Life insurers in particular can benefit by automating the traditionally paper-intensive new-business process, says John Johnsen, managing director of TCi Consulting and Research and former insurance company CIO. Almost 40 percent of all paper applications that are sent in are not in good order and need to get sent back or require a call back to the agent. The work involved in that is enormous.

Theres a lot more pain in the life process, because the average new-business cycle time is about 45 days, Weber adds. On average, a paper point-of-sale application takes about 10 days to reach the home office. So most carriers find that simply by capturing applications electronically they can eliminate most of that delay and get underwriting information ordered almost instantly. And once you have the data electronically, theres no need to have an expensive human interface between systems that use that data, which is where XML has the most promise.

Maximize Sell Time
Zurich Life, Schaumburg, Ill., whose pending purchase by Bank One was recently announced (see sidebar, p. 26), realized the benefits of streamlining the life insurance application process when the insurer created a fax-based system more than five years ago. Agents would complete a paper pre-application and fax it to Zurichs TeleLife unit, which would re-enter the data and complete a follow-up call to the applicant to fill in the remaining details. The aim, according to Michael Slades Sladek, senior marketing director of e-commerce for Zurich Life, was to reallocate the bulk of the cumbersome application process from the field agent to the call center and maximize time for selling in the field.

The system achieved that goal and evolved to become the basis for straight-through processing of new applications. In early 2002, Zurich completed conversion of the fax-based system to its Web-based Z-App (thats Z App, not zap) system. Rather than complete a paper form, the agent fills out a pre-application online and submits it to Zurich. Application data is sent directly to Zurichs policy administration system, and e-mails are automatically sent to the TeleLife unit for work assignment and to the agent for confirmation of receipt of the application. In 2003, the insurer added an electronic payments capability to the system to allow applicants to submit electronic payment at the time of pre-application.

We essentially said to the general agent, Its too costly for you to baby-sit term applications that are $300 a case, Sladek says. Rather than the agent completing all the application questions at the applicants home or in the office, an agent can talk on the phone and, in under two minutes, submit the pre-application, which immediately goes into the call center queue.

Z-App runs in an IBM WebSphere, Java environment on Solaris servers running Unix. XML is used to connect Z-App with Zurichs legacy policy administration system from CSC, and it also lays the groundwork for connection with agency management systems, third-party aggregators, or other future policy application sources.

Our agents told us that in the long run they didnt want the functionality [of Z-App] exclusively on our Web site, so when we developed the middleware [to connect Z-App to CSC], the majority of rules for data validation and system edits are built into the middleware and not the front end, Sladek says.

Paramed reports and other supporting documents also are received electronically, with the exception of attending physician statements. Zurich currently has not found the need to digitize or image these statements due to the fewer than 10 percent of applications on which these statements would be ordered. At one time, Zurich Life had an underwriting judgment processing system in place, but the insurer found this system did not allow for the needed flexibility in underwriting borderline applications and removed it.

The Z-App system has met Zurichs objectives so far. The application process for the agent takes less than five minutes. It also has reduced the amount of paper sent back to the agent, the internal errors, and the turnaround time because the data comes directly from the agent whos typing in the information. Its reduced our cost, and its increased our relationship with a number of general agents, some of whom have marketed Z-App so well theyve been able to double their production, says Sladek.

Last year, we saved about $90,000 in the first year of inception. The system cost was a little higher than that, so it should be a 24-month payback just in cost savings, Sladek continues. That doesnt include the fact a lot of our general agents have improved their business, resulting in all the additional premium weve received.

Acquisition easier
While the pain point may be higher in life insurance for new business, even in the other lines of insurance, acquisition has been the area of focus. Part of the reason is other processes, such as claims, tend to present greater business and workflow challenges for STP.

Weve seen instances where [new- business STP projects] require just 20 to 40 percent of the effort to do claims processing, says Gautam Desai, vice president of research at Doculabs, a technology consulting and research firm in Chicago. He attributes that to the variation of claims handling rules and processes among companies versus the relatively homogenous process of, for example, personal lines underwriting. Larger companies in particular see their claims process as a competitive advantage, making it difficult for vendors to create a single [STP] solution.

In addition, since the claims process involves ad hoc contact with many potential third parties, it not only makes achieving STP more complicated but also raises security concerns. Insurers see the benefit to improve efficiency and lower their costs for simple claims, for example, by using policyholder service portals to initiate a claims request and to take the data entry for that claim out of the call center, which lowers the transaction cost. But the issue is if youve created an automated end-to-end transaction in claims, theres a potential for fraud. Theres only so much automation you can put in place, or else youll be very efficient but losing money in the end, Desai asserts.

