassurance channel include:

n Higher level of integration: Disparate functional systems need to be tightly integrated to

simplify the sales management process and enable faster decision making. These systems

include sales illustration, application capture and data entry, rule-based underwriting tools,

workflow applications and sales reporting systems.

Figure 1: Bancassurance Models

Joint Venturen Common management and higher degree

of commitment from both partiesn Profit sharing arrangement based

on stake in JVn Sharing of bank customer data for lead

generation and underwritingn Insurance advisors assist bank staff in

setting complex products

Fully Owned FinancialServices Groupn Developed through acquisition or

formation of subsidiary

n Modalities similar to JV with evenhigher integration

Distribution Agreementn Can involve multiple insurers or banks

n Banks serve as distribution points forinsurance

n Commission based income for banks

n Insurer responsible for underwritingand product design

n Insurer retains underwriting profit

Strategic Alliancen Exclusive bank-insurer relationship

n Banks responsible for distributionand assist in product design

n Principally commission-based incomefor banks

n Insurer responsible for underwriting

n Limited sharing of underwriting profit

Bancassurance Models

PRODUCTCOMPLEXIT

Y

INTEGRATION


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n Rule-based processing and PoS (Point of Service) enablement: Automation of application

data validation and underwriting rules at the PoS to enable straight-through processing and pre-

approval of policies for enhanced customer satisfaction with faster processing of the

application.

n Web enablement: Various functions need to be Web-enabled, including form fill-out, dataentry, underwriting and reporting. In addition, maintaining online repositories of product

brochures and marketing materials ensures ease of access, as well as consistency and accuracy

in data collection. It also helps bridge the insurance knowledge gap of bank sales personnel.

n Data mining: Sharing of customer data between banks and insurers through effective use of

CRM and data mining helps with better lead generation and identification of cross-selling

opportunities.

The figure on the following page represents an ideal-scenario technology platform that addresses business

drivers that help a Bancassurance channel achieve optimum efficiency.

The importance of IT in a Bancassurance channel increases with an increase in the level of integration.While managed services provide minimum support to run the channel, marginal integration aims to improve

productivity of the bank employees and sales staff deployed at bank branches. A fully integrated IT model

enables development of customized insurance products, driving greater underwriting profits and cross sales

through CRM implementation, and driving higher revenue.

Conclusion

Bancassurance has emerged as an important new channel for distribution of insurance in Asia. Players are

developing confidence in the channel with an increase in both life and non-life premiums generated. In the

coming years, increased investment in IT is expected as insurers take the natural next step to achieve

higher levels of systems integration to further improve channel effectiveness.

Figure 2: Roadmap for Bancassurance System Integration

n Sharing of customer data

n CRM and data mining

n Auto underwriting at POS for

STP and pre approval

n Minimal investment in IT

n Physical transfer of forms to insurer

n IT used for commission calculation

and disbursement

n Illustration application at POS

n Application data entry by sales staff

n Electronic form fill up using web

Full Integration

Marginal Integration

Managed Service

Time

Low

Medium

High

Integration Roadmap for Bancassurance System Integration


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Suseel Kumar Kammara is part of the Cognizant Business Consulting group and has worked on multiple

technology and process consulting assignments for Insurance Clients across North America and Asia/

Pacific. He has a wide knowledge on insurance operations and has played a key role in setting up and

managing domain Centers of Excellence (CoE) for Underwriting and Agency management.

Saumyajit Ray is part of the Cognizant Business Consulting group and has deep understanding of the New

Business, Underwriting and Policy Administration processes. He has been a part of several key consulting

and business analysis assignments for clients across Asia-Pacific and North American regions. He currently

manages the Center of Excellence for New Business and Underwriting at Cognizant.

References

Bancassurance Global Update: Lessons from Around the World in China, India, Europe, and US , Celent,

March 2008

Analysis of Bancassurance and its status around the world, Scor, October 2005

New Trends in World Bancassurance, Milliman, 2004

Figure 3:

Source: Bancassurance Global Update: Lessons from Around the World in China, India, Europe

and US, Celent, March 2008.

