Softening markets usually don’t portend lavish times in the IT departments at insurance companies. Yet, even as insurance companies are looking to tighten their belts, many are investing in business process management (BPM) solutions as a means to improve efficiency across the enterprise, and as a hedge against falling rates.

So what specific efficiencies can a carrier investing in BPM expect? Simply, as the name implies, more efficient processes. While insurance companies tend to pride themselves on the efficiencies of their processes, there is always room for improvement. So, somewhat perversely, the worse off an organization is prior to BPM implementation, the more it stands to gain.

At its most basic level, BPM affords carriers visibility over their processes, enabling them to get a better handle on workflow. BPM also promises carriers flexibility and the assurance that as their businesses change, their infrastructures will have the ability to do so as well. By consuming information in interchangeable chunks, it can extend the life and functionality of existing systems. Additionally, BPM also can be a precursor to the automation of processes and, consequently, to straight-through processing initiatives.

For all its promise, BPM is still in the early phases of mass-market adoption. Some see existing document management legacy applications as a barrier to the widespread adoption of BPM. Indeed, some carriers with robust document management systems with work flow capabilities already in place may well question their need for BPM. Also, as with anything new — especially anything that promises big things and comes sporting a three-letter acronym — there is always a concern among potential customers that the hype of a new solution won’t match the reality.

Nonetheless, a recent survey by Boston-based Celent of insurance industry technologists, “Insurance CIO/CTO Pressures, Priorities, and Plans in 2008: U.S. Survey Results,” found that this fear was not much of a deterrent as BPM was a top IT initiative for nearly 80% of the large P&C insurers in the survey.


Enumerating the potential benefits of BPM may be easier than nailing down a precise connotation of it. Just as some still quibble whether a tomato is fruit or vegetable, BPM seems perched on the precipice between business philosophy and technology.

“From a purist perspective, I view BPM as more of a philosophy that is enhanced and enabled by technology,” says Chris Smith, principal technologist, at Raleigh, N.C.-based Genworth Mortgage Insurance Corp.

Michael Lees, director of BPM Product Marketing at Germany’s Software AG and coauthor of the book “BPM Basics for Dummies,” says BPM is as much a management discipline as it is a technology, albeit one that is strongly facilitated by technology. Lees says it’s this technological base that differentiates BPM from other management disciplines such Six Sigma. “If you just do BPM technology without the management discipline, your chances of failing are higher than if you did BPM as a management discipline with no technology,” he says.

What’s more, even proponents of BPM acknowledge that it is not a panacea, and that much of the success of a BPM implementation depends on having good models in place for the processes it overlays. “You can take a bad process and implement BPM and you still have a bad process,” notes Genworth’s Smith.

This need to adopt the methodology and fix underlying processes means that, unlike a pure technology, the returns from BPM implementation are not often readily realized. Similar to a point guard basketball who makes the players around him better, BPM’s greatest value to an enterprise might lay in helping IT departments derive value out of previous expenditures. “People have spent as much as they can stomach on packaged applications and need something to fill the white spaces,” Lees says.

The lack of instant gratification inherent with a BPM implementation is all right by Steve Paquette, VP and CIO of claims for Hartford, Conn.-based Travelers Cos. Inc., who is in the early stages of adopting a BPM solution. “We look at this as a long-term strategy,” he says.

Paquette says the company decided to invest in BPM only after a long, rigorous look at its needs as the organization convinced him that there was a need for a solution. “We felt good about where we were,” he says. “There was no crisis facing us and we were doing things efficiently, but we wanted to look down the road three to five years from now and figure how we wanted to position ourselves.”

It was only after the claims organization understood how to leverage some of the concepts and turn them into an executable strategy that the focus turned to the technology. “When we went into this, it wasn’t as a technology, it was to have more flexibility and integrate some of the separate processes and workflows we have today into more of a holistic, integrated service delivery model within claims,” he says. “We want to institutionalize processes, but we have learned over time that the best processes are the ones that we can change quickly due to market conditions.”

For the technology, Travelers opted for a rules-centric system from Cambridge, Mass.-based Pegasystems Inc. “What we liked about Pega was the combination of business process and business rules,” he says.


As with many carriers across the industry, Paquette was confronted with a mix of modern and legacy systems when implementing the system. He says, perhaps not surprisingly, the more modern legacy applications the company employs have been easier to assimilate than the older COBOL-based systems. However, overall, he is content with the integration. “From a pure infrastructure perspective, the BPM solution we have fits nicely with our infrastructure.”

This ease of technological integration, while not mitigating the need to adopt the accompanying methodology, can help people buy into it. “As long as you understand that you are going to have to address the management issues, the technology can help in a big way,” Lees says.