This is not to say, however, that insurers are completely stopping their STP projects at the acquisition level. AFLAC, for example, is using the success of its new-business STP work as a springboard for future projects, according to James D. Lester III, senior vice president and CIO of the supplemental disability insurer. Its application system, SmartApp, dates back nearly 10 years and is based on the system originally sold to AFLAC by Portable Systems Technology, the company Lester founded and worked for before joining AFLAC in 1999.

For the past year and a half, AFLAC has been reengineering the SmartApp system, originally written in C++, to make use of Web services technologies and Microsoft .NET. In January, we completed the last engineering step in the process by taking a large assembler batch program that handled underwriting and rating, says Lester. We now run it real time in WebSphere.

The SmartApp system is a core system for AFLAC, with 86 percent of the applications the insurer receivesabout 2.5 millionsubmitted electronically via SmartApp. AFLAC has deployed the laptop component of the system on 12,000 agent PCs nationwide. Agents typically complete applications offline for batch upload.
Once AFLAC receives an application, SmartApp parses the application data and passes it to the mainframe via IP connection. Simultaneously, the system renders an application image from the data, which it routes to an image server, and also sends the application to an expert underwriting system built by AFLAC in Java and running real time in WebSphere.

Nearly 55 percent of the applications routed to the underwriting system are jet-issued, meaning they meet underwriting criteria, and these applications are routed for nightly batch printing and mailing. The system sends remaining applications to underwriters for review.

Agents can, for example, transmit 100 applications and, since the system runs real time, dial in and see just how many [failed] and what error codes were generated, Lester says.

He adds AFLAC sees two key areas of opportunity for STP: acquisition and service. With the former firmly in hand, AFLAC has sought to target the latter. Were broadening our architecture to encompass other transactions and events, such as claims, Lester says. As in new-business processing, STP in service also will require rearchitecting legacy service-based systems for real-time processing and with component-based architecture.
AFLAC retained BearingPoint in late 2001 to help identify opportunities for STP in service, from low hanging fruit to heavy resource projects. What AFLAC found was that, in contrast to the SmartApp system that was best served by an internal rewrite, the insurers service systems will be best handled by using webMethods to integrate applications and create new infrastructure for business process management, automation, and monitoring. The purchase of webMethods was recent, and work is in progress with AFLACs current Internet-based billing system being the first target.

Western-Southern Life, Cincinnati, Ohio, whose new straight-through under-writing and application system was featured in the September 2002 issue of Tech Decisions, similarly is planning a gradual evolution of STP now that the system has come online in 2003.

The biggest payback has been in new business, but now that we will be bringing the application into our systems in electronic form, we can automate other areas as well, says Jim Teeters, senior vice president insurance operations for Western-Southern. The next project will involve automating policy assembly, and Western-Southern has purchased Document Sciences policy solution to accomplish that.

Once we do that, particularly with our captive field force, we will be ready to take the next step of printing directly in the agents office, Teeters says. After our issuance projects, well attack self-service over the Internet. Western-Southern currently supports the ability to do some changes to in-force policies via the Web, but further work has been slowed by what Teeters reports is the untested world of e-signatures. We still have to follow up with policy owners and get a wet signature on Internet-initiated changes, he says.

demand-driven semci
In addition to meeting defined business goals, responding to market demands has driven and will continue to affect the insurers STP efforts. Perhaps primary among these demands is the clamor of independent agents for SEMCI. Left to their own devices, carriers probably wouldnt push for [SEMCI]. But increasingly some of their distribution channels are demanding it, Weber says. The carrier doesnt want to be marginalized, but if the [sales] channel is big enough, its going to have more influence on how the carrier does business. There always will be some 800-pound gorillas out there, says Weber.

Because of the use of independent [agency] channels, the emphasis will be on capturing data through whatever tool the agent uses, Weber continues. However, most carriers still have captive agents, or they have independent agents who dont use an agency management system. So carriers need to support both methods of data capture, through both proprietary portals and by interfacing with agency management systems.
Cincinnati Equitable Insurance Com-pany is an example of a property/casualty carrier doing just that. The carriers administration systems for both policies and claims are based on Applied Systems Diamond platform. At Cincinnati Equitables own Web portal, agents have policy, billing, and claims inquiry capabilities, as well as the ability to report claims, request policy changes, and apply payments posted in real time. Automation of the quoting and application process is in progress.

