Piece by Piece
|Carriers increasingly are connecting disparate businessprocesses that take place over and over–assembling them into asingle, coherent entity and user experience. Utilizing businessprocess management, workflow, business rules, and other processesbecome repeatable throughout the enterprise, enabling carriers tocontain costs and become more profitable.
|Insurers have lived with inefficient practices for years, but asthe awareness of business process management (BPM) grows within theindustry, carriers are learning efficiencies throughout theenterprise can increase profit and growth. Whether addressing how acompany does business internally or with its customers, theprocesses require both the business and IT sides to develop andmanage a plan of operation.
|Insurers are paying greater attention to BPM, according toCynthia Saccocia, director of the consultancy TowerGroup, whileextracting benefits from traditional transactional tools. They arelooking at BPM as a way to manage the business more efficientlyfrom end to end through the steps of their processes. "There havebeen some tools introduced in the marketplace that couple all ofthese things together, but suites are difficult to find that pulltogether the elements of content, process, and data," she says."BPM really is a discipline. It's a means by which you create theprocess flows, work on your process management, understand yourbusiness rules, and use what tools are available to move thingsthrough the different steps in the process and have the necessaryhandoffs. You try to automate as much of that as you can."
|What's It All About?
|David Bethiel, director of image and workflow at MetLife, offersa somewhat different view of BPM. "I see BPM as the naturalevolution of simpler forms of automation that over time haveevolved to become the more holistic picture BPM represents–thenatural maturation we've gone through," he says. "In the past, wewould focus on individual processes and build, maybe, one-offsolutions for image and workflow, and we would have differenttechnologies supporting those [solutions]." Technology and businesspeople need to define BPM, and based on that definition, Bethielbelieves they are going to determine a strategy that would reflecttheir view of the processes.
|One strategy may focus on the administrative work force in theback office, which may achieve increased job satisfaction by usingwell-defined BPM solutions with image and workflow automation,suggests Bethiel. For instance, by replacing and eliminating paperand allowing employees to focus on meaningful work, which is justone aspect of BPM, the back office could experience increasedretention rates and decreased rollover and training costs. "Takingthe bigger picture, what BPM brings to the table is an absoluteboon in both cost savings via commonality as well as growth," hesays.
|But BPM involves more than auto-mating your existing processes,maintains Ross Rosen, vice president of marketing at solutionprovider Riskclick. "It's really a chance to improve thoseprocesses and make them more efficient," he says.
|It is unrealistic for an insurance carrier to have a singlemonolithic application to address every need, Rosen believes. "Youuse BPM [software solutions] to sit on top of all these [other]systems," he says. "It ties them together in providing a single,coherent process and user experience that integrates all theback-end systems." Most back-end systems are too narrow to serve asa BPM solution. "They may be very good at what they do, but they'rejust not designed to be the cross-enterprise process controller,"he adds.
|How It Works
|Saccocia lists five components she suggests comprise BPM:
|o Process management. "What we're finding insurance companiesare doing is extracting some of the rules from traditional policyadministration systems, [assessing] the processes of the businessfunction they are trying to complete," says Saccocia. "That's fromthe point of contact through the end result. It's a means by which[carriers] evaluate the handoff; the connections between contentand the user, between data and the user; and how that influencesthe processes."
|o Business activity. This component establishes where differentbusiness activities are in the steps of processes, according toSaccocia. "Are there any bottlenecks occurring? Where are thevolumes coming from?" she asks. "Some tools help monitor theprocess flow and where different activities are occurring."
|o Workflow management. "This is similar to process management,"says Saccocia. "But where process [management] allows you todescribe and document the processes, workflow really is theautomation of the specific steps from one connection to thenext."
|o Business rules. In lockstep with process management arebusiness rules, but this BPM component also describes the rules bywhich certain events or services occur, according to Saccocia."[Business rules] are creating definitions based on particularconditions within the business," she says. "Some of the more robustbusiness rules provide you with much more than that, such as thebusiness logic residing behind the decisions."
|o Exception management. "This component of BPM exposes theevents that create ways for management to deal with exceptions inthe process and whether a new rule needs to be created," saysSaccocia. "It's a means to monitor things that aren't flowing inyour workflow management."
