While NASA may have popularized "Faster, Better, Cheaper," the philosophy behind this mantra has driven the reengineering efforts of many industries since at least the beginning of the Industrial Age.
The insurance sector is no exception, with its never-ending quest for ways to get business done more efficiently and at lower cost, while still maintaining high quality. Technology has responded: business process management (BPM) has developed into a systematic approach to plan, design, model, execute, and manage processes across the enterprise. Core insurance systems have evolved from basic record-keeping platforms to full-function platforms that incorporate embedded workflow functionality.
"Some of the larger functional systems, like claims, underwriting, or policy administration, now have very impressive process management capabilities built in," says Rod Travers, executive vice president, Robert E. Nolan Company. "These systems have the ability to be configured, rather than modified with custom programming, which is also the whole notion behind BPM. You design the process, and the technology is so flexible you can very much enable that without a lot of coding."
In recent years, BPM has been driven by the desire to control costs, but the motivation of insurers may be changing.
"The drive for process improvement has been framed in terms of handling the same number of inputs--submissions for coverage, claims coming in through the front door--with X fewer people or Y percent greater cycle time," says Donald Light, senior analyst at Celent. "Today, we're coming out of that period and heading into a more growth-oriented and market-share-oriented focus on process optimization."
"In the past 24 months there has been a shift. Some companies are taking advantage of the market downturn to make big investments in technology, including business process management technology, to advance their position in the market," says Bob Jirgal, who joined CNA in August as senior vice president of business process reengineering.
"At CNA, we are focused on taking an 'agent-in' view and making investments that enable the agent-focused strategy we're pursuing," he adds. "That means maximizing our process capabilities so it's easy for agents to engage with us, whether it's through technology interchange, face-to-face contact, or access to information. We're willing to make the investment to achieve that."
Like the classic paradox of which came first, the chicken or the egg, the dilemma of workflow optimization centers around whether process design should dictate the technology approach chosen, or whether software tuned to the insurance industry should dictate a best-practice process flow.
"Don't just throw technology at the problem," Travers argues. "There are lots of processes in place at an insurance company simply because they've always been there. Carriers need to drill down and determine the actual impact of processes that could be improved, including ones that are 'broken.' If you have a broken part in a process but it's exceptional--only affecting one in a thousand applications--it might not be worth changing. But if it affects one in ten, it's worth taking a look at."
Companies that fail to undertake this assessment will likely wind up disappointed with the results, rather than achieving their workflow optimization objectives. They might get there faster, but it may not be cheaper and will definitely not be better.
Insurers should look beyond assessing existing processes and "leap to the ideal," Travers says. "If you're going to pave the cow path--'superautomate' what isn't working from a business standpoint--you're going to end up with more of the same. One year down the road you will have a shiny new system, but you won't have better processes. The best practice is to design your processes in clams, underwriting, or elsewhere without the constraints of technology or geography."
Jirgal says CNA's reengineering strategy is to identify a handful of core, end-to-end processes that add value to CNA's producers and policyholders, such as product development, claims processing, and submission processing. Each of those core processes involves subprocesses, such as the underwriting, rating, and issuance components of submission processing. Then, CNA looks for ways to optimize the end-to-end process within each of those, never losing sight of the overarching strategy.
"CNA believes in making process changes in advance of technology," Jirgal says. That strategy is playing out at CNA in several concurrent projects, including a strategic claims initiative to modernize and consolidate its core claims platforms.
"Ultimately the goal is to optimize the interaction with the producer and policyholder, supported by a single platform across the organization for claim processing," Jirgal says. "We are looking for the claims platform to enable a process that delivers superior results to policyholders, beginning with understanding whether each step in the process or activity is really delivering value."
In assessing that value, CNA relies heavily on end-users who will be affected by any changes. "You need to ask the ultimate customer--the agent, policyholder, or internal user," Jirgal says.
A challenge for CNA that is shared by many other insurers is how to address the potential for variation in processes among personnel, departments, and locations. "We need to standardize processes so that, when the technology is deployed, it minimizes the impact and training time for people who are processing things manually now as they transition to the new platform," Jirgal says.
Determining what should represent the standard workflow throughout the organization involves working with the people who have first-hand knowledge of how things get done. But there is a balance that needs to be struck.