[The portal is] the primary method we support because about half our agents dont use an agency management system, explains Terry Brown, vice president of information systems at Cincinnati Equitable.
Each of these transactions will process straight through the administration system in real time with no additional intervention. When the agent initiates the transaction, a Web service is invoked that passes ACORD XML into Diamond. Diamond returns the same XML instance to the Web service with additional data fields populated, such as policy numbers and error codes. The Web service then displays the result to the agent at the portal.

Cincinnati Equitable also accepts applications uploaded from third-party comparative rating software, which is more commonly found in the offices of the insurers agents. Applications upload-ed via comparative raters invoke the same Web service used by the portal. However, the process still involves some manual intervention at this time. The data gets into the system [from the comparative rater file], but it usually has to be tweaked on our end before it can be issued because of company-specific fields, Brown says. Still, a great deal of the rekeying has been eliminated.

With its administration system based on Diamond, Cincinnati Equitable also has been in a good position to interface with Transformation Station, the XML-based communications infrastructure from IVANS that is supported by Applied Systems agency management systems. Support for Transformation Station is being rolled out at Cincinnati Equitable on a transaction-by-transaction basis, with policy and billing inquiry currently available for auto and property. And, by using ACORD XML standards, Cincinnati Equitable eventually will be able to interface with other agency management systems and comparative raters as well. If the vendor can provide ACORD XML, we love that, but not all vendors do. Some still provide only text files, Brown says.

Zurich also built its Z-App system with the future of agency connections in mind and currently interfaces with Agencyworks in a pilot program at the insurance distribution division of Bisys. You have to have development partners. In the first go around, well have select partners, but we support XMLife, so we can support any, says Zurichs Sladek.

xml supports stp
XML and the development of the various XML standards have been essential for insurers ongoing STP efforts. The standards are a work in progress, but they are a very usable piece. We see many software providers building in support of ACORD XML, but carriers are still experimenting with it: quoting, policy issuance, adding endorsements, renewals, billing, and claims inquiries. By no means have we peaked in our use of XML as a tool to enable STP, says Weber.

If all of the software vendors were using ACORD standards, it would make achieving STP much easier, adds TCis Johnsen. You could use one vendor for new business, another for policy administration, and it would be easier to pass data back and forth. Unfortunately, theyve got a way to go.

Also proving important has been the maturation of XML Web services. However, rather than fulfilling their promised destiny as distributed components accessible on an ad-hoc basis via the Internet, Web services currently are being used by insurers for interoperability and integration of systems as part of STP, as in AFLACs and Cincinnati Equitables systems.

Web services are a key integration technology, says Desai. A lot of companies have built adapters that have exposed themselves through Web services, but right now there still needs to be some sort of middleware to direct them, rather than having them connect peer to peer. Thats important because what weve had happen is companies have built Web services to interact with mainframe [applications], but those services started taking up cycles on the mainframe. Middleware allows you to plan for security and to manage those services in a centralized manner.

T+1
In addition to marketplace drivers, various regulations and industry guidelines have impacted (or threatened to impact) the STP plans of insurers. The most visible among these has been HIPAA, whose requirements
include the upcoming October 2003 deadline for electronic transactions between health insurers and providers.

Another proposed requirement that has surfaced over the past several years is T+1, which would require securities trades to be settled in the day after trading. The question has been just what this requirement would mean for insurers, particularly those that offer annuities and whole life products. While the Securities Industry Association, the driving force behind the T+1 proposal, has postponed the issue indefinitely, it is worth examining because of the number of financial services firms that have been working toward that goal.

The bottom line is that any future requirement for T+1 trades would have little, if any, impact on the business insurers do with their policyholders. Each policy is not managed individually. Its a group of products that are managed as a fund, explains David Cornelius, recently global STP leader at Cap Gemini Ernst & Young and now vice president of financial services at FileNet, a content management and business process solutions provider.

T+1 would factor into any trades an insurer made to its own investments or to the investment portfolio supporting a book of business, but the compliance burden would rest with the securities broker. Additionally, Cornelius sees any move toward T+1 being only tangential to an insurers overall STP efforts. The emphasis has been on linking order and portfolio management with financial accounting systems to provide better real-time financial modeling, he says. Insurers are pursuing STP for cost or risk reduction, rather than any T+1 deadline.

