Popular wisdom tells us “reengineering” has gone the way of themullet and the Macarena, fads of the 1990s that are the targets ofderision today. But if you look deeply enough into the visionbehind today's business process management (BPM), you'll find thecore tenets of reengineering–identifying, changing, and eveneliminating processes–are a fundamental part of BPM.

Making sure this part of BPM (let's call it “processimprovement”) is successful begins with understanding whyreengineering, as a rule, wasn't. Essen-tially, the valid visionput forth by proponents of reengineering from Michael Hammer onforward was bastardized, used not as a route to excellence but asan excuse for otherwise-planned cost cutting and staff cuts.

“Business process reengineering was misinterpreted,” claimsLaurent Lachal, senior analyst at Ovum consultancy's Londonheadquarters. “It was implemented as a 'big bang' approach. You'dhave an army of consultants descending on a company, recreatingprocesses, then disappearing, leaving behind them pro-cesses thatwere not able to deliver what they were supposed to.”

For BPM to be most effective, companies need to understand andaccept the fact improvement, rather than automation, must comefirst. This, however, is contrary to the natural inclination tolook at BPM as a primarily technological solution. “The situationis not as bad as it was two years ago, but there still tends to bethe issue where people see the money spent on [BPM] technology, sothey focus on that technology,” says Roger T. Burlton, president ofthe consultancy Process Renewal Group.

But take heart: Read on for five tips on achieving processexcellence and examples of how several insurers have made processimprovement work for them.

Newton's first law of motion says objects at rest stay at restunless acted on by outside forces. Likewise, processes tend to stayin place unless they are changed, and people naturally resistchange. You need to work to overcome that inertia at alllevels.

“BPM moves us into change management, defining what it is youwant to do and why you want to do it, and selling that vision tovarious audiences in the company,” Lachal says. On top of having aproactive, audience-specific communication plan, Lachal suggestscompanies need to discover key “process controllers” within theorganization.

“That's not necessarily people who have the title, but they havethe influence over the project and people, and you need to get themon your side,” he explains. Also, particularly where processescross departmental and product boundaries, top-managementsponsorship is essential to prevent turf battles andinfighting.

That support also helps overcome the natural human inclinationagainst change. “Business staff members will say, 'We do thingsdifferently because we're special,' and you have to determinewhether that's true or whether they're just unwilling to change,”says Kimberly Harris-Ferrante, vice president of research atGartner. “It's almost a political debate.”

When Michigan-based Auto Club Group (ACG) looked to change froma 100 percent manual underwriting pro-cess to include automated,point-of-sale underwriting via its agent sales portal, it made sureto involve people not just from underwriting but from other areas,as well. “We had underwriters, staff from sales, claims, productmanagement, people who file rules [with state insurancedepartments], and IT, including developers and maintenance, soeveryone was on the same plane,” notes Michael Koscielny, directorof regional underwriting operations at ACG.

Ultimately, the insurer chose Blaze Advisor, a rules-basedsystem from Fair Isaac, as a basis for automating the underwritingprocess. ACG retained Accenture as a consultant on the project tohelp establish the initial architecture and rule base of thesystem, which was first deployed in 2002. “In the rule development,we also made sure to include sales, underwriting, and product staffso we didn't miss anything,” says Koscielny. And in the ongoingrule maintenance of that system, the same groups of people areinvolved to ensure rules contribute to the optimal underwritingprocess.

Similarly, American National In-surance Company (ANICO) lookedfirst to people when it needed to solve a vexing process problem inits customer service center. ANICO, which sells life/health andproperty/casualty products, annuities, and mutual funds, knew theproblem stemmed from customer service representatives having toenter and exit a number of different back-end systems to handle onecustomer call, but the company didn't want to take a systems-firstapproach.

“We had to identify what people had found to be the mosteffective practices, the shortcuts, and the real ways they got workdone, then use that knowledge to improve the process,” says GaryKirkham, vice president and director of planning and support atANICO. “That helped them realize talking about [those shortcuts]was a good thing, the project didn't endanger their jobs, and weheld them in high esteem as 'process experts.' The majority ofpeople who became our workflow architects had worked in the callcenters.”

