Designed to help companies improve processes and workflow by automating and streamlining a variety of day-to-day functions, business process management (BPM) technology is rapidly emerging as a popular tool for insurers.

Indeed, insurers are using BPM to overlay and augment a variety of business processes. The primary challenge with any BPM effort is determining the right functional area on which to focus and, within that area, picking the right project to start with.

"Typically, you want to start small and build up from there," says James Lee, IT manager at Southfield, Mich.-based Meadowbrook Insurance Group "Unfortunately, due to business needs, we had to tackle a fairly large project early on in our BPM efforts."

When Meadowbrook launched a BPM initiative in April 2006, the initial effort's focus was on processes that involved the manual entry of data received from external sources into its core policy issuance and policy management systems. "These processes were labor-intensive, time-consuming and had an unacceptable level of risk associated with data entry errors," Lee says.

The firm used the BPM capabilities in Chicago-based Adeptia Inc.'s Adeptia Server suite to address two key areas associated with those processes: data integration/transformation and automating exception handling and processing. According to Lee, the company next focused on creating a wrapper around existing processes where the underlying technology-while functional-didn't support BPM efforts. "In this area, we focused on automating steps, where possible, and using Adeptia's workflow capability to alert key users when errors occurred within the process, or when critical tasks weren't completed in a timely manner," he says.

More recently, Meadowbrook began using Adeptia's workflow simulation tool to document existing processes and then conduct several "what if" scenarios to identify the impact of potential changes to those processes.



Another firm, Farmers Insurance Group, a Los Angeles-based wholly owned subsidiary of Zurich Financial Services, has applied BPM software to multiple aspects of its business. The firm's Small Commercial Lines division in May 2007 began using Pegasystems SmartBPM from Pegasystems Inc. Farmers built an agent-facing quoting and servicing application on the BPM software, with the aim of improving and speeding processes related to applications and underwriting for business owner's policy (BOP), workers' compensation, commercial auto and commercial umbrella.

Paul Burger, director of commercial IT at Farmers, says the application replaced a series of manual processes the division had been previously using. The company had an agent-facing Web application, but it was simply a pricing application and had no built-in underwriting function, Burger says. Now, agents use the BPM-enabled applications to enter all data required to determine a premium, and underwriters can use it to handle referrals and approve, decline or modify submissions as needed.

"By putting underwriting rules workflow processing into the [BPM] application, we were able to automate a bunch of processes, such as the calculation of experience modifications," he says. "By doing that we were able reduce the time agents and underwriters spend processing commercial lines from 14 days to just 14 minutes."

The division also built a cross-sell function into the application, Burger adds, so every time an agent quotes a property or liability risk, he or she also can provide an umbrella quote. This has resulted in increased sales, yet another benefit for Farmers.

The upshot is that the company has been able to streamline its processes and make its underwriting staff more efficient. "They're not spending as much time on the phone with agents trying to get new quotes through," Burger says. "They're focusing on more complex risks and doing true underwriting rather than processing."

Meadowbrook has likewise seen a significant reduction in the time needed to process data from external sources. That has resulted in data being available sooner for downstream processes, Lee explains, adding that the firm also has seen an increase in the overall capacity of its workforce by reducing manual intervention and duplicate entry of data.

Another plus is that data errors are identified and addressed during the data import process instead of after the data entry stage is complete.

"From a technology perspective, the Adeptia server suite has allowed us to create a standard framework that we use for the majority of our data interface workflow needs," Lee says. This "reusability" has resulted in shorter implementation times and enabled easier maintenance of the automated processes once they have been implemented.



Farmers also has been able to leverage BPM expertise elsewhere in the enterprise.

As part of an effort to revamp its customer relationship management processes and first notice of loss (FNOL) application, the company developed a system known as "Hero," which logically presents sequenced information to guide customers in filing auto, property and other types of claims.

Hero went live in early 2009, and now supports FNOL for auto and other lines of business insurance. The application helps trigger the right questions to claimants, gather the right responses and integrate the information into the claim system so that all information becomes part of the case file. Within the first year of implementing BPM for customer service, Farmers reduced the training time for customer service representatives from two weeks to just one day because of the application's built-in intelligence. It also improved the average handling time for a claims call by 20%.

BPM also has helped the company deal with challenges integrating legacy customer service systems of acquired companies.



One key question that might come up with a BPM implementation is whether it is best to apply BPM to existing processes or do it in tandem with a core system refresh.

