Most everyone is eager to learn about new trends in theinsurance IT space, but in the case of business process management(BPM), at least one consultant believes “trend” is too light a termto describe its place in the technology spectrum.

Marc Gallo, partner in the financial services advisory practicefor Pricewaterhouse-Coopers,no longer considers “trend” the right description for BPM. “We seeit as a shift within the insurance and technology space,” hesays.

Insurers employing BPM solutions at the front end of largersystems are “redoing the entire business process and the underlyingtechnology,” he says. “Rather than replacing back-end solutions,you put [BPM] in front so the process becomes more efficient. Butyou haven't replaced the technology underneath.”

One thing that has mirrored BPM's growth in recent years is theadoption of service-oriented architecture (SOA) by IT departments–afortunate pairing. Integrating technology requires an environmentthat allows users to connect or disconnect applications as theenvironment and the technology change.

“The promise of SOA is if we have a common way of providingservices as applications are integrated, the ability to plug andunplug becomes the key way that happens,” Gallo says. “It's theopposite of point-to-point integration where you have to write anawful lot of integration software to make it work. SOA enables theapplication integration to happen.”

Deloitte Consulting has done research on what it calls“services thinking,” which Larry Danielson, a principal for thefirm, describes as decomposing processes into logical components inbusiness terms–such as process a claim or issue a policy.

“All of these business terms are packaged and tied to how [theservice] is executed in the technology,” he says. “It starts withthe business terms. The processes are defined and streamlined andthen connected. It allows people to think very tactically but alsoin technology components–to think about how to process business,how to organize it, streamline it, and report against it. We firmlybelieve that is the way you will see the future go.”

(To learn more about the issue of better alliance between thebusiness side and IT, click here.)

PAIN AND SUFFERING

SOA allows carriers to prioritize their pain points. “If youhave some areas of process improvement or some processes that aresitting in mainframes that are 25 or 30 years old, you can unwindthose individual processes and make them more efficient,” saysKaren Pauli, research director in the insurance practice atTowerGroup.“If you don't use SOA [in such instances], you are looking at awholesale rip and repair, and I don't know anyone who wants to dothat ever again.”

SOA allows carriers to deal with problems in manageable chunks.That's important considering the financial restraints mostcompanies have had to deal with for the last 18 months. “What wefound throughout all of 2009 was carriers were trying to doshort-term deliverable projects–not the 18-month projects, morelike the three- to six-month project,” says Pauli. “[SOA] allowscarriers to achieve change without completely blowing everythingout of the water.”

The BPM tool set used by Meadowbrook InsuranceGroup, licensed from Adeptia, lends itself to reusabilityand standardization of the process, explains James Lee, informationsystems manager for Meadowbrook.

“The first time we did a commercial lines interface, we spentsix months trying to get it right,” he says. “My team didn't havethe knowledge of the data itself, and we relied on our businessanalysts to help us get it figured out. Then we had to take thatsame process and clone it, if you will, to handle workers'compensation data. It took about two months to convert [theworkers' comp data] as we redid the mapping, understand the data,and then do the bench testing and production.”

Once the rules are defined around the data–how it is handled andmapped–the basic framework is there, explains Lee. That allowedMeadowbrook to define a standard error-handling framework when datacomes in.

“The basic framework has been cloned for multiple processes froma data interface standpoint,” says Lee. “It has helped to compressthe amount of time it takes and given some standard processes sothe business knows what the standard routine is. The business knowswhat to expect and what the regular handling routine is.”

One of the factors influencing BPM adoption is theimplementation of standards, according to Danielson, as businessusers figure out BPM is worth doing and there is a business benefitfrom it.

“It's driving people to change, and when they do that, thetechnologists are interpreting ways to apply it,” says Danielson.“We are starting to see things such as operating modelchanges–people taking a look at the fundamental way they structurebusinesses. Should they have a local structure? A regionalstructure? Should it be more centralized? These operating modelshave to change. When we start to do that, it's much easier to go toa tool such as BPM and standardize, say, a centralized model,define it, document it, and then leverage it using the SOA processrather than keeping it more informal or allow it to benonstandardized.”