|When to Worry
|Paul Armborst, application analyst with Westfield Group, advisescarriers not to spend too much time documenting what they are doingnow, doing so only to the extent they might need that informationto move forward to where they want to be. "You have to lay out a'to be' model–what you want things to be–and then you have tofigure out how you're going to get there," he says. Westfield isproject oriented, he continues, so what BPM means for the companyis creating a series of projects to actualize the "to be" model."You want to monitor things as you go along because you might findwhat you thought you wanted as the outcome isn't quite what youwant now that you've started to gain more experience," he says.
|Over time, technology and philosophy have evolved to take on amore holistic view of business processes resulting in BPM, Bethielbelieves. "With BPM, you manage the business process from end toend, and you account for the ongoing change associated with theprocess itself," he says. Steps being taken at MetLife on behalf ofBPM include a focus on strategy, more architecture involved in thesolutions, commonality in procedures and the components beingdeveloped, the core infrastructure the carrier runs on, and thegroups supporting that infrastructure. A support team wasestablished by the carrier across the environment that linkstogether the business units, their requirements with their ITpartners, and the enterprise technology resources that support thetechnologies. "That's all part of the bigger picture, which now hasbeen defined as BPM," says Bethiel. "In the past you had thosemonolithic waterfall approaches that would try to capture an entirebusiness process and spend a year or more defining it andsubsequently a year or more building it. By the time you delivered[the solution], it was obsolete."
|He believes this has led to tighter deliverables on the IT sidewhere IT would define smaller chunks of work related to corebusiness processes. "You allow that as a solution to evolve, whichsimultaneously supports change in the business process itself andthe continual improvement you are looking for, so the businessprocess and the automation of that process continually isenhanced," he says.
|Making Money
|There are two great ways, Bethiel points out, for carriers toincrease profitability–reduction of costs and organic growth. Hebelieves BPM plays a role in both of those dimensions. "Being aboutprofitability and recognizing the profitability associated withwell-defined processes and the cost savings associated with that,you have opportunities for more reuse–commonality of code,technologies, and the infrastructure that runs them; the supportservices required for the care and feeding of your technologies;fewer people; and simpler processes that relate to reducedoperational expenses," he says.
|If a carrier does these things, it ends up, essentially,building a better mouse trap, Bethiel asserts. By improving thebusiness processes, carriers have a population of users–thousandsof agents supporting a large insurance company, for example–whobecome satisfied customers because easier business processes andfaster turnaround time make agents want to do business withcarriers, Bethiel adds. "This leads to money in theirpocket–increased compensation–when it is easier to do business withyou as a company because you have well-defined processes beingmaintained through something such as BPM," he says.
|As for mergers and acquisitions, BPM may not affect the make orbreak of the deal, but Bethiel believes it is the make or break ofthe realization of any benefits. "You can go out and buy the bestcompany and not integrate it well and not get any benefit out ofit," he says. "At its core, the concept around BPM facilitatesstandardization and business process definition and maintenance ofthat common business process. If you are [involved in] a merger oracquisition and the standards environment is comfortable with thenotion of taking common processes or making processes common, youcan take that acquisition partner and introduce it into an areawhere it will fit well. If you've applied [BPM] properly, thenyou've architected solid common processes that will adapt to theneeds of the new businesses you are pulling in as part of thatgrowth strategy, and it makes it easier for you to incorporatethem."
|True Value
|Carriers may rely more on the vendor and its professionalservices to help with some of the more complex systems, notesSaccocia. But she feels confident about the IT department's abilityto support BPM with the technology that is available today. "Ourconcern really lies with the business's ability to define thebusiness rules and the processes," she says. "That's where thingscan be challenging."
|Two words describe BPM's value to insurers–control andoptimization–according to Donald Light, senior analyst for Celent."Insurance companies have a higher stake than ever, given theregulatory climate we live in, to make sure the business processesare done the way they are supposed to be," he says. He describesthe old approach to doing business as accumulating all kinds ofmethods, procedures, training, and managerial supervision and thenauditing after the fact. "One way of thinking about BPM solutionsis they provide an automation of a lot of the process steps you'dotherwise try to control through those other means," he says. "Thelevel of uniformity of how those processes are done is higherbecause you are dealing with a system that restricts choices, givesspecific guidance, and records results."
