Insurance carriers move to crumple paper processes

Insurance industry powerhouses including American International Group Inc., The St. Paul Cos. and The Hartford Financial Services Group Inc. are stepping up efforts to cut paper from operations with a breadth of Web-based projects that are just going live, but are part of a new automation trend among large insurance carriers.

Earlier this month, St. Paul Cos. and insurance broker went live with a Web-based XML application. New York-based AIG said it would deploy next week a Web-based XML program that automates quote preparation processes and cuts paper use. And in early April, Hartford, Conn.-based Hartford Financial will begin using a paper-reducing “claims hub” for some interinsurance company transactions.

According to Rick Maloy, CEO and president of InsureHiTech in Princeton, N.J., the end customer, his insurance agent, or both, fill out an electronic form that InsureHiTech’s back-end system then sends as an XML e-mail to the carrier’s server.

“No humans have to touch it,” Maloy said. “It drops directly into their rating and policy management system, so there’s no re-keying.”

The technology will make quote preparation and delivery more efficient and increase customer satisfaction, said Christopher Sparro, president of the middle market and commercial units at National Union Fire Insurance Co., an AIG member company in Pittsburgh. He said he couldn’t give specifics about expected cost or time savings because the process is so new.

In addition to the XML-based system InsureHiTech has pioneered, AIG offers a Web-based interface for agents to use. “It allows us to generate quote letters, to qualify our accounts, quote and bind policies all online,” Sparro said.

St. Paul Cos. uses the same technology for property, general liability, errors and omissions and biotechnology product liability and clinical trial coverage policies.

It only took a couple of months for St. Paul to tie into the InsureHiTech system, said Jon Farber, underwriting director for St. Paul Technology in St. Paul, Minn.

Despite the progress that InsureHiTech is making, the average broker won’t be fully automated for at least five years, said Eduard Cecere, an analyst at TowerGroup in Needham, Mass.

“There’s the disparate nature of sophistication in technology at these agents and brokers,” he said. “You’ve got a wide spectrum of actual configuration — you’ve got agents just getting online and some still using ledger books.”

In addition, the carriers have to be ready to accept electronic transactions — and not all are, he said.

In a very different approach to eliminating the paper trail, one web exchange is moving to reduce delays by using a claims processing hub between insurance carriers. According to Dennis Marone, chief technology officer at ClaimPlace Inc. in Wilmington, Mass., insurance companies often have to deal with one another to settle claims or outsource some claims to other companies for processing, something that usually involves a large amount of paper changing hands.

Marone said Hartford Financial will begin using his firm’s claims hub within two weeks, with a full-scale rollout scheduled for midyear.

Todd Eyler, an analyst at Forrester Research Inc. in Cambridge, Mass., estimated that the insurance industry could save US$10 billion and reduce processing time by a week with claims hubs that route case files electronically.