CONTENT IN ORDER

At UnitrinDirect, how the carrier operates today vs. how it operatedprior to the installation of its BPM solution from DocFinity is drasticallydifferent. “It's a different world for us compared with before theimplementation,” says Jerel Titus, underwriting manager for thecarrier.

Unitrin's underwriting group before BPM was paper driven, withincoming documentation adding to the normal underwritingcorrespondence. “We moved to paperless as step one and then to aworkflow piece later on,” says Titus. “Both those steps were asignificant change for us.”

Having a content management system in place is an importantfirst step for insurers looking to improve processes, explainsTitus. “You could probably do BPM without [content management], butit would be a lot of work,” he says.

Unitrin isn't alone in this regard. Gallo is working with aclient that has a paper-intensive environment. The client is “keenon understanding what tools such as BPM can bring,” he says. “Themodeling aspect allows the company to understand what the impactwould be before going down that path and replacing coresystems.”

Clement Moore, a director in the financial services advisorypractice for PwC, adds companies need to lay out a businessarchitecture and how it can be supported in a large-scaletransformation effort.

“The BPM solution is the first step in a CIO's world in terms ofunderstanding how the business wants to drive new functionality,”says Moore. “We then can use that to prioritize and develop thetechnology road map not only on the cost-benefit analysis but alsoon the market competitiveness derived from different solutions. Thepackage application environment greatly benefits where you can plugand play these applications, and the standardization within anACORD environment supports what we are proposing. You can show howeach of the applications in a BPM environment will play.”

OTHER BENEFITS

Personnel is a major expense for insurers, so if a company cantake a major function within the organization, do it moreefficiently and with fewer errors, fewer people, and less legalexposure, that's a huge gain, points out Gallo.

This will become critical because the number of workers enteringthe insurance industry today is declining. One of Gallo's clientswas lamenting the fact his part of the insurance business is notconsidered sexy by potential workers, even though it is a criticalfunction.

“It's difficult to recruit to his part of the business, letalone persuade people from other parts of the company to join him,”he says.

That is one reason to take a serious look at BPM, assertsGallo.

“If he doesn't find a better way to be better, faster, and moreeffective, he is going to suffer from a shortage of manpower,” saysGallo. “The efficiency and consistency that is brought into theequation as a result of BPM is critical when you look at thingssuch as an aging work force and the reality that there are types ofwork people don't want to do anymore. BPM is meant to address thoseissues in the same way people didn't want to work on assembly linesforever and robotics came in to take some of the drudgery out ofthose jobs.”

When it comes to labor, Danielson maintains, it is important tolook at what employees are doing and how they can do their worksmarter and revisit the model the company operates under.

“To do [BPM], you need to spend time and effort–invest a dollartoday and see the fruits of your labor later,” he says. “It's notsomething you can do without an investment.”

Organizations also need to look at their rate of return. If theyare going to get a marginal return on investment, Danielsonbelieves BPM projects can be too disruptive to go down a path thatdoesn't offer great rewards.

“The bar isn't set high enough if it's only incrementalimprovement,” he says. “This type of change in the process andeliminating whole steps is painful for an organization, and youneed to get a rate of return for the investment. When people layout programs, they need to demand [ROI] and plan for the resultrather than the incremental change you might see.”

Lee was brought to Meadowbrook to implement the Adeptia BPM toolthree years ago and to manage the projects that would be utilizingthe services the tool would provide.

“The primary goal from the beginning was to automate theexisting manual processes related to bringing data from externalsources into our environment and also from other systems thatweren't connected,” says Lee.

Meadowbrook had grown over the previous years, and Leeindicates, not all the systems talked to each other nor was therean automatic integration path.

“A customer would send us data in an Excel spreadsheet; ourpeople would print out the spreadsheet and then keypunch that databack into the policy management system or into the claimsprocessing system,” relates Lee. Meadowbrook's goal was to loadthat data into the back-end systems and eliminate as much manualintervention as possible to minimize human error.

There is hesitancy within any organization to adopt such majorchanges, Lee notes, citing the well-worn rebuttal: “This is the waywe've always done it.”

Meadowbrook used Adeptia as leverage to get people not just toautomate the process but to look at how things were done and thenredesign the process.

