Why Straight-Through Processing Is Important for Insurers

Straight-through-processing can cut manual input by up to 90% and it’s getting more attention in the insurance industry. Learn mo

 min. read
May 28, 2024
Why Straight-Through Processing Is Important for Insurers

The post-pandemic landscape has brought with it increased growth for the insurance industry and with that, mounting pressure to keep up. A 2021 survey from Deloitte highlighted just how key technological advancements are becoming more important for insurance companies who not only want to improve their efficiency, but also the experience of their customers.

At the forefront of this shift is straight-through processing (STP). The automation of claims payments and underwriting carries huge advantages for insurers as they try to keep clients happy and stay on top of industry growth. Read more to discover exactly what STP involves, how it can improve workflow and revenue for insurers, and how intelligent document processing can facilitate STP.

As defined by Investopedia, STP is an “automated process done purely through electronic transfers with no manual intervention involved.” It’s described as “straight-through” because the system is streamlined enough that documents are handled in one, clean process, rather than needing added input. With STP, documents don’t need to bounce between departments or different employees. Instead, it’s all dealt with through a single computing system.

Now that we've got the basics of STP covered, the next question is “what is straight-through processing in insurance?”. Technological advancements such as AI and machine learning have made it possible for insurers to automatically process transactions and underwriting, without manual intervention.

Though it’s still quite uncommon to use STP in claim applications, as insurers improve their systems and data extraction, it’s expected to become far more standard. Personal insurance claims, especially those that fall within P&C have a simpler process and as such, are already being streamlined with STP. In a 2021 Mckinsey report, it was suggested that P&C insurance is likely to double STP rates in the future as they cut manual inputs by up to 90%.

Where automation has taken the fastest hold is mostly with regard to how claims payments are processed as insurers move away from mailing checks etc. toward digital payments. Instead of claims payments being a lengthy administrative task, STP streamlines the entire process so that filing is quicker for clients and more efficient for the insurers handling them. The benefits of straight-through processing insurance are significant – it’s no wonder that it sits at the forefront of the technology being adopted by insurers.

In the interest of taking care of clients, limiting errors, and improving overall efficiency so that revenue goes up and costs go down, shifting to a straight-through processing insurance system is an attractive change. But how exactly does STP meet these priorities?

Everything about modern life is structured around maximum convenience with minimal input, the result of which is an increasingly impatient customer base. People’s willingness to wait a lengthy period for a claim to go through has long passed. If insurers are too slow to process claims and payouts, customers are left frustrated and often, considering whether to take their business elsewhere. Unfortunately, the manual processing of insurance documents is still very time-consuming.

The solution to slow workflows and antsy insurance claimants is simple: STP. The level of automation that insurance straight-through processing involved drastically decreases the time it takes to get through claims and underwriting. For low-value claims, or P&C claims especially where the adjudication is very obvious, STP can help insurers wade through documents quicker and provide better service to individuals.

There’s no denying that on bigger, more complicated claims, a level of human involvement will always be required. However, by automating the ones that don’t need it through STP, insurers can put their employee’s energy and time to better use. The simpler claims go through faster thanks to STP and the bigger ones follow suit because staff isn’t as stretched. The upshot is a client that isn’t left waiting too long and as such, is less likely to be tempted elsewhere.

Customer service is an intrinsic part of the success of any business, but in insurance it is paramount. STP helps to protect that relationship and make for a speedier, happier outcome for all.

Although some might question whether having less human engagement in delicate processes such as insurance claims is a good thing, it’s only possible because of how advanced technology has become. Moving from manual, human labor to automation is always a daunting step but with the kind of AI and machine learning applications available now, it’s also the smart one.

Humans make mistakes. It’s natural, especially when wading through files and files of documents. Humans have however managed to hone intelligent technology that can process large volumes of documents and the data contained by them not only faster but often with higher accuracy than can be performed manually. Automating the processing of documents and claims with a straight-through processing insurance system lowers the chance of human error and in turn, makes these tasks more efficient.

STP is a key optimization tool for insurers and while there will always be aspects in which automation cannot replace human involvement, it makes so much sense to let it do what it can. Especially when automation means fewer errors and less time wasted by employees.

Perhaps the most attractive outcome of STP is its effect on the bottom line. The impact that insurance straight-through processing has in improving the speed at which claims can be dealt with means happier clients and a better retention rate. That’s the first tick on the checklist of ways in which STP can lead to more revenue, simply by protecting the customer base.

Automating document and claims processing also improves workflow and requires fewer human hours on the job – the result of which is lowered operational costs. The fact that fewer mistakes are made when automation is involved also adds to the cost-saving benefits of a straight-through processing insurance system.

From a financial perspective, it makes far more sense to put your best employees on the difficult tasks rather than wasting their time on things that could be automated. Work hours are valuable. STP ensures that simpler P&C claims, digital transactions, and underwriting are automated so insurers can operate more efficiently, and not waste labor capital on unnecessary tasks.

One of the most important factors for any insurer to consider as they move towards an STP system is how accessible their data is. Automation cannot occur without accurate, accessible data. It’s why the very first step in insurance straight-through processing is automating how data is extracted from documents.

Intelligent Document Processing (IDP) automates data extraction so that no matter what document is sent in, or its format, the information that would otherwise have been typed up manually, is now extracted digitally. The document is simply scanned by the program and the necessary information is added to the system and ready to use. This occurs in a fraction of the time it would take someone to do and with a much lower risk of error.

Using IDP in a situation where, for example, a car inspection report is sent in, all the relevant data from that report would be extracted and returned as structured, usable data. An STP system powered by AI would then automatically adjudicate applications based on the given data. It’s how STP gets its name – a document comes in and is processed directly through the system rather than being handled by multiple people or departments. In this case, it’s not handled by any human hands at all.

That process however starts with automating data extraction. A single claim can involve multiple documents, both physical and digital, that need processing. IDP is able to take on that task, whether the file includes receipts, medical reports, blood tests, or anything else, and turn all that information into structured data. Having that data digitalized and ready is what allows the rest of the streamlined STP system to do what it needs to.

FormX offers a user-friendly, reliable IDP solution that is ready to automate data extraction and power up your insurance straight-through processing system. We’ve helped insurers expedite their workflow in terms of claims processing, underwriting, and other processes relying on document with different layouts and content.

Ultimately, our automated document processing tools are all about increasing operational efficiency through intelligent technology. The result of putting these tools into action is businesses that are better able to meet the demands of their customers while still maintaining the bottom line.

Contact us to see how FormX can help you automate document processing and improve the overall efficiency of your insurance business.