Many insurers are turning to business process management (BPM) solutions to break through the logjams caused by stovepiped and legacy systems that hinder attempts to achieve greater speed to market and nimbleness. BPM technologies help companies better automate their processes across organizational walls, enabling intelligent workflow automation and straight-through processing. However, industry surveys show such a transformation is going to take time.
While the insurance industry - with all its paper-intensive processes - seems to be a natural candidate for BPM, carriers have been relatively slow to adopt the technology - perhaps slower than many other industries. "As with so many technologies, insurers are laggards to adopt BPM," says Lawrence Danielson, principal with New York-based Deloitte Consulting LLP. "This is counter-intuitive because the paper-based nature of the business is an excellent fit for this technology."
Adding to the challenge is the fact that "the insurance industry is fraught with a 'but-this-is-always-the-way-we've-done-it' mentality," says Zach McCoy, SVP for Indianapolis-based Kaplan Compliance Solutions.
PROVEN BENEFITS
Major benefits seen from BPM efforts include cost reduction and loss ratio improvement. "Implementing today's BPM tools to triage claims and reduce loss expenses is a clear leader given the overall claims loss expense at P&C insurers," says Deloitte's Danielson. Another benefit is growth. "Agency systems and portals that offer straight-through processing is another BPM offering that can provide top-line improvements." Underwriters can see advantages, since a BPM-enabled system can "provide underwriters with specific submissions that require their unique expertise, and offer integrated technologies that link process and data."
Donald Light, analyst with Boston-based Celent, sees BPM reducing a lot of paperwork, as well as improvements in quality and consistency. "The default has always been, you train and you manage," he says. "You have written policies and procedures, and new people are retrained to follow them, with the managers and supervisors trying to ensure compliance with the policies and procedures. The benefit from BPM is that those processes can be automated and recorded in terms what's actually done to monitor for consistency and monitor for quality, and improve both."
Positive results can be seen fairly rapidly in some cases. "With an integrated BPM solution - with rules, process, user interface, data integration and reporting all in one package - radically improved business processes can be rapidly deployed in less than 90 days," according to Gary Kirkham, former VP at American National Insurance and currently director of insurance industry solutions for Pegasystems. "They also provide meaningful performance metrics to management."
An AIIM survey last year found that more than half of respondents who conducted a return on investment (ROI) study achieved a positive ROI in three years or less, and 70% of those same individuals cited direct cost savings as a benefit. Among those who conducted an ROI study, 52% achieved a positive ROI in three years or less. Another 15% achieved ROI in five years or less.
One insurer, Redwood City, Calif.-based CAMICO Mutual Insurance, which provides liability coverage to CPAs, has seen tremendous productivity gains from automating its Web-based customer application process with BPM tools. "I would estimate for our average transaction, we've probably cut the time at least four - or five-fold," says Scott Webber, VP of eBusiness for CAMICO. "Once a customer passes our underwriting rules, there's basically no human involvement whatsoever from start to finish."
WHERE TO START
Industry experts advise starting a BPM effort with the low-hanging fruit. "Start where the business opportunities are bigger - results can be achieved faster, and the impact is more visual," says Joerg Heistermann, CEO of the Americas for Germany-based IDS Scheer. "After the initial success, it will be possible to aim for bigger and more challenging goals." He also points out that BPM may not add much to core processes or workflows, since these areas "should already be well managed."
Instead, start with an area such as customer service, an area ripe for greater automation, such as customer service management, because it "covers many workflows and departments," he explains.
Light says he sees the greatest adoption within business lines "where you have the highest counts of policies and people insured, and requests for service coming in." He adds that BPM technology is a good fit "anywhere where the value of the total transactions and number of transactions justifies the investment in BPM."
At CAMICO, the initial phase of the BPM deployment played a key role in identifying customer trends. Webber says that getting data into a Web format is a significant first step. "In the old world, we had a partial set of all the data that customers submitted. Now, when they renew online, or submit new data, we have every single data element. So we can start analyzing the customers on many different levels that we weren't able to do before. That was a big discovery."
INCREMENTAL CHANGE
Because BPM can be a complex undertaking, the key to selling the effort to the rest of the business is to demonstrate success on an incremental basis, Webber advises. "You want to stair-step into the complexity of BPM. A first approach might be just getting a dataflow and a workflow through your different roles. Then a subsequent step would be to plug in Web services to either read or set data."
A BPM initiative, especially for organizations new to the concept, "should start small with a visible project," Heistermann agrees. "It is not mandatory that an insurer commit to a full organizational transformation effort," adds Kirkham. "Huge gains can be achieved in divisional and regional organizations with a simple commitment to moving toward process excellence."
Celent's Light agrees that businesses and their IT departments can quickly be overwhelmed by the complexity and reach of BPM systems. "These are not inexpensive systems," he says. "Like with any major IT purchase, you have to have a pretty good idea of what sets of benefits you're going to get, and where in the organization these will occur over a period of time."
Often, the initial expense of BPM systems does not cost-justify deploying it for a single solution. The payoff is seen as the system is expanded to encompass additional processes. "We call this best practice 'deepen and extend,' and it defines how an insurance company would use BPM," Light says. "Somebody on the operating side may have an issue, and the solution is to solve the problem using BPM. However, almost always, that initial implementation doesn't cost-justify the whole having a solution. If it's a claims issue, say first notice of loss, the BPM solution needs to be also used in other areas, such as adjustments."
WHO'S IN CHARGE?
Who should take charge of BPM initiatives among carriers? Light advocates establishing a center of excellence to help the organization take advantage of the BPM solution and approach on an enterprisewide basis.
Kirkham advises selecting "an executive, or influential individual that serves as the process 'champion.' The champion works at the divisional or enterprise level to educate others on the benefit of process."
Management - not just having the latest-and-greatest technology - is key to effectively promoting BPM methodologies in the enterprise, agrees Kaplan's McCoy. "It is critical that management communicate that there will be change while implementing BPM," he says. "Change can be disconcerting for some and this is one of the reasons more progress has not been made in this area." He urges BPM proponents to "brush up on change management practices," and "identify those who will fight the change early in the process and provide specific coaching." Most of all, he says, "check all egos at the door. Within your organization there should be no sacred cows as you enter into this process."
Joe McKendrick is an author and consultant specializing in IT, based in Doylestown, Pa., and a regular blogger for www.insurancenetworking.com.
(c) 2010 Insurance Networking News and SourceMedia, Inc. All Rights Reserved.
