If it can do all it's purported to do, business process management (BPM) has a tall order to fill. As a structured approach to employing methods, policies, metrics, management practices and software tools to manage and continuously optimize activities and processes, BPM holds great promise. But whether the insurance industry and vendor community fully grasps its capabilities remains to be seen.Like a supersonic jet liner, BPM, also known as business process optimization, is taking off, and a host of insurance carriers and vendors alike are riding the contrails hoping for a quick lift.
Not surprisingly, the demand is on the insurance side, and the push is on the vendor side, claims Marc Cecere, vice president of the financial services team at Forrester Research Inc., a Cambridge, Mass. research firm. "On the insurer's side, BPM really has great value, once companies get more comfortable with what they can do with it."
There are several reasons why BPM has taken hold as the latest and greatest tool in the insurance industry's toolbox, chief among them: Insurers are discovering that BPM enables them to design, monitor and manage a variety of processes in a near real-time environment. Reduced cycle times and the ability to win more business with fewer resources follow on as other popular reasons.
Still, some vendors, hungry for wins of their own, see a propitious opportunity for the insurance-centric solutions they provide, slapping the BPM label on enterprise solutions that have little to do with process anything.
"There is some confusion in the marketplace, and the term BPM has become watered down," says Eddie Jones, senior vice president, product strategy at Fiserv Insurance Solutions, an unit of Fiserv Inc., Brookfield, Wis. "Everyone is saying they do BPM. But there is also a healthy curiosity out there among carriers and lots of room for insurance companies to tackle that learning curve and partner with the right solution provider to take advantage of what BPM has to fully offer."
Whether they take advantage of what BPM has to offer depends largely on the insurance company's ability to understand BPM's capabilities-and confront their own existing complexities.
"When you ask a carrier, 'What is your process?' that's a frame of reference-and it requires a new language-a new discussion," points out Jones. "'Quote a policy' could be made up of 100 small processes, so they have to reduce it to 10 medium processes and begin there."
FRONT END FIRST
While BPM may be top of mind, cautions Cecere, "it's limited in use." Cecere maintains that vendors are slow in creating BPM capabilities for core applications, opting instead for the quick wins of front-end processes, such as call center applications.
For some carriers, full BPM functionality is seen as more of a journey than a destination, and getting there means taking an initial hard look at front-end processes.
When Jack Schumaker, vice president of call center operations at Electric Insurance Co., (EIC) Beverly, Mass., sat down with his team to kick around the idea of how to leverage an inbound call, he immediately saw other call center business processes that would benefit from a rules-based system running BPM.
"We knew it would fit into a larger piece of our architecture, but the initial application started as a proof of concept," recalls Schumaker. "So we created two applications: one to enable customer service reps (CSRs) taking billing inquiry calls to cross-sell, and the other to improve overall productivity of the transaction, which is now supported from the beginning to end."
Licensed in all 50 states, EIC's roots date to 1966 when it provided insurance for employees of General Electric. Today it has expanded its P&C direct-to-customer rates to the general public.
BPM technology from Pegasystems, Cambridge, Mass., is now tied to EIC's multi-variate rating model, enabling CSRs to offer customers a chance to save money by bundling various lines of business.
"A visual client-alert button tells the CSR that something on the policy should be brought to their attention," Schumaker says. "It could be a cross-sell opportunity, it could be that the customer called many times, and the rep needs to be extra sensitive, or it could be a note from underwriting stating that paperwork is needed from the customer. Without rules-based BPM, information tied to this had resided in too many places."
For one carrier, starting from scratch made BPM a viable alternative for the entire enterprise. Splitting off from Seattle-based Safeco Corp. less than two years ago, Symetra Financial's focus has been to build a nimble and more entrepreneurial organization.
As the Seattle-based company's business lines quickly grew to include employee benefits, retirement plans, annuities and life insurance products, the company implemented a "process innovation program" that would ultimately drive BPM into place.
Beginning with installation of its internally built platform, the company installed BPM in its new business unit, where processing was initially cumbersome and labor-intensive, says Margaret Harder, Symetra's operations manager.
"We worked with a vendor to conduct business flow analysis to establish a new process," she says.
