Moving away from rigid legacy systems in favor of more modern, innovative claim technologies which utilize a service-oriented architecture is a major part of that transformation.

SOA can provide the foundation upon which a new information technology infrastructure is built and through which new claim management efficiencies are achieved. By applying an SOA framework to core business services, insurers can begin to integrate existing systems with new point solutions. In addition, the introduction of SOA can provide measurable long-term benefits, including:

o Reduced claim-cycle time

o Reduced leakage

o Improved operational efficiency

o Consistency in claim-handling

o Compliance with regulatory and reporting requirements

o Reduced IT costs

One of the key ways SOA enables insurance companies to achieve new claim management efficiencies is by making true straight-through processing and customer self-service possible.

Essentially, SOA makes information-sharing more efficient and ensures greater data integrity, which ultimately results in faster claim resolution, improved customer service and greater policyholder retention.

The primary goal of STP is to reduce the amount of redundant data entry that occurs when data is manually transferred between multiple, disparate systems in the time from when a claim is first reported until it is settled and closed. The key to STP is to collect the right information in a timely, accurate manner.

To illustrate how STP is made possible in an SOA environment, let's walk through the handling of a simple auto claim. Here is how it could work.

o First, the policyholder would enter an auto physical damage claim directly into a customer portal that accesses the insurance company's business rules to check for missing or invalid data.

o Alternatively, an agent could enter the same loss information through a similar interface or agent portal.

o Next, the insurance company's claim system receives the first notice of loss, automatically generates a claim number, and messages the company's document management system to create a new electronic claim folder with the assigned claim number.

o Ideally, the claim system will then automatically pass the loss notice data to a predictive modeling/analytics application that identifies potential fraud conditions and determines the appropriate routing and assignment for the claim.

o If the claim qualifies for auto-adjudication, then it can be automatically approved for payment.

o Otherwise, it will be routed to a claim-handling unit or assigned to a specific adjuster based on the insurance company's automated business rules for claim assignment and workload balancing.

o During the next part of the process, an adjuster typically contacts the customer to set up an appointment with a preferred auto body shop that participates in the insurance company's direct repair program, and often also arranges for a car rental while the customer is on the phone.

o Data is transferred electronically between the insurance company's claim system and the vendors' systems in real-time utilizing the SOA infrastructure.

o Appraisals, damage photos, rental agreements, work orders and invoices can be electronically transmitted from vendors and indexed into appropriate claim folders in the insurer's document management system, which then triggers a notification to the adjuster to review and take action on the received information.

o The adjuster then reviews the electronic documents and initiates an electronic funds transfer payment from the claim system to each vendor via an automated clearinghouse interface and closes the claim.

o Finally, the claim system automatically generates correspondence to the agent regarding the closed claim and updates the claim status for both the policyholder and agent to see via their respective portals.

Keep in mind, this is a very simple example. A more complex claim can involve more systems and business entities. However, an SOA framework enables a complex process with multiple, disparate systems to be integrated into an effective, efficient and seamless STP model.

The benefits of STP made possible through SOA are significant to both the insurance company and any third parties, and include faster claim resolution, as well as improved customer, agent and vendor service.

Meanwhile, this improved level of service can be exactly the market differentiator that an insurance company needs to stay on top in today's marketplace.

Keith Inouye is chief operating officer and senior vice president of BlueWave Technology, developer of PipelineClaims, an SOA-enabled, Java-based core claims management system built for small to midsize carriers in the p&c industry. He may be reached at [email protected]