|Insurance companies need to perform due diligence to see whetherthey are getting what essentially is a beefed-up workflow programor a tool that is more horizontal and has the different componentsthey've identified in terms of design, monitoring, andoptimization, advises Light. "The value in the horizontal solutionis you can apply it anywhere and everywhere it fits," he says. "Theadvantage of a workflow capability within policy admin or claims isit sits there fully integrated into that specific application orprocess. But a good workflow capability within policy admin buysyou nothing in claims and vice versa."
|Where to Turn
|Alliances among vendors is critical in BPM, Saccocia believes."Process management and business rules technology need partnershipswith content providers or document management providers," she says."The documents or the content [components] that either arecaptured, imaged, or created have an influence on the process. Youneed to have a partnership with those involved in data integrationso you are passing and receiving the appropriate data into theworkflow management tools." She adds SOA and the use of Webservices are helping to make all this possible. "What we've seen isthe advancements of the technology have allowed business processmanagement to be more viable such that you are able to stringtogether the steps in the process from the minute it occurs to theminute it closes."
|Three years ago, when TowerGroup began studying business-ITalignment, analysts felt the two sides really were coming togetherwith integration between the teams, in the strategy, and in theprioritization. "The rapid change in the technology and theinfluence of technology such as Web services and XML-enabledstandards have started to create a bit of a void as business and ITare starting to drift apart again," observes Saccocia. "ITrecognizes it can be more nimble with SOA, but the business doesn'treally understand that. The CIO recognizes there is opportunityhere, but articulating that and getting business on board are wherewe see an ongoing challenge."
|Light has noticed a reasonable amount of market activity for BPMsolutions among insurers. The fit in terms of size and complexityof insurance companies, he says, starts with fairly substantialmidsize companies–$500 million in written premium. To deploy a BPMsolution across an entire process (such as new business) or acrossseveral sub-processes, Light continues, requires a reasonablysophisticated commitment of higher-level resources (such asbusiness or systems analysts) to learn the package, use thepackage, and then continually reuse the package. "The availabilityof those resources is more likely to be found among the midsizeinsurance companies and up," he notes.
|Purchasing a software solution isn't always the solution forproblems, Armborst believes. "To make use of [tools], there isgoing to have to be a mindset to adapt the business to use them,"he says. "IT departments can't go out there and bring something inand say, 'Here, you've got to use it.' It's got to be businessdriven. But then it becomes kind of a joint journey becausebusiness needs to say, 'Here's where we need to be.' And IT thenneeds to be an enabler for that."
|Armborst indicates once you get closer to the "to be" model, theprocess then becomes a constant. "Another term at that point wouldbe 'continuous improvement,' which we've heard before," he says."But to some people, business process management includes businessprocess reengineering. It depends on the company and in some caseson the individual and how each defines it."
|The problem insurers find with different processes within theenterprise is both a quality issue and potentially even acompliance problem, Light reports. A BPM solution can reducesignificantly those risks of variation from office to office withinthe company. "Getting good value from a BPM solution impliesputting the resources into understanding current processes andcommitting to a continuous cycle of improvement," he says, "which alot of companies are trying to do [by additionally applying]business methodologies such as Six Sigma and other approaches."
|In looking for a BPM solution, Bethiel maintains carriers needto perform due diligence and understand the options in terms oftechnologies. "You need to make an evaluation and come up with agood decision on a standardized technology, but then, when it comestime to implement it, you have to understand your limitations," hecautions. "We found it has been a significant contributing factorto leverage the vendors themselves as well as their value partnersas systems integrators to come in and facilitate the earlyimplementation at least until the point we have sufficient hands-onexperience and internal expertise to own it ourselves."
|The Real Thing
|The hype/reality ratio applied to BPM is improving, contendsLight, with the hype going down and reality going up. "I think BPM,as a class of solutions, certainly has proven it has value withinthe insurance sector and is going to be around for the long haul,"he says. "I would not say it is supplanting many other kinds ofsoftware or it is becoming dominant, but it has taken its place inthe overall portfolio of a lot of companies."
|Tech Guide: Business Process Management
|AdminServer
|Chester, Pa.
|610-619-3100
||Allegient Systems
|Wilton, Conn.
|203-761-1289
||Allfinanz
|NewYork, N.Y.
|888-824-2929
||AWD
|Kansas City, Mo.
|816-843-8222
||BEA
|San Jose, Calif.
|800-817-4232
||Bluespring Software, Inc.