That vendor was Dallas-based Global 360, which counts larger carriers, such as AIG and Aflac, among its customers. In Symetra's case, Global 360's BPM technology manages workflow for receipt of new applications for life insurance, the underwriting process and policy issue.
"The entire process has been streamlined from a very cumbersome paper process with lots of human touches, into an efficient paperless process where the system does much of the work," says Harder.
A follow-on BPM implementation in Symetra's client services' business unit used the first process as a model, basing the follow-on process on the company's proven work distribution method.
Harder wouldn't argue with the idea that Symetra's IT operations both drove the BPM initiative and to date has realized almost immediate benefits.
"The technology side is in charge right now, pushing things," notes Cecere. "That's not necessarily optimal, but it has to start somewhere. Gradually, business people are taking a stronger role, but they need to think like IT people, who are comfortable with automating rules."
For the IT team at Preserver Group, Paramus, N.J., BPM became a necessity, but ultimately it was the business side that determined what the implementation would entail.
Preserver and its two subsidiaries (Mountain Valley Indemnity Co. and North East Insurance Co.) all write small and mid-size commercial and personal property business in several East Coast states.
"It started with a simple interface," says Elaine Salvador, Preserver's IT manager. "We had one policy rating system with multiple interfaces and realized we needed to rewrite an interface to our CSC Point System (on the AS/400)."
Other lines of business were interfaced conventionally to the carrier's back-end systems, but changes were cumbersome and required RPG or COBOL programming, reports Salvador.
"The goal was to lower the technology level, and be able to pull data from multiple sources and have them speak to each other via the interface," notes Charlie Pelosi, Preserver's vice president of IT.
Preserver's IT team decided to train one of the analysts on the use of a BPM server and toolset from Chicago-based Adeptia, which provides BPM tools to integrate various internal applications and automate workflows.
"Analysts have more knowledge of the business-so it eliminates a lot of confusion and error when explaining to a tech what's needed," points out Pelosi.
Salvador believes Preserver's IT/business philosophy is a solid one. "Our business analysts reside within the IT department," he says.
The analyst who worked on the interface project was familiar with Preserver's other lines. "So the business requirements came from the analyst, and together with Adeptia, we spec'd all the changes and requirements through the rules," says Salvador.
The result was the creation of a series of steps, which, when completed correctly, route e-mail notifications to the appropriate parties. A typical example: Data is pulled from a commercial lines rating file, the policy is marked that it's ready for transfer, a process populates the transfer table, the transfer table connects to the AS/400, transfer verification occurs, and a final step marks the file that the entire process was a success.
The attraction of BPM, notes EIC's Schumaker, is that once integration takes place, making changes can be managed by the business, not IT. "In our case, cross-selling opportunities can take place when the caller is notified of a state eligibility or credit threshold change," he says, "and ease of use enables the business side to make those types of changes."
With approximately nine million medical members, Humana Inc., Louisville, Ky., was right about its BPM hunch: Tying it to Humana Access health savings account (HSA) and flexible spending account (FSA) cards would make cost-justification a moot point.
One of the largest U.S. publicly traded companies to offer coordinated health insurance coverage and services to employer groups, government sponsored plans and individuals, Humana, like EIC, took a systematic approach to implementing BPM, and obtained its technology from Metavante, the technology unit of the Milwaukee banking company Marshall & Ilsley Corp.
"We didn't have that much experience with debit cards prior to 2004," says Ben Slen, product manager for Humana Access, "and we had been working with a third-party administrator prior to this."
The notion of having Metavante work in tandem to provide its BPM suite, third-party transaction processing (excluding claims), and the print and production services required for the cards enabled the company to refine its processes in phases.
"First we brought up our internal processing platform that handles our FSA and HSA volumes, then we changed the card transaction processors to work with Metavante's BPM technology, and then changed the financial processors to work with VISA," he explains.
Currently, 75,000 members use a single card that holds a combined medical ID with flexible spending, health reimbursement and health savings account information. Humana expects card transactions to top $75 million by year-end, jumping from $14 million in its inaugural year, 2004.
To Slen, the benefits of offering debit and prepaid cards are obvious: "It gives a consumer experience benefit to both the cardholder and employer group," he says. "When you offer this to employers with no cards, there's a real uptick."
