From the highest executive to the lowest-level associate, business people in corporate America are creatures of habit-often to a fault.Take paper processing. The reliance on paper documents might represent a drag on day-to-day workflow, but to business people accustomed to traditional processing methods, paper provides a comfort zone-inefficiencies and all.

Two years ago, Penn Mutual Life Insurance Co. recognized the need to automate its policy processing procedures. The hard part was how to do it without disrupting workflow.

"From an enterprise perspective, our objective is always to look at our processes and determine if and how they need to change," says Frederick Rackovan, vice president of new business, for the Horsham, Pa.-based insurance company.

"But the trick is getting people to look at the process and come to some kind of agreement that change is actually helping them perform their jobs better, with technology as the enabler."

Improved productivity

Industry experts refer to business process management (BPM) as an operational approach to automating a process to make it more efficient.

While several other industries have become aggressive adopters of this operational approach, insurers are testing the water carefully and charting conservative courses.

With end-to-end automated processing supporting the effort, industry experts believe insurers can expect productivity improvements of at least 50% across their organization.

Penn Mutual has a customer base largely consisting of affluent individuals who acquire annuity products for wealth accumulation. From time to time, individuals rollover company-sponsored 401(k) plans into annuities, including deferred variable, fixed and single premium.

The carrier concluded that paper processing for new business-and a lack of systems integration and dynamic document imaging-conspired to undermine its goal of increased productivity and higher sales. In 2002, Penn Mutual began examining its core processes throughout the organization, and discovered that it was "behind the IT curve," Rackovan says.

A challenge of trust

"We didn't have automated imaging and workflow systems in place. This was a big drawback in achieving our goal to increase capacity," he says.

In addition, the company has only eight full-time case administrators to process annuities. "We're looking to build annuity capacity, but to do so with the same number of case administrators we currently have," he adds.

In early 2003, Penn Mutual began a three-phase program with the introduction of an automated work distributor technology-which serves as the backbone for new business workflow, routing, imaging and new business reporting-and a document imaging system. Both went live in the first-quarter of 2004.

"When we implemented this system, it was a challenge for our case administrators to trust that the system could adequately manage the work. It was also important for them not to fear the technology, believing it would eliminate their jobs or reduce their responsibilities. That's because as we look to build annuity sales capacity in the future, our people will become even more important to us," says Rackovan.

The second phase involved implementing nbAccelerator (nbA) from Computer Sciences Corp., El Segundo, Calif., a product designed to automate application submission, workflow and productivity reporting and policy processing. Penn Mutual integrated nbA with its back-end annuity processing system-which happens to be CSC's Vantage system.

Penn Mutual's IT group also developed a front-end interface to Vantage and other core databases: one for contracts and licensing for producers and another for regulatory requirements.

"Without the front-end piece, a case administrator would have to log into multiple systems to pull data for annuity processing. Now they have one unified system, all within a service-oriented platform," Rackovan says.

Rules drive workflow

In addition, Penn Mutual found that it had to automate business rules and integrate those rules into the new-business accelerator to enable case administrators to process new annuity business quickly and effectively.

Rackovan says business rules enable case administrators to take a piece of work in the system and, supported by electronic work queues, prioritize how work is carried out. So a large-dollar variable annuity would more than likely be placed at the top of a work queue, while a small fixed annuity would likely be placed at the bottom of a queue.

When a Penn Mutual customer wants to roll a 401(k) plan into an annuity, Penn Mutual must authorize an exchange from the customer's employer to allow the funds to be transferred, Rackovan explains.

"This does not happen overnight. So our people perform application entry work, which begins the process for funds to come through."

The new-business system features automated "triggers" that alert Penn Mutual of case status, based on Penn Mutual business rules. For example, on a pending annuity exchange, a case administrator might have told the system that when a particular case reaches two weeks, the system needs to alert case managers to follow up on a fund exchange.

"Based on our rules, a case administrator might only be instructed to make a phone call to the employer. They make the call, update the file and wait for the next what we call 'counter' to kick in," Rackovan says.

If a file has been inactive for an inordinate amount of time, the new-business system automatically moves the file to the top of the processing work queue. The business rules recognize that action should be taken based on a protracted period of time.

Industry experts say that as insurers such as Penn Mutual examine the role of end-to-end automation to support a business process, the effort will hinge on the recognition of change management to act as the enabler.

"One consideration is helping people come to terms with a new automated environment," says Tim H. Kennedy, CSC's director of research and development and enterprise architecture for the company's life and annuity division.

"We've seen the top performers in a manual world become challenged in the new environment because they have yet to understand the change curve."

Proceed carefully

Kennedy says insurers need to proceed conservatively as they implement BPM solutions. "You can't just switch on the solution overnight; you have to make sure the technology scales (properly) and hope the business organization is able to handle the level of change expected. Training and knowledge management is essential."

Insurers must also be aware of the role that a service-oriented architecture (SOA) plays, Kennedy says, because for process automation to be a success, carriers must embrace a flexible, open architecture to enable multiple systems to interact with one another.

The BPM journey may have its fair share of bumps in the road, but these temporary hurdles are worth it to insurers, Kennedy adds, because the benefits of BPM vastly outweigh the detriments.

"In looking at the benefits and where they come from, we've seen that half of the benefits of a full BPM investment come from the efficiencies of the new imaging system (to reduce paper), while the other half is the result of the process orchestration (imaging system hooked in with the other processes). The payoff is that productivity enhancements average or may exceed 50%," he says.

Going forward, Penn Mutual is planning to leverage the new-business system to support its life business, which represents the majority of its new business applications. This effort will be more complex than the annuity conversion, Rackovan says, because of the significant level of third-party integration-not to mention the automated underwriting that's involved.

Annuity processing, on the other hand, is "more simple based on the requirements of the line. A policy application comes in, and our people can key in the application and typically bring it to closure very quickly," he says.

Rackovan says that while ROI metrics are still taking shape, the carrier has already reaped various "soft" dividends.

"In the past, when someone wanted to know the status of a case, they had to retrieve the paper file. Now, people can pull up all the documents on the system and get answers to questions on the spot. "

On the old system, he says, when a producer called asking about a case file, it usually required two phone calls-one incoming and one outgoing, because the case administrator would have to track down the file and then call the producer back.

"It was really a cumbersome workflow," says Rackovan.

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