This initiative led to a number of far-reaching and ongoingprojects, beginning in 1999 when the insurer implemented a workflowsystem from Pegasystems to give the CSRs a single viewpoint intothe systems that hold customer information and, by defining rulesthat embodied the best service practices they identified, to guideCSRs through a service task. Additionally, ANICO has taken itspeople-first approach to that project to effect ongoing processimprovement in the years that have followed. The carrier initiallydeveloped a workflow process team focused on service workflow.Later, it created a cross-functional customer-service action teamto identify and implement best practices in overall customerservice.

In addition to recognizing the importance of staff in pro-cesschange, companies need to reward process experts accordingly. “Wetend to reward people for having a project come in on time andunder budget,” Burlton indicates. “We don't translate that back tothe [project's] initiation.”

Besides elevating the role of process experts, ANICO continuallylooks for ways to recognize staff involved in process improvement.“We've had incentive parties along the way, we've given T-shirts,we've done other recognitions,” Kirkham says.

The Pegasystems project at ANICO has had several quantifiableresults, including reducing call abandonment by more than 70percent and average service call time by more than 60 percent. Butmore important, adds Kirkham, is it has allowed ANICO to service agrowing book of business, which included an increase in its annuitybusiness from $200 million in 2000 to $2.4 billion in 2004. “Wecouldn't have done that with the old process,” he remarks.

“Before you fix processes, you need to understand them,” Lachaladvises. It sounds simple, but often it's not. “Many companies talkabout their processes, but when you ask them whether theyunderstand what they're doing, they don't. They just do it.”

The history of understanding business processes didn't involvetechnology. “We had brown butcher paper and tape, where we'd stickthe process up on the wall and talk about it,” Kirkham recalls. Butlike everything else, process modeling has become moresophisticated, and process modeling tools, whether stand-alone orpart of BPM suites, not only help insurers understand existingflows but also are able to simulate the impact of process change.Today, ANICO has replaced butcher paper with IBM's MQ WebSphereWorkflow process modeling software.

As carriers go about the modeling task, they must be prepared tofind some surprises. “When you sit the people down who actually dothe work, not everyone agrees with what the process is,” notesHarris-Ferrante. Even if a company has its processes documented,employees may not follow them consistently. “There's a lot ofsubjectivity. Just understanding and agreeing upon the processtakes a lot of time,” she says.

Even though ACG's underwriting rules were defined anddocumented, there still were surprises. “There was a group [ofrules] in the manual we could put our hands on, and there wasanother group we kept in-house, close to the vest, thingsunderwriters do. And there were unwritten rules passed down throughthe ages, things we did but no one ever sat down and defined.”

Eventually, ACG was able to codify its rules to the extent wheretoday 99 percent of personal auto applications are underwrittenautomatically. That level of automation, in turn, created some moresurprises.

“When you write a manual, those [rules] are subject tointerpretation,” Koscielny says, adding that's not so when thoserules are automated. After first deploying the Fair Isaac system,he found himself deluged with calls from agents who claimed thesystem's underwriting analysis was wrong. A “listener” feature tothe system allowed him to view in-process quotes and answer agents'questions.

“My phone rang off the hook for two months,” he says. “Ofcourse, our underwriters had been battling that all along on afile-by-file basis, but now rather than dealing with it afterissuance, the agents could see the discrepancy at the point ofsale.”

In addition to the high pass-through rates, Koscielny creditsthe system with helping ACG achieve “significantly better” lossexperience in states where it has the tool deployed vs. ones thatare still pending deployment.

Carriers not only need to understand a process before they canimprove it, but they also need to be able to measure the before andafter states. “The capability to generate simulations has emergedin the last few years,” Lachal points out. “Once you've created aprocess model in a modeling tool, the tool allows you to feed datainto it. That can tell you such things as how long it takes for acase to be processed, how much it costs, where and what thebottlenecks are, and how much a company needs to invest to makethat process faster and better.”

At Lincoln National, CSC's Auto-mated Work Distributor (AWD)process management system, in place at the insurer since the late1990s and upgraded in 2002, provided both the basis for andmeasurement of recent improvements to processes involved in theannuity business, specifically regarding new-businessprocessing.

“As our volume [of annuity business] increased, it was gettingmore difficult to process new business because we're obligated todo same-day pricing. Our overtime costs were going upsignificantly,” explains Steve Johnson, Lincoln National's secondvice president of business solutions and support.

