By: Gautam Desai and Linda Andrews, Doculabs
It's called straight-through processing (STP): the ability to streamline operations by automating the processing of transactions, using the Internet as the means of exchanging data. The idea is to move data through the value chain, from beginning to end, without rekeying the data at each stage in the process. STP got its start in the financial services industry for applications such as brokerage investment and settlement.
STP is now making its way into the insurance community as an approach to streamlining operations such as application processing and claims. Mergers and acquisitions, increasing transaction volumes, and increased demand for real-time access to information all underscore the need for the efficiencies that STP can deliver.
But the real impetus for STP comes from the convergence of the insurance and financial services industries. With the continuing dissolution of boundaries between insurance and finance, there is an increasing need for cross-industry standards for exchanging data-not just within an enterprise, but externally, with business partners: customers, carriers, agents, and brokers.
STP faces challenges, as the industry must agree on standards for data exchange. But the good news is that the technology required to support STP applications is available nowand much of it is designed to allow organizations to leverage their existing technology and systems. Thus, at Doculabs we advise our clients to develop a strategy for taking advantage of STP, and then plan to put in place the technology and infrastructure to take advantage of straight-through processing.
From a technology standpoint, the cornerstone of STP is systems interoperability. As such, the critical technologies behind this streamlined, end-to-end processing approach are those that enable automated flow of information between systemsboth your organization's systems and those of its partners. The key elements of an infrastructure to support STP are Extensible Markup Language (XML), integration technology and Web services.
XML Provides the Mechanism
The basic idea behind straight-through processing is the efficient sharing of data, irrespective of differences in platforms, networks, or software. This requires data that has been defined at its creation in such a way as to satisfy all subsequent demands for that data, using standard definitions that simplify the process of transmitting the data between business partners.
XML is a meta-language that provides a straightforward mechanism for creating these standard data definitions. Defining a common data schema in XML that is understood by multiple companies allows those companies to readily exchange data and import the data directly into their own databases or back-end systems.
It thus allows every participant in the insurance value chainagents, carriers, brokers, and underwritersto streamline their paper-intensive processes and standardize the ways in which they interact and exchange information. It's a far less-costly alternative to approaches such as electronic data interchange (EDI), providing an easier way for smaller companies to participate with partners in online data exchange.
And because XML is platform-independent, it doesn't matter which operating systems or platforms you or your trading partners are usingto trade data seamlessly, you only need to agree on standard definitions for the document types you exchange. To this end, some industries have formed consortiums to define standard definitions for documents commonly exchanged in their industries.
In the insurance industry, ACORD has been at the forefront in establishing XML-based standards and data object models for exchange of information in areas such as policies and submissions, claims, surety and accounting data.
What about the technologies for implementation? While XML is much easier than EDI, it is by no means simple. The different tools needed to facilitate XML implementations include XML editors, XML schema/DTD editors, XML viewers, and XML servers. While some XML utilities are inexpensive or even free, the challenge remains to pick the right tools from among the products available, not to mention the technical challenge of configuring them in a cohesive system.
Fortunately, many vendors of application software are beginning to incorporate varying levels of XML support directly into their products. For example, application server vendors such as IBM (Armonk, NY) and platform vendor Microsoft (Redmond, WA) are providing full-fledged XML service capabilities right out of the box, allowing developers to quickly write applications that can pull data from back-end systems and convert it to XML (and import XML data back into those systems).