|Cincinnati, Ohio
|877-794-1764
||BMC Software
|Houston, Tex.
|800-841-2031
||BroadVision
|Redwood City, Calif.
|650-542-5100
||Captaris, Inc.
|Bellevue, Wash.
|425-455-6000
||Cartesis
|Norwalk, Conn.
|203-956-2800
||Casewise Systems
|Mount Laurel, N.J.
|856-380-1400
||Chordiant Software
|Cupertino, Calif.
|408-507-6100
||Clarity Systems
|Toronto, Ont.
|877-410-5070
||ClearStory Systems
|Westborough, Mass.
|800-298-9795
||Clear Technology
|Westminster, Colo.
|303-583-4100
||Cognos
|Ottawa, Ont.
|613-738-1440
||Computas
|Sammamish, Wash.
|425-391-2000
||CSC
|Austin, Tex.
|512-275-5000
||Decision Research Corporation
|Honolulu, Hawaii
|800-836-6057
||DSPA Software
|Mississauga, Ont.
|905-279-9993
||Duck Creek Technologies
|Bolivar, Mo.
|866-382-5832
||eiStream
|Dallas, Tex.
|214-520-1660
||EMC
|Hopkinton, Mass.
|508-435-1000
||Exigen Group
|San Francisco, Calif.
|415-402-2600
||Fair Isaac
|Minneapolis, Minn.
|612-758-5200
||FileNet
|Costa Mesa, Calif.
|800-345-3638
||Files X
|Southborough, Mass.
|508-480-9920
||First Notice Systems
|Boston, Mass.
|800-310-4367
||Fiserv Insurance Solutions
|Cedar Rapids, Iowa
|800-943-2851
||Fuego
|Plano, Tex.
|972-801-4200
||Fujitsu Siemens Computers
|Sunnyvale, Calif.
|408-746-6000
||GeniSys Outsourcing
|Toronto, Ont.
|416-934-2390
||Global 360
|Dallas, Tex.
|916-834-8221
||Guidewire Software, Inc.
|San Mateo, Calif.
|650-357-9100
||HandySoft Global Corporation
|Vienna, Va.
|703-442-5600
||Hyland Software
|Westlake, Ohio
|440-788-5000
||IBM
|White Plains, N.Y.
|888-426-4968
||IDS Scheer
|Berwin, Pa.
|610-854-6800
||InsureWorx, Inc.
|Emeryville, Calif.
|800-785-4526
||Intalio
|San Mateo, Calif.
|650-577-4700
||ISCS, Inc.
|San Jose, Calif.
|888-901-4727
||iWay Software
|New York, N.Y.
|212-330-1700
||Knightsbridge Solutions
|Chicago, Ill.
|312-577-0210
||Lawson Software
|St. Paul, Minn.
|651-767-7000
||LIDP Consulting Services, Inc.
|Woodridge, Ill.
|630-829-7000
||Lombardi Software
|Austin, Tex.
|512-382-8200
||Magma Group
|Lavendelplein, The Netherlands
|+ 31 (0) 342 406 200
||Metaserver
|New Haven, Conn.
|877-789-8090
||Metastorm
|Columbia, Md.
|877-321-6382
||Microsoft
|Redmond, Wash.
|425-882-8080
||Optical Image Technology, Inc.
|State College, Pa.
|814-238-0038
||Pegasystems
|Cambridge, Mass.
|617-374-9600
||PeopleSoft
|Pleasanton, Calif.
|925-225-3000
||Popkin Software
|New York, N.Y.
|646-346-8500
||Proforma
|Southfield, Mich.
|248-356-9775
||Pure Edge Solutions
|Victoria, B.C.
|888-517-2675
||RulesPower
|Burlington, Mass.
|781-272-1111
||Sajus Technologies
|Mississauga, Ont.
|905-602-7507
||SAP
|Newtown Square, Pa.
|800-872-1727
||Solimar Systems
|San Diego, Calif.
|619-849-2800
||Steel Card, LLC
|Santa Barbara, Calif.
|800-553-9961
||Sterling Commerce
|Dublin, Ohio
|614-793-7000
||TIBCO Software, Inc.
|Palo Alto, Calif.
|800-420-8450
||Valley Oak Systems
|San Ramon, Calif.
|925-242-4600
|Want to continue reading?
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