Slen believes as the company makes more use of its BPM suite, other opportunities will present themselves.
"We've only scratched the surface," he says. "One of the big things around these health care accounts, such as FSA, is substantiation. All card transactions need eligibility verification under IRS guidelines. That's typically a fairly manual process, in which the cardholder has to submit a paper receipt-not very convenient or consumer focused for the cardholder, but it meets IRS requirements. We've worked to automatically substantiate as many of those card transactions as possible. And we'll use BPM to work through a number of system iterations to make improvements and enhancements to keep notching up the auto substantiation rate for our FSA and HSA programs."
Forrester's Cecere believes as companies continue to dig below the surface and apply BPM to additional areas, the greatest benefits will be seen not in the front or back office, but enterprisewide.
"I predict 2007 as the tipping point," he says. "This is when we'll see examples on the business side where insurers will start applying BPM strategically."
BPM: What you Need and From Whom
By Terry Schurter, Business Process Management Group
Everything we do is a process. BPM products consist of a means to create graphical flow-based models of processes that can then be managed and controlled through an underlying process engine. BPM products provide an integrated system for building process models, applying control and rules, creating forms (for people to interact with the system), real-time alerts and dashboards, automatic report generation, version control and data collection for compliance and historical analysis. Some systems have simulation and optimization capabilities as well.
BPM benefits will vary depending on the aims and goals of individual carriers, but categorically include performance improvement, enhanced regulatory and compliance management, and business agility. Insurers considering the use of a BPM product are advised to understand both their organization's objectives and the available resources for implementing a BPM product.
What you should know about your BPM usage:
* Is your primary goal cost reduction, increased capacity or both?
* Do you have specific processes that are your targets?
* Who will configure your BPM system-technical or business people?
* What other systems are likely to be affected?
Performance improvement (process automation, reduction of duplication by people, seamless hand-offs, integrated error-checking, work prioritization, alerts for instant notification of goal threats, and business rules that make expert knowledge an embedded part of processes in the BPM product) yields cost reduction and increased capacity. Secondary benefits include increased customer satisfaction and improved competitive market position.
What you should ask vendors about their products' performance improvement capabilities:
* Can the product be configured by your targeted people?
* Does the vendor have templates for targeted processes that can help you get a head start on configuration?
* Does the vendor have refined process definitions (more advanced than templates) that meet specific needs - and have specific benefits - for the insurance industry?
* Will integration capabilities meet your needs without significant effort?
* Does the system have version control and is that control easy to manage?
* Does the process development environment seem intuitive to you?
* What are the development requirements for every step of total system configuration (process model, workflow, forms, reports, alerts, rules, integration, etc.)? Are your available resources comfortable with this? Can changes be easily made?
* How does the system help meet compliance or regulatory needs?
* Do they have experience-and proven success-in your industry?
* Do they have the proven capability to meet the volume requirements you are likely to experience?
* Is the resulting system fully integrated with itself so maintenance requirements are kept at a minimum?
What you should watch for:
* Activities that are not clear or seem unnecessarily complex.
* The vendor's ability to communicate how you can succeed, including assistance in determining how to implement BPM in a stepped approach that builds a series of successes.
* The vendor's support services to both help get you identify goals and build the ability of your organization in successful use of the BPM product.
Business agility is the management of products; in this case what would best be termed "knowledge products." Because products in the insurance industry can be quite complex with many detailed business rules, it's often difficult to change products quickly. BPM products-as well as business rules products-can dramatically improve the management of knowledge products. The key to successful knowledge product agility is to get your knowledge experts to configure, manage and own these knowledge products.
What you should ask vendors about their BPM products and their impact on business agility:
* Can your product handle the management of knowledge products?
* Has your product successfully been used for management of knowledge products in the insurance industry?
* Can business people configure, change and manage the system?
* Are multiple versions available?
* Is version control available?
* How do I test changes?
* How can I see the results of changes before taking them live?
* What tools do I have to identify products that are selling well? What about those that are not? What about changes to selling patterns when products have not changed?
* Can I see a demonstration of how a knowledge product operates in our system?
Source: Terry Schurter, BPM group chief analyst for the Business Process Management Group, Boston and Warwick, U.K. For more information, visit www.bpmg.org.
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