Straight-Through Processing (STP)

What is Straight-Through Processing (STP)?

Straight-Through Processing (STP) in insurance claims refers to the complete automation of claim handling from initial submission to final payment without any manual intervention by a claims adjuster. The claim arrives, the system automatically classifies it, extracts data, validates coverage, checks for fraud indicators, approves payment amount, generates the payment, and updates all relevant systems - all in minutes or even seconds, with no human touch.

STP represents the ultimate goal of claims automation: zero-touch processing for appropriate claims. Not every claim can or should be processed this way - complex liability disputes, serious injuries, large property losses, and claims with fraud indicators require skilled adjuster judgment. But a significant portion of claims - industry estimates suggest 20-40% - are simple, low-severity, routine claims that can be processed automatically if the right technology and business rules are in place.

The financial and customer experience benefits of STP are compelling. A manually handled claim might cost $200-500 in labor and overhead. An STP claim costs $10-30, primarily technology expenses. A manual claim settles in days or weeks. An STP claim settles in minutes. Customers love the instant response. Carriers love the cost savings and capacity expansion.

What STP Means for Claims Operations

Straight-through processing fundamentally changes the economics and speed of claims handling:

Touchless Processing: From the moment the claim is submitted until payment is issued, no claims adjuster opens the file, reviews documents, or makes decisions. The technology handles everything. This requires sophisticated AI, business rules, and integration, but when achieved, it eliminates the labor component of claim handling for STP-eligible claims.

Rules-Based Decisions: STP depends on comprehensive business rules that codify decision logic. These rules define when a claim qualifies for STP (claim amount, type of loss, required documentation present, policy in force, no fraud flags, etc.), what validation checks to perform (policy coverage, limits, deductibles, prior claims), how to calculate payment (approved amount based on policy terms, less deductible, less prior payments), and when to route to manual handling (any exception triggers human review).

Automated Validation: Before approving payment, STP systems validate multiple dimensions automatically: policy status (is the policy in force on date of loss?), coverage applicability (is this type of loss covered under the policy?), limits and deductibles (does the claim amount fall within policy limits?), duplicate detection (has this claim already been submitted?), fraud indicators (does anything suggest fraud or abuse?), and identity verification (is the claimant the policyholder or authorized representative?).

Instant Payment: Once all validations pass and approval is automated, payment is generated immediately - ACH transfer to the claimant's bank account, payment to a vendor network, or issuance of a virtual payment card. Claimants experience near-instant settlement. This speed creates exceptional customer satisfaction and differentiates carriers in competitive markets.

Which Claims Qualify for STP

Not all claims are STP candidates. The claims most suitable for automated processing share common characteristics:

Low Severity Auto Glass Claims: Windshield replacement claims are ideal STP candidates. The claim is simple (damaged windshield), the cause is straightforward (rock strike, vandalism), the coverage is clear (comprehensive coverage with specified deductible), the repair/replacement cost is standardized (carriers have negotiated rates with auto glass networks), and fraud risk is low. A policyholder submits photos of the damaged windshield through a mobile app. AI verifies the damage is real and consistent with covered causes. The system checks policy coverage, verifies the glass shop is in-network, auto-approves payment of the network rate minus deductible, and schedules the appointment. Total processing time: 2 minutes.

Simple Health Claims: Routine health claims for standard medical services with pre-approved providers are strong STP candidates. An office visit claim arrives electronically with standard CPT codes. The system validates the member is active, the service date is within the coverage period, the provider is in-network, the service is covered with applicable copay, and there are no coordination of benefits issues. Payment is calculated automatically using fee schedule and copay rules. Adjudication and payment happen without human review.

Pre-Approved Treatments: When prior authorization has been obtained (prescription refills, continuing treatment following prior approval, services under a treatment plan), claims for those authorized services can often STP. The prior authorization established coverage and necessity. The claim validates that the services match authorization and processes automatically.

Small Property Claims Under Threshold: Minor property claims below certain dollar thresholds (commonly $1,000-2,500) with clear coverage and no complexity can qualify for STP. Small water damage claim from appliance leak under $1,500, with policyholder providing photos, repair estimate from approved vendor, and no other complications. The system validates coverage, verifies the estimate is reasonable compared to database of similar repairs, checks for fraud patterns, and auto-approves if all criteria are met.

Criteria for STP Eligibility

Claims must meet multiple criteria to qualify for straight-through processing. These criteria are configured as business rules in the STP system:

Policy in Force: The policy must be active on the date of loss with no lapse in coverage. The system validates against the policy administration system in real-time. Any question about policy status triggers manual review.

Coverage Confirmed: The loss type must be covered under the policy with no applicable exclusions. The system matches loss cause to covered perils and checks for common exclusions (wear and tear, intentional acts, uncovered causes). If coverage is unclear or exclusions might apply, the claim routes to an adjuster.

