Issue brief: Straight through claims processing

Insurance companies make money one of two ways. The first is underwriting profits. That is, when premiums collected from customers, exceed the cost of claims and operating expenses. The second method is investment income. Investment income is derived by investing premium dollars in the markets. Historically, insurers came to rely heavily on investment income, looking at underwriting dollars as simply a way to fuel the investment income engine.

The financial crisis brought an abrupt halt to the investment cash machine and despite a recent recovery in the economy, investment income remains under pressure. This has forced insurers to look inwards for profitability, focusing more attention on making better underwriting decisions and becoming much more effective and efficient at claims processing.

Traditional claims processing is largely a manual process relying on the intuitive knowledge of experienced claim handlers. This is proving problematic due to the ‘greying of the industry’ and customers demanding fast turnaround times.

This content highlights why many insurers are looking to ‘straight through processing’ (STP) as a means to address these concerns.