“The only thing worse than a broken process is automating abroken process,” says Lee. “If you are going to the trouble ofautomating this step, let's take a look at what we are trying to doand try to get some gains.”

The biggest learning curve for departments, Lee continues, isthinking about how they can do the job differently. Meadowbrookspent a lot of time detailing to business users what BPM can do forthem.

“In some cases, [users] just weren't ready for everything, so wehad to go incrementally,” he says. “It depends on the comfort levelof the business community. For some folks it took only one instanceof getting changes, and they jumped in with both feet and havesince come back and asked us whether [the system] could do otherthings. Part of my job is to get business users to understand whatthe tool provides and the benefits we can give them from a businessstandpoint if we use it properly.”

SAVINGS PLAN

Virtually every insurance carrier at least is thinking about theadvantages BPM can bring to an organization, Gallo observes, addingsome carriers have gone the next step and purchased a vendor toolset. “They believe it can bring great efficiencies to what they aredoing,” says Gallo.

The third class of adoption includes the insurers that have notonly purchased and implemented BPM solutions but realized theefficiencies and cost savings.

With a system in place, “you can do more work with a smaller andmore effective team,” says Gallo. “The business case around this isit enhances profitability and revenue. Even though you have tospend money to make money, this is the direction you have totake.”

Unitrin Direct is a member of the third group. Rob Shaphard,assistant vice president of operations, reports once the carrier'sIT people learned how to develop the BPM system, they were able totranslate that knowledge to other business units.

“From a customer experience perspective, it really has helpedour customer service reps,” he says. “They have the information attheir fingertips. It is easy for them to talk with the customernow.”

In addition, staffing issues have provided a huge benefit forUnitrin. “We can handle, say, a 50 percent increase in work, but wewouldn't need to increase our work force by 50 percent,” saysTitus. “It's much easier to grow.”

Danielson believes in the service function of BPM, as well. “Ifpeople measure the number of times they spoke to a customer and gota certain result that wasn't a sale, it would drive behavior. Youmight find people spending more time on the phone helping customersunderstand either the product they've got or whether there is a newproduct that can help them,” he says, which can produce a sale.

“You tie data to behavior, and that is clearly linked to theprocesses–the steps that people follow,” he continues. “BPM is notnecessarily looking at identifying more steps or taking steps outbut to better understand how to streamline things. If you canautomate them, that's great. If there is no reason for people totouch a process manually because you can use some technology tool,such as a business rules engine, and apply it to a standardizedprocess, that's a great thing to do and that's what BPM willdo.”

BPM also is important for enabling customers to interact with acarrier as they choose–whether through a Web site or a mobileconnection, points out Pauli.

“If your internal processes are a mess and you don't have thingssuch as straight-through processing or aggregated data andinformation, you are going to alienate your customers if they haveto go to multiple places to do simple things such as change anaddress,” she says. “They get that kind of [positive] experiencewith other industries. Companies need to look at their processesbefore taking on any big customer initiatives–not the reverse.”

Getting a grip on process improvement gives carriers a costbenefit, adds Pauli.

“It makes it easier for the consumer and for the distributor,and it saves money,” she says. “You are impacting three businessdrivers with one basic initiative around BPM technology. That's amajor win.”

ONE SOLUTION

Gallo believes BPM will move beyond being a solution in its ownright to become a part of a broader software solution. “Over timeyou will see vertical solutions within the insurance industry beginto adopt BPM capability within their tool,” he says. “[Software]will not only be industry specialized, but you will be able totailor the BPM to your own organization.”

But all these benefits come with a warning, cautions Danielson.If a carrier is looking to make significant changes in businessperformance, Danielson suggests the company first considerpotential risk and impact. Plans need to be in place to mitigaterisk and be proactive.

“People need to understand this is a dramatic change,” he says.“The way they do that is address change management and talentissues that happen.”

These fears won't cause carriers to shy away from BPM, predictsDanielson. “Those that actually recognize the potential risk, dealwith it,” he says. “These are not small marginal changes; these arethings that can make big improvements. So, there's a trade-off. Ithink it's worth it, and clearly the data supports it.”

TD