E-Commerce/Web Services Tech Guide

Accenture
Palo Alto, Calif.
650-213-2000
www.accenture.com

AdminServer, Inc.
Malvern, Pa.
610.578.0112
www.adminserver.com

Allenbrook
Brunswick, Maine
207-725-6600
www.allenbrook.com

Applied Systems
University Park, Ill.
800-999-5368
www.appliedsystems.com

AscendantOne
Nashua, N.H.
603-598-5427
www.ascendantone.com

BMC Software
Houston, Tex.
713-918-2632
www.bmc.com

CGI Group, Inc.
Montreal, Quebec
541-841-3200
www.cgi.com

Connective Technologies
Houston, Tex.
800-856-6788
www.connective-edi.com

Connextions
Orlando, Fla.
877-772-6868
www.connextions.net

COSS Development Corp.
Milwaukee, Wis.
262-241-8989
www.cossdev.com

CSC Financial Services
Austin, Tex.
800-345-7672
www.csc-fs.com

Duck Creek Technologies
Bolivar, Mo.
866-DUCK-TEC
www.duckcreektech.com

EDS
Plano, Tex.
972-604-6000
www.eds.com/insurance
eHealthSystems
Sunnyvale, Calif.
408-542-4800
www.ehealthsystems.com

ePolicy Solutions
Torrance, Calif.
310-819-3210
www.epolicysolutions.com

Examen
Sacramento, Calif.
916-921-4300
www.examen.com

Fair Isaac
San Rafael, Calif.
415-472-2211
www.fairisaac.com

Fiserv
Brookfield, Wis.
800-422-3220
www.fiservais.com

Genelco Software Solutions
St. Louis, Mo.
800-983-8114
www.genelco.com

GRX Technologies
Providence, R.I.
401-331-6932
www.grx.com

I-Alliance
Indian Head, Pa.
800-997-5871
www.iallianceonline.com

INSTEC
Naperville, Ill.
630.955.9200
www.instec-corp.com

Insurity
Hartford, Conn.
860-616-7452
www.insurity.com

MFXchange Holdings
Toronto, Ont.
866-639-6399
www.mfxfairfax.com

National Con-Serv
Rockville, Md.
800-251-6274
www.accessflood.com

NaviSys
Edison, N.J.
800-775-3592
www.navisys.com

PilotFish Technology
Wethersfield, Conn.
860-257-0523
www.pilotfishtechnology.com

Results International Systems
Dublin, Ohio
614-540-3666
www.resultscorp.com

S1 Corporation
Atlanta, Ga.
404-923-7637
www.s1.com

SEAGULL
Atlanta, Ga.
404-760-1560
www.seagullsw.com

Sun Microsystems
Santa Clara, Calif.
650-786-0662
www.sun.com/finance

Swingtide
Portsmouth, N.H.
603-431-4081
www.swingtide.com

Torrid Technologies
Marietta, Ga.
770-565-6405
www.torrid-tech.com

TOWER Technology
Boston, Mass.
888-733-5500
www.towertech.com

Visibillity, Inc.
Chicago, Ill.
888-484-7424
www.visibillity.com

webMethods
Fairfax, Va.
703-460-2500
www.webmethods.com

Whitehill Technologies
Moncton, N.B., Canada
630-579-1534
www.whitehilltech.com

WorldGroup
Emeryville, Cal.
800-785-4526
www.wgcusa.com

technology a factor in bank ones purchase of zurich life
Zurich Life considers its Z-app front-office system as a competitive differentiator. This and other systems also were factors in the recent decision of Bank One to purchase the insurer. According to a Bank One press release, Bank One identified the benefits of Zurich Lifes front-office technology as well as strong life and annuity back-office processes and systems.

There were many factors that made this [acquisition] attractive, and certainly technology was an important one, says Thomas A. Kelly, Bank One spokesperson. Zurich Life has committed a lot of resources to technology applications to become a leading-edge player, and we expect to reap the benefits of that going forward.

Neither Bank One nor Zurich Life could comment on any specific technologies discussed in the negotiation. Michael Sladek, senior marketing director of e-commerce for Zurich Life, reports Zurich considers its technology assets to include both the Z-App front end as well as robust integration technology that supports any manner in which agents submit new business to Zurich Life.

We recently developed in-house a Java-based messaging middleware application that allows general agents to submit electronically new business from any platform, not just the Z-App front end, he explains. It takes standard TXLife transactions and reformats them to the format required by the CSC [policy administration] system. If general agents want to work through an agency management system or through their own Web site, this will import that XML transaction directly to the back end.
Additionally, Sladek references Zurich Lifes TeleLife unit and related back-office processes for new-business life insurance. After the TeleLife staff complete the application that was submitted by the agent, our back-office systems create an application packet that gets sent to the proposed insured, he explains. This in turn is picked up by the paramed when he or she is at the applicants house for the exam. When Zurich Life receives that application packet, it is scanned and linked to the exam results and other medical information for underwriting review.

Again, this streamlined application process is something we view and market to agents as an advantage over other carriers, Sladek says.