"How many branches to visit in order to understand at least the superset of any one process is part of the challenge," Jirgal says. "You might not be able to visit every location, but you need to visit enough to gain a thorough understanding and to get buy-in that enough views have been captured. You need to balance doing discovery with doing too much discovery, otherwise you end up a year into an initiative and you haven't gotten anywhere."
Bill Garvey stresses insurers need to put "boots on the ground" before they should begin changing workflows. Garvey spent 30 years in insurance operations and IT before founding Eastern Shore Consulting and recalls an experience from a recent IT management post he held.
"We went through a series of interviews with agents and found there were a lot of bottlenecks for handling claims. We did real-world analysis and were stunned to find that, from the time you reported a claim to the time you got a check, the average claim took 45 to 60 days."
Streamlining the workflow was the first step in solving the problem: agents were given the authority they had been seeking to settle claims up to a certain dollar amount. Technology was second.
"We determined we need to get a loss to the right person quickly, rather than going from an agent to a clerk to a supervisor to a claims rep," says Garvey. The insurer extended an existing workflow management system to build an automated, rules-based process for claims triage and routing, cutting the total claim processing time across the company by more than half.Garvey says that, "for the most part," reengineering before automating is the right way to go. Yet, he admits that the approach is not without its potential problems, illustrating possible pitfalls with his experience from a difficult policy administration replacement project.
"We determined that, since it would be a long time before we rolled out the system, we would change the way everyone worked, whether or not software would be involved in the ultimate process," he says. "On one hand, we became more aware of our workflows because of the change process. We grabbed some low-hanging fruit and streamlined some activities."
But because the legacy admin platform couldn't automate some of the "to be" workflow states that were designed, it created new problems. "By the time we got the new software installed, which took a while, a whole bunch of irritating workarounds were created by people in order to get the job done in the new process. We never anticipated having to factor in those workarounds," Garvey says.
Rod Dunlap says it can be more effective to automate first, then reengineer only if necessary. "If you're achieving the right outcome, it makes sense to focus on getting to that outcome faster," he says. Dunlap recently founded business process automation consultancy Triangle BPA after having been director of Blue Cross Blue Shield (BCBS) North Carolina, which is undertaking a claims automation initiative using the Pegasystems SmartBPM platform.
"Most claims are paid correctly--at least 99 percent. So if we just replicate the process that people do when they're handling a claim with technology, there's a 99 percent chance we'll be right. However, if we design a new process, there is a higher chance we will get it wrong," he claims. "In other words, if it ain't broke, don't fix it, just make it faster."
BCBS North Carolina's goal was to reduce the number of claim "repairs" that required manual intervention from 20 percent to five percent. Repairs are needed to correct duplicate billing, process coordination of benefits, and handling errors and exceptional situations. "We identified a tremendous potential savings," Dunlap says. "We had 400 people paying claims, and at $50k a person, that is $20 million in salaries alone, not counting overhead. We estimated we could save $15 million by achieving a 95 percent rate of claims automation."
The insurer began its process optimization initiative by identifying the highest-value repair scenarios and targeting them first with rules-based, automated workflow. "Most times, a human is not using any type of intuition or unique human skill in the repair process. They are comparing claims and other things based on predetermined rules and criteria. So, we try to automate what the human is doing, which is also quicker than building new processes from scratch," Dunlap says.
That automation involved building a variety of reusable services within a SOA framework. Each service utilizes different strategies to emulate the human workflow. Some incorporate open integration based on APIs; others utilize more tightly-coupled integration and database triggers; others incorporate keystroke emulation.
"Think about it," Dunlap says. "We're automating a manual process. If Sally or Tim sit behind a terminal and do 27 keystrokes to modify a hold code and resubmit a claim, we just emulate that."
The Pegasystems solution incorporates a rules-based "claims optimization framework" that allows BCBS North Carolina to push control of business rules to business users. To date, more than 500 rules have been written by business people.
"With two weeks of training in Pega-systems, users can begin building new workflows. That makes more sense than having the business translate a process to IT, then having IT build something for the business that may or may not be right," Dunlap says.
Speed of deployment is a key benefit of an "automate first" approach, says Dunlap. "It's important, particularly in this business climate, to be agile. Things change quickly. The government has new guidelines every day. If you can automate something in a matter of days, versus the traditional timeframe of several months, you can respond better," he says."It also shifts the development paradigm," Dunlap adds. "Companies shouldn't build things to last; they should build things to change. And if I can build things in a week, what difference does it make if it only lasts six months?"
