For an insurance company, evaluating pricing and product mixregularly is an essential part of doing business successfully andstaying on top of the competition. But with the soft market drivingpremiums down and insurance becoming more of a commodity all thetime, choosing a differentiator other than price is crucial.

Service is a key differentiator not every company can deliversuccessfully.

The most important time for your company to demonstrate superiorservice is during the claim process, through fast, fair andefficient claim-handling.

The claim function is an ideal focus for process improvementsthrough technology due to its many external touch points withcustomers, agents, service providers and other insurance companies.Integrating systems to streamline the claims process can help youcompete in today's market.

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

SOA can provide the foundation upon which a new informationtechnology infrastructure is built and through which new claimmanagement efficiencies are achieved. By applying an SOA frameworkto core business services, insurers can begin to integrate existingsystems with new point solutions. In addition, the introduction ofSOA 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 achievenew claim management efficiencies is by making truestraight-through processing and customer self-service possible.

Essentially, SOA makes information-sharing more efficient andensures greater data integrity, which ultimately results in fasterclaim resolution, improved customer service and greaterpolicyholder retention.

The primary goal of STP is to reduce the amount of redundantdata entry that occurs when data is manually transferred betweenmultiple, disparate systems in the time from when a claim is firstreported until it is settled and closed. The key to STP is tocollect 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 howit could work.

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

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

o Next, the insurance company's claim system receives the firstnotice of loss, automatically generates a claim number, andmessages the company's document management system to create a newelectronic claim folder with the assigned claim number.

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

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

o Otherwise, it will be routed to a claim-handling unit orassigned to a specific adjuster based on the insurance company'sautomated business rules for claim assignment and workloadbalancing.

o During the next part of the process, an adjuster typicallycontacts the customer to set up an appointment with a preferredauto body shop that participates in the insurance company's directrepair program, and often also arranges for a car rental while thecustomer is on the phone.

o Data is transferred electronically between the insurancecompany's claim system and the vendors' systems in real-timeutilizing the SOA infrastructure.

o Appraisals, damage photos, rental agreements, work orders andinvoices can be electronically transmitted from vendors and indexedinto appropriate claim folders in the insurer's document managementsystem, which then triggers a notification to the adjuster toreview and take action on the received information.

o The adjuster then reviews the electronic documents andinitiates an electronic funds transfer payment from the claimsystem to each vendor via an automated clearinghouse interface andcloses the claim.

o Finally, the claim system automatically generatescorrespondence to the agent regarding the closed claim and updatesthe claim status for both the policyholder and agent to see viatheir respective portals.

Keep in mind, this is a very simple example. A more complexclaim can involve more systems and business entities. However, anSOA framework enables a complex process with multiple, disparatesystems to be integrated into an effective, efficient and seamlessSTP model.

The benefits of STP made possible through SOA are significant toboth the insurance company and any third parties, and includefaster claim resolution, as well as improved customer, agent andvendor service.

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

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