Sales ToolsPolicyInfo

Bank ProgramManagers

LicensedBank Rep

Call Center Underwriter

Client

ApplicationEntry

AutomatedUnderwriting

SalesReporting

Financial

Reporting

PolicyAdmin

Compensation

ApplicationStatus, History

ManualUnderwriting

Financial Institution Insurance Platform

Web

Web Web

Web Web

Source: Celent


16/20



Straight-Through

Processing and itsApplication in the

Insurance IndustryBy Lawrence T. Gillick, Sr., & Bhavesh Mandlas

In response to the growing need of insurance carriers to respond to shifts in the marketplace, Cognizant has

become a major player in straight-through processing (STP) for insurance products. Our model of straight-

through processing for insurance carriers can be applied to all distribution types.

Cognizant insurance consultants understand that achieving top-level returns on technology investments in

the insurance marketplace is an ever-increasing challenge. Certain technology investments including

integration of data across systems, business process management (BPM), customer relationship

management (CRM), service-oriented architecture (SOA), Web, portals, e-mail and interactive voice -- can

provide carriers with the power to deliver service excellence while they meet business unit objectives, such

as increasing productivity and sales, as well as retaining existing customers.

When business units gain insights into effective utilization of these IT improvements, they can drive vital

changes in their activities, led by requirements studies. The traditional view of a paper-driven environment

has been changed as IT replaces every step in the long stream of transaction processing. Todays insurance

operations are increasingly entering into the long-promised, but not yet achieved, realm of a paperless

environment.

Cognizant consultants have worked alongside and partnered with technology vendors to bring customizedIT solutions and services to insurance carrier operations. As partners on multiple projects, weve been very

successful in providing requirements documentation, process flow automation, rules-based engines and a

single view of customers, even when data has been captured in multiple application silos. For self-service

Web sites, weve even been able to create environments through which customers can receive

individualized and validated cross-sell and up-sell information as part of their standard site interaction.


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Conventional transaction processing encompasses multiple manual steps, including application review and

the ordering of credit and medical reports. Automation is now seen as the only way to improve the process,

which is where STP comes in. STP is a method of adopting automation as a processing goal. STP brings

automation to all steps in the transaction process, from the initial request to its completion, and the concept

is readily applicable across all lines of business and activities.

Carriers have been moving toward STP, as evidenced by the utilization of BPM to automate the business

process; CRM to automate the customer relationship process; and SOA to enable the development of links

necessary for BPM integration. The insurance industry has a need to adopt the STP concept even if the

realities of specific policies and risks require some human intervention. Our view of STP for insurance

carriers is to ensure that all necessary data is captured only once and is available throughout the enterprise

for all applications. Even with each step in every application automated, we still recognize and build

business rules that require human intervention. A significant advantage of the STP process of integrating

external rules engines with legacy applications is its significant impact on competitiveness, removing many

of the advantages of start-up operations.

Straight-through processing provides the insurance industry with a framework for meeting the goals of

rapid response to change; improved time to market; real-time transaction processing; improved productivity;

decreased operating costs; improved audit trails; maximized legacy systems efficiencies; and greater

satisfaction in the distribution channel and among customers.

Figure 1: Industry trend in Straight through processing

n Accounting.n Commissions.n Post-issue services.

Industry Trends

Implementation Model

Business Driversn Become responsive and

customer-centric.n Increase new business by

reducing policy issuance time.

n Reduce transaction cost.

n Increase productivitythrough automation.

ImplementationRisks

n Non-integratedheterogeneous applications.

n Poor documentation of businessrules and processes.

n Involvement of partners (e.g.,distributors).

n Change management.

Enabling Solutionsn Electronic documents and forms.n e-Signatures.

n Process orchestration.

n Case management and workflow.

n Electronic content management.

n Electronic contract generationand distribution.

n Automated underwriting.

n Electronic payment& settlement.

OTS Productsn Planet soft:

The Policy Processor.

n FirstBest UMS.

n Xenos: Guaranteed Issue.

n Blaze.

n

iLog.

Exception Interception Model

n Optimal combination of processautomation and humanintervention.

n Provision for humanintervention in case of exception.

n Easier to implement andcost-effective.

