Straight-through processing (STP) is the only viable long-term solution to tackling the re/insurance industry’s ongoing challenge with out-of-control expense ratios, a London quarterly event held by global standards-setting body ACORD has concluded.
But while the business case is proven, in the long-term a standard approach and a focus on people as much as technology are key.
ACORD is the Association for Cooperative Operations Research and Development and acts as the global standards-setting body for the insurance and related financial services industries, with offices in London and New York.
Its latest panel event, entitled Global Reinsurance and Large Commercial (GRLC) Framework – Empowering London Market Straight-Through Processing, considered issues including placement, claims, technical accounting and settlement from both an insurer and broker perspective.
Need for change
Chris Newman, ACORD’s London managing director, said the discussion “highlighted that those who have made great progress towards STP haven’t done so overnight. The scale of change can be overwhelming and a common success factor is to start small – run tests, fix bugs, get comfortable and confident with the process then roll it out more widely.
“Those who have successfully been through the process have found that the costs associated with implementation don’t arise from flaws in the technology or the standards, but rather from human error in using them. The success of STP isn’t just about implementing a system and adopting standards but on managing the change around them, shifting people’s mindsets, making them aware of the benefits and providing them with adequate training.”
ACORD has developed GRLC standards to assist leading players in the re/insurance industry participating in the Ruschlikon Initiative – which aims to reduce operational costs and enhance client service – in improving their back-office processes to generate faster cash, higher efficiency, and better information and service levels.
“There is a burning platform for change in the insurance industry,” said Newman. “Disjointed and unaligned processes are frequently generating thousands of queries, wasting millions of pounds and requiring the need for extensive administrative support that adds no value.
“But the good news is that the infrastructure exists to drastically reduce the administrative burden on all stakeholders in the insurance value chain by using one set of consistent, inter-linked, GRLC messages that build an STP model for commercial insurance transactions.
The ability to have everyone plug into the same system removes a huge amount of pressure on re/insurers and brokers. People have been developing a range of platforms to help enable STP but the lynchpin is that we all need to be talking the same language – ACORD standards deliver that consistency.”
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