"We fundamentally believe that in any enterprise system deployment, evolution is much better than revolution," says John Colbert, VP of research and analysis at the Stamford, Conn., advisory services firm BPM Partners Inc. "Making a series of gradual changes, seeing what works and what doesn't and then reprioritizing your plan is more efficient than forcing a 'big bang' change. This evolution approach reduces risk, improves end-user adoption and allows you to minimize the disruption to your business."

If, for operational reasons such as a major enterprise resource planning system upgrade, a company does have a huge changeover in systems, "it makes sense to apply the BPM changes along with a system refresh," Colbert says. "That said, you can possibly get some of the process changes started prior to the big system refresh, and have them roll over with the new system."

Although Farmers Small Commercial Lines division applied BPM to existing processes and systems, Burger thinks it's best to apply the technology in tandem with a core system refresh.

"If you're going to do a core system refresh anyway, you absolutely should take the opportunity to streamline [processes] by putting some BPM in there at the same time," Colbert says.

Meadowbrook's Lee sees things a little differently. He believes the decision of whether or not to apply BPM in tandem with a refresh depends entirely on the situation. "You can't really apply a blanket rule to BPM implementation," Colbert says. "You have to look at each opportunity separately, evaluate the existing processes and then determine where the opportunities for improvement exist."

Sometimes changes in technology will present opportunities to improve the process, while at other times, business needs may dictate changes to the systems that support those processes, Lee adds. "If the core system is due for a refresh, then you need to look at the new functionality that is available and how that functionality may change and benefit existing processes," he says.

Regardless of whether or not BPM is applied with a systems modernization project, it's clear that the technology can help insurers make process improvements that might not otherwise be possible.



Before insurers get started with a BPM implementation, they first must ask themselves two questions: How can they best implement BPM so that they gain the maximum payback? Additionally, when and where should they apply BPM? Figuring out the answers is crucial to ensuring successful deployment.

As a starting point for any BPM project, analysts at BPM Partners typically ask clients in the early stages of exploring an initiative to do a thorough assessment of existing processes, Colbert says. The questioning includes determining the internal processes that are functional today, what processes the organization is looking to maintain because they are critical, and identifying those known to be inefficient that could potentially be improved through the use of BPM technology.

Colbert believes the challenges surrounding paper handling of claims and other manual interventions necessary in the process are fertile areas for a BPM implementation. Reducing mundane manual processes, and enabling teams to have more analytic capabilities is where BPM improvements can have the biggest impact, he says.

"Although expert advisors can provide a reference for best-in-class capabilities based on other projects, the client typically knows their internal processes better than any advisor, and which areas are unique and should not be changed," Colbert explains. "This allows the advisor to help the client prioritize the deployment of BPM."

Meadowbrook's Lee agrees that carriers should not be reluctant to utilize outside expertise. "We were able to augment our staff with members of Adeptia's technical team, and that enabled us to deliver the solution in a timely manner," he says. INN

Bob Violino is a New York-based business editor and writer and frequent INN contributor.


How to Derive Business Value from BPM How to Derive Business Value from BPM

How can insurers best maximize their BPM investment? A new report from Boston-based Celent, Creating Business Value from Business Process Management, addresses this issue in depth. The report, authored by Celent Senior Analysts Benjamin Moreland and Donald Light, says BPM can make a difference in a variety of operational areas across the enterprise. "A BPM solution will make processes more efficient, consistent, and compliant," the report states. It can make an insurer a better business partner for an independent agent or broker and get the right information to an underwriter at the right time. It can increase a service unit’s productivity or decrease cycle times in a claim group."

The authors contend that insurers should view BPM less as a one-time technology installation than a tool for continuous process improvement. As such, a comprehensive strategy for BPM must precede any installation. "The first step in maximizing ROI probability and reducing project failure is establishing BPM governance to provide consistency and repeatability from one project to the next," the report states. "Only after establishing an enterprise BPM strategy and direction should insurers focus on individual projects."

Yet, the report notes that the maturation of BPM technology is a relatively recent development. "It is only in the past few years that BPM has emerged as an important horizontal application category within insurance," Moreland and Light state. "Six or seven years ago, an IT analyst would look over a landscape of workflow, enterprise application integration (EAI), and image and content management applications."

With the array of vendor options now widening, the report provides guidance on what insurers should look for when adopting BPM. "A complete BPM solution has six elements: process design and integrated development environment (IDE); process repository and management; process execution engine; monitoring and management; execution history; analytics, modeling, and optimization."

- Bill Kenealy

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Corrected January 4, 2011 at 1:41PM: yes