Other Process Areas with Potentialfor STP Implementation:

n Licensing andappointment.

n Claims.n Disbursements.

Business

ProcessesCurrent Focus Areasof STP Include:

n New business.n Underwriting.

IndustryTrends on STP


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Data access processes must perform independently of any specific database. STP applications incorporating

BPM, SOA, DMA and CRM processes offer simpler systems that integrate well with existing platforms and

can be easily modified. Various application programming interface (API) design models can be utilized, but

the core technology is Web services. Succeeding with STP requires a close partnership with an expert who

understands how to effectively create an optimized business services organization.

To discuss how to implement STP or obtain our white paper on which this article was based, please contact

your account manager. The white paper addresses the core issues for any organization wishing to adopt

straight-through processing techniques to modernize its operations. Learn how STP, integrating and

processing real- or best-time data through all channels of information across your enterprise can optimize

your legacy systems running on multiple platforms and enable more timely and effective strategic and

operational shifts to meet todays and tomorrows business requirements.

Lawrence T. Gillick, Sr., CPCU, is a member of Cognizant Business Consulting group and has extensive

experience in P&C insurance. A graduate of the City College of NY, he taught insurance at Hofstra Universityand is certified in New York to teach and monitor exams for Property and Casualty, Life and Accident and

Health State Licensing. He has been a consultant in insurance processes for 12+ years.

Bhavesh Mandlas is a member of the Cognizant Business Consulting group and has extensive experience

in consulting assignments in both Life Insurance and Annuities domain for North American and APAC

insurers. He has wide knowledge on insurance business processes and his areas of interest are Process

Rationalization, Requirements Engineering and IT Portfolio Assessment. He holds a Masters degree in

Management and also insurance specific certifications like LOMA, AAPA & IRDA certifications



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About Cognizant

Cognizants single-minded mission is to dedicate our global technology and innovation know-how,our industry expertise and worldwide resources to working together with clients to make their

businesses stronger.

To learn more about Cognizant, please visit: www.cognizant.com.

India Operations Headquarters:

#5/535, Old Mahabalipuram Road

Okkiyam Pettai, Thoraipakkam

Chennai 600 096 India

Phone: +91 (0) 44 4209 6000

Fax: +91 (0) 44 4209 6060

Email: [email protected]

Australia Operations Headquarters:

Melbourne

566 St. Kilda Road,

Melbourne,

Victoria,

Australia 3004

Phone: +61 3 9526 8470

Fax: +61 3 9526 8969

Sydney

Darling Park, Tower-2, L-21

201, Sussex Street,

Sydney, NSW,

Australia 2000

Phone: +61-2-9006 1297 / +61-2-9006 1298

Fax: +61-2-9006 1010


World Headquarters:

500 Frank W. Burr Blvd.

Teaneck, NJ 07666 USA

Phone: +1 201 801 0233Fax: +1 201 801 0243

Toll free: +1 888 937 3277


European Headquarters:

Haymarket House

28-29 Haymarket

London SW1Y 4SP UK

Phone: +44 (0) 20 7321 4888

Fax: +44 (0) 20 7321 4890


Global Delivery Centers:

Budapest (Hungary); Buenos Aires (Argentina); Canary Wharf (U.K.); Shanghai (China); Toronto (Canada); Bangalore,

Chennai, Cochin, Coimbatore, Gurgaon, Hyderabad, Kolkata, Mumbai, New Delhi, Pune (India); Bentonville, Boston,

Bridgewater, Chicago, Phoenix (U.S.)

Regional Offices:Atlanta, Boston, Chicago, Dallas, Los Angeles, Minneapolis, Norwalk, Phoenix, San Ramon, Teaneck (U.S.);

Toronto (Canada); London (UK); Frankfurt (Germany); Paris (France); Zurich, Geneva (Switzerland); Amsterdam

(The Netherlands); Shanghai (China); Tokyo (Japan); Melbourne (Australia); Singapore (Singapore); Kuala Lumpur

(Malaysia); Buenos Aires (Argentina); Hong Kong (China); Manila (Philippines).


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