Another way to ease BPM implementation is to take an incremental approach. “We are taking this as any prudent business would with bite-sized chunks—albeit large bites,” says Tony Pavia, CEO of Alpharaeta, Ga.-based AIG Agency Auto. The company is utilizing BPM on both the sales side (to enable a Web-based quoting solution for its agents) and also in the back office to service Web-based endorsements on existing policies. “Typical of any new technology, there’s a few months of figuring things out, but once you get it down, the ramp up for the next set of applications is much faster and less disruptive.”

Scott Schenker, senior managing director at Devon, Pa.-based SMART Business Advisory and Consulting LLC, says organizations often get involved in BPM at a departmental level prior to adopting BPM as a platform to use throughout the organization. “A business need will drive BPM to be introduced and, from that point, there’s consideration for broader use,” he says. “Implementing BPM enterprisewide takes awhile.”


An insurer looking to invest in BPM has a choice from a galaxy of options, as vendors of all stripes develop products for the market. There are document-centric BPM offerings from traditional content vendors, decision-centric BPM offerings from vendors specializing in business rules and integration-centric BPM solutions from middleware purveyors. While the specific needs of a carrier will go a long way to determining what they will ultimately buy, making that decision is certainly not an easy one.

“There’s quite a bit of overlap in the products and their capabilities,” says Schenker. “Established vendors continue to make improvements to their existing products as other players have entered the space.”

Gary Kirkham, director, insurance industry solutions for Pegasystems Inc., says the company has begun to offer products that focus on insurance processes and now provides ready-made backbones for areas such as claims and customer contact centers. “Two or three years ago, people would purchase a general purpose BPM package with all the available tools, such as user interface, integration and rules engine, and build their solutions,” he says. “Now, we’ve created a framework at a cheaper cost than they could themselves.”

Just as traditional BPM vendors tailor their offerings to the insurance market, vendors that specialize in serving the insurance vertical also are incorporating BPM into their product offerings. Jennifer Kem, director, sales, marketing and business development for Honolulu-based BlueWave Technology Inc., says the company’s flagship claims solutions, PipelineClaims, was developed with BPM principals fully in mind. “BPM is a philosophy on which we built our architecture,” she says, noting BPM is especially conducive to the claims process. “The biggest opportunity for BPM is in claims, because that’s where the leakage is.”


Another reason for popularity of BPM solutions in the insurance industry is that BPM efforts dovetail nicely with the industry-wide move toward service- oriented architectures (SOA). In fact, there is a good overlap and even confusion over the two concepts. While both stress reusability and inteoperability and facilitate agility, SOA is purely an IT strategy, while BPM is more of a business methodology. In a company employing both, BPM might act as the central nervous system of an organization and consume SOA-enabled services.

Thus, according to Lees, the true promise of BPM lays in the flexibility it affords an organization to improve and change processes by breaking them into consumable, interchangeable chunks.

“Unless you have a flexible IT infrastructure where you can decompose some of these functional IT applications into business services that can be reused, it’s really hard to conceive of the end game for BPM,” he says. “You can do BPM without SOA, or SOA without BPM and be successful, but you’re not going to get the full value from either of them by doing that.”

Paquette concurs that the combination BPM and SOA is essential to deriving the full benefits of both. “We think there’s real power between having a service-oriented architecture and combining that with BPM,” he says. “We want to fundamentally change how we can respond to changing processing needs and business needs. Those two in combination give you the ultimate in flexibility. ”

(c) 2008 Insurance Networking News and SourceMedia, Inc. All Rights Reserved.

The Three Standards of BPM

Another consideration for carriers seeking to implement a BPM solution is with what standards the solution is compliant. A 2007 report from Boston-based Celent notes there are three sets of standards commonly encountered in the world of BPM solutions. Like all standards, their basic business value is to preserve the value of intellectual capital and to facilitate the flow of people, skills and artifacts among technology environments over time, Celent says. The three standards are:

* BPMN (business process modeling notation) is a standard for drawing a business process flow chart. BPMN is a non-technical tool that can be used by business analysts and business managers.

* XPDL (XML process definition language) is an XML-based format that enables the accurate transfer of process flows among different workflow applications and engines. XPDL provides an exact description of the locations of, and the connections among, the elements in a process flow chart.

* BPEL (business process execution language) is an executable process modeling language. It is a set of programmed instructions that can be carried out by a process execution engine. BPEL is designed to orchestrate the interactions among systems through the use of a Web services framework.

(c) 2008 Insurance Networking News and SourceMedia, Inc. All Rights Reserved.

Register or login for access to this item and much more

All Digital Insurance content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access