At the start of 2010, BCBS North Carolina had reduced the need for manual intervention on claims to just 10 percent and is continuing the automation initiative. The project, utilizing the Pegasystems' platform, achieved a 300 percent ROI in the first year and 800 percent by the second, according to Dunlap.
Changes and Challenges
The technology industry in recent years has made advances in process modeling tools, insurance-specific process models, and BPM tools tuned for the insurance industry. "While there is no 'BPM solution" specific to the insurance industry, several horizontal BPM solutions have insurance-specific templates, content, and so on," says Light. "The 'verticalization' of those solutions has been a major trend in BPM."
"Most of the BPM systems have very sophisticated design tools, so you can visually model processes, design attributes, simulate processes and where bottlenecks are, and design process performance measures," Travers says. "Those capabilities have come a long way."
Light adds that BPM tools incorporating BPEL (Business Process Execution Language) do "a pretty good job" of putting modeling and execution in the same place, creating executable code as tasks are created and thereby reducing the number of hand-offs between business analysts and IT developers. Additionally, BPM solutions have strong process modeling capabilities, giving users the ability to optimize processes by looking at various "what if" scenarios.
"All that said," cautions Light, "insurers must make the necessary investment in people and skills in several product and process sectors in order to realize full value from their BPM solution."
BPM systems and standalone modeling platforms aren't the only tools insurers can use in the decision to change, keep, or eliminate processes. For many insurers, process design involves getting a bunch of smart people in the room together with a whiteboard. "The whiteboard approach is not bad, depending on the complexity of the workflow and the level of improvement you're looking for," Light says.
In process modeling, Travers sees two common mistakes: over-documentation of existing processes, and addressing the symptom, rather than the cause, of business problems.
"Don't spend a lot of time documenting your broken process," he advises. "You already know the process is causing you problems because of your business outcomes or the benchmarks you are measuring yourself against. However, companies often start out reengineering by documenting processes in exhausting detail. That's just throwaway work and a distraction to the real goal of improvement."
The reason insurers focus on the symptom, Travers says, is that they are the easiest thing to spot. "People who do the job every day see the symptoms, and they want to fix them," he says.
As an example, Travers illustrates the scenario of a claims rep not having a place in the admin system to record needed claim data. "They might address the symptom by 'innovating at the desktop' and simply creating a new spreadsheet. They've solved the symptom, but the underlying process still exists. Worse yet, they've created duplicate and 'shadow' processes that are worse than the symptom they're experiencing," Travers says.
"Sometimes those workarounds do work, but most times they pile up like barnacles that clog the system," he adds.
Jirgal observes that some companies struggle with lack of a top-down framework to guide improvement that will lead to optimal workflows. "What I've seen from my prior experience is that companies like to start with process modeling, but without any goal in mind. And modeling for modeling's sake doesn't add value," he says.
"Understanding and capturing the process is very different from understanding opportunities that can be gained by changing the process," Jirgal adds. "That's where companies can get caught up in process modeling tools and modeling portions of BPM tools. They get too focused on the technology, when they should be working with people and focused on identifying and implementing changes that improve business outcomes."
Making it Work
Change management is also an ongoing issue insurers must contend with on the path to workflow optimization. "Technology may enable a process, but there is an organizational component to implementing any process change," Jirgal says. "The challenge is making the necessary organizational changes, not necessarily to corporate structure, but to roles and responsibilities. Those are often overlooked, and when they are overlooked it results in not getting the optimal results you thought you would."
Regardless of whether a process is changed, retained, automated, or eliminated, the most important thing to do in the reengineering effort is to engage the users. "As stupid as it sounds to exclude the users, that is the single biggest mistake that companies continue to make," Garvey says.
This mistake is a product of a myopia that is all too common to the business consulting corp. "We like to think that we know what people on the 'front lines' want because we have this body of knowledge. It's just a natural trap to fall into, especially when you want to get something done and you feel like you're on the right track," Garvey adds.
"Rather than giving people information and training on how to use new tools, new screens, new 'whatever,' companies need to address first the employee morale issue," Light says. "Unfortunately, that's something that's often overlooked, particularly if a company is in tough economic times like we're certainly going through now."
"The purpose of optimizing the workflow is to maximize the benefit to all the stakeholders in the business--the employees, the agents, the customers," he adds. "You need your staff to understand and believe in the benefits of those changes, because they're the ones that ultimately will determine the success or failure of the effort."