Amount Under Limit: The claim amount must be below configured STP thresholds. These thresholds vary by line of business and carrier risk appetite. Auto glass might allow STP up to $1,000. Simple property claims up to $2,500. Health claims up to $500. Any claim exceeding the threshold requires adjuster review regardless of how routine it seems.

No Fraud Flags: The system runs fraud detection algorithms scoring each claim for fraud indicators. Red flags include: very recent policy inception (policy bought days before claim), unusual loss patterns (multiple small claims just under STP threshold), inconsistent information (location discrepancies, timeline issues), known fraud addresses or repair shops, and claimant history (multiple prior claims, previous fraud indicators). Any fraud score above configured thresholds prevents STP and routes to special investigation.

All Required Documentation Present: STP requires complete information. For auto glass: photos showing damage, repair shop information, coverage verification. For health claims: claim form with diagnosis codes, procedure codes, service dates, provider information. If any required document or data element is missing, the system requests additional information or routes to manual handling.

How AI Enables Touchless Processing

Modern AI technologies make STP practical for claims that would have required manual handling a decade ago:

Document Classification: AI automatically identifies document types from unstructured submissions. An email arrives with 5 attachments. AI classifies: FNOL form, photos of damage (3 images), repair estimate PDF. Each document routes to appropriate handling - FNOL data extracted, photos analyzed for damage verification, estimate parsed for amount and services.

Data Extraction: OCR and natural language processing extract structured data from unstructured documents. From a photographed auto glass repair estimate, the system extracts: shop name, address, VIN, damage description, labor charges, parts charges, total amount. From a health claim form, it extracts: member ID, provider information, service dates, diagnosis codes, procedure codes, charges. This extracted data populates claim records automatically.

Validation Against Policy: The extracted policy number is validated against the policy system. Coverage details (what's covered, limits, deductibles, effective dates) are retrieved. The system programmatically compares the claim details against policy coverage to confirm the loss is covered.

Fraud Scoring: Machine learning models trained on millions of claims score each submission for fraud likelihood. Models consider hundreds of variables: claim amount, loss timing relative to policy inception, claimant history, provider/vendor patterns, geographic indicators, and inconsistencies in submitted data. Claims with low fraud scores proceed to auto-approval. High scores route to investigation.

Auto-Approval and Payment Generation: For claims passing all checks, the system calculates payment (total loss minus deductible, or fee schedule amount minus copay), generates payment transaction in the payment system, creates payment record in the claim file, and sends confirmation to the claimant - all automatically within the workflow.

STP Success Rates and Metrics

Carriers implementing STP track several key metrics to measure success:

Percentage of Claims Qualifying for STP: What portion of total claims volume meets STP eligibility criteria? Industry leaders achieve 20-40% STP rates depending on business mix. A carrier with significant auto glass exposure might reach 35-40% STP. A carrier with mostly complex commercial liability would be much lower.

Percentage Successfully Processed: Of claims that enter the STP pathway, what percentage complete without manual intervention? High-performing STP systems achieve 85-95% completion rates. The 5-15% that fall out typically involve edge cases where automated validation identifies issues requiring human judgment.

Error Rates: STP systems must maintain low error rates to justify touchless processing. Metrics include: incorrect payments (paying amounts not supported by policy or evidence), coverage errors (paying claims that shouldn't be covered), and fraud that slipped through (fraudulent claims that passed fraud scoring and auto-approved). Error rates should be below 1-2% and comparable to or better than manual adjudication error rates.

Processing Time: Average time from claim submission to payment for STP claims. Leading carriers achieve sub-hour processing, with many claims settling in minutes. This represents 90%+ faster processing than manual handling.

Benefit Quantification

The financial and operational benefits of STP are substantial:

Cost Per Claim Reduction: Manual claim handling costs $200-500 per claim (adjuster time, overhead, systems). STP claims cost $10-30 (technology costs, payment processing). For a carrier processing 100,000 claims annually with 30% STP rate, the savings equal roughly $5-14 million annually.

Cycle Time Improvement: STP claims settle in hours instead of days or weeks. Faster payment improves customer satisfaction, reduces inquiries and follow-up calls, and improves working capital (lower reserves for shorter periods).

Customer Satisfaction: Instant claims settlement drives Net Promoter Scores 20-40 points higher than traditional processing. Customers who experience STP become advocates, referring friends and maintaining loyalty at renewal.

Capacity Expansion: Adjusters freed from handling routine claims can focus on complex claims requiring expertise. The carrier can handle higher claim volume with the same staff, or reduce staffing costs while maintaining service levels.

Straight-through processing represents the future of claims handling for routine claims. The carriers who implement sophisticated STP capabilities gain sustainable competitive advantages in cost structure, customer experience, and operational efficiency.