Having undertaken a Six Sigma initiative, Lincoln had a group ofstaff trained in process analysis and improvement. The annuity areawas able to pair some of those staff members with business andtechnical staff members who maintained the AWD tool to attack theproblem.

“By taking the baseline metrics on productivity and cycle time,we could simulate how process changes would impact the bottleneckswe were experiencing,” says Colin Chin, Lincoln National's directorof operational support.

The analysis, begun in late 2004, eventually resulted in severalchanges related to new-business processing. Most significant, thecompany revamped the way it handled application entry for its morethan 300 different annuity products. Before, staff would handleapplications end to end; today, the company uses an assembly-lineprocess. Therefore, newly hired or less experienced staff can beassigned easier application entry or information look-up tasks,while more complicated or product-specific tasks are passedautomatically to more experienced staff to complete.

Other areas were impacted, as well. For example, the carrierreevaluated the way it handled image scanning. Pre-viously, thesame number of imaging staff members would work the entire day.However, workflow data showed spikes in volume in the second halfof the day, after mail arrived. Therefore, Lincoln National shiftedwork hours in the imaging center to keep staff operating at fullcapacity.

“We went from more than 400 hours of overtime a pay period to 65hours, with six fewer people,” Chin reports.

“If [an insurer] becomes the best in the world at issuingpaychecks, that doesn't make much of an impact on its strategy.What makes a difference are processes that develop new products andsell to and service customers,” Burlton says.

Harris-Ferrante asserts insurers actually have done a good jobof identifying high-value processes. “For life insurers, thebiggest pain point is in the new-business policy issuance. Inproperty/casualty, it's claims. Some of the biggest gains I've seenin BPM have been in claims,” she says.

Merastar Insurance Company, which writes employer-sponsoredpersonal automobile and homeowner's insurance, found the perfectopportunity to revamp its claims processes when the company wassold from Prudential P&C Holdings to Haverford (Bermuda) Ltd.in 2003. Essentially, the company was working from a blank slate,because it didn't take Prudential's claims system in the sale, onlya green-screen, COBOL-based application that hadn't been used infive years, which it was forced to resuscitate in the short termjust to do business.

“We literally started from [deciding] where the adjusters'mailboxes were going to be, how many cubicles we would need, evenhow many people we would need,” says Scott D. Harris, who was hiredat the time of Merastar's sale as its vice president of claims.“Our philosophy was a high-tech approach to claims processing withaccuracy first, speed second.”

Merastar selected Guidewire's Web-based ClaimCenter system. Thesystem, fully deployed in mid-2005, automates the flow of allclaims tasks from first notice of loss through investigation,evaluation, settlement, and recovery. The company sources theloss-reporting function to First Notice Systems, which afterverifying an in-force policy and collecting claim information,uploads a loss notice to Merastar. ClaimCenter automaticallyassigns and routes new claims to the appropriate adjuster using arules-based approach that considers the expertise level needed on aclaim and existing adjuster workloads. Manager dashboards alsoallow claim managers to view the companywide claim process and makeadjustments to flows and workloads as needed.

While not having had a claim system that supported a high levelof automation before doesn't give a benchmark for comparison,Harris contends the benefits of the system are clear. “It's made usa more accurate claims operation by requiring adjusters to gathermore information and to follow a specific claim-handling processevery time,” he says. The company also can monitor more easilyservice standards, such as 24-hour contact. “And we have more thanone set of eyes on a file, which lessens the chance we'll pay whatwe don't owe,” Harris reports.

Finally, process excellence is a journey, not a destination.“It's done by people who stay, not just by consultants who come in,change everything, and disappear,” Lachal says.

At ANICO, “we change processes almost monthly as we discover newways of doing things,” Kirkham indicates. For instance, heexplains, a three-person team used to handle unearned premiumreimbursements when a policyholder died. “The [customer-serviceaction] team determined we could eliminate that manual process bycreating an automated business process. Now, when we know aninsured has passed away, the [Pegasystems] system passes the dataautomatically to initiate those refunds, and we've redeployed thosethree people.”

Focusing on continual improvement vs. a one-time effort can be achange in mindset for project-focused staff and technology-centricIT departments. But it's a change in mindset Lachal says in someways is being driven, perhaps paradoxically, by the technologyindustry itself. “As a whole, software is becoming moreprocess-centric,” he claims. “And since people use software, peoplewill use it from an increasingly process-centric point of view.That's a good thing.”