If there has been a theme for 2009 it's been: Efficiency Rules. Insurers have turned to IT departments to find better ways to work while reducing expenses in the face of difficult financial conditions. Often, that has been accomplished by extending existing systems.

To tackle this issue, insurers have had to understand and organize how the business side goes about running the operation and the daily workflows of the work force. They have turned to business process management to enable that effort.

Celent senior analyst Donald Light agrees the financial crisis and recession have increased the industry's attention on BPM. Of particular interest to carriers is the ability to wrap and extend strategies around legacy systems.

“If you have a legacy policy administration or claims system and you are looking to replace it, an alternative is to keep the old warhorse but get a better front end to create agility through the use of a BPM solution,” he says. “We're having more conversations with insurers on this.”

BPM systems are deployed into an environment that is a mix of legacy and newer systems, according to Light. That means integration is a key element. “One of the things that has to be done correctly and takes up a fair number of resources during implementation is getting the BPM to integrate with all those systems and databases so they can all function,” he says.

IT BENEFICIARIES

A BPM solution gives the IT staff a set of tools to integrate processes across applications and to respond to changes from the business side.

“If you are in an IT shop, your purpose in life is to enable business strategy and operations,” says Light. “If you have a BPM solution, you have a good deal of facility within IT and you can respond more thoroughly to what the business wants to do. In that sense, the IT shop is a big beneficiary of BPM. From the business side, if [carriers] want to change something or go into a new market and if IT says it can do that in three months rather than nine months, the business becomes the beneficiary.”

Genworth Financial has made these advances, and the carrier credits Web services capabilities along with IT's knowledge of the different technologies available. “We have agents in the field taking applications via handheld units,” says Shannon McLaughlin, director of fulfillment operations for Genworth. “Five years ago, you were lucky to see an efficient process [for wireless technology].”

By implementing more advanced technologies, Genworth now has the ability to get the correct data upfront to business users and quickly into the carrier's proprietary system through an automated underwriting engine that can make underwriting decisions and help make the decision process more efficient.

Compared with other kinds of core systems, BPM is more than an IT project because the use of BPM may be fairly invisible to the business users, explains Light. “What the users experience is more responsiveness from the IT department on the one hand and maybe a more powerful ability to do the processes cleanly,” he says. “The way that happens is a bit more behind the IT curtain than is the case with other applications. In general it will be more of a sell within IT to respond to your business partners.”

West Bend Mutual Insurance took a look at different technologies before choosing a BPM solution from Lombardi Software. “We did some advanced integration between different products we were looking for and came away with this suite,” says Eric Hanson, IT manager for corporate solutions at West Bend. “This wasn't about technology. It's really a coupling of a methodology associated with a technology, and that's probably why we've had some of our success.”

BUSINESS/IT RELATIONSHIP

Some of the work between Hanson's IT team and the business users involved trust-me conversations. “There was an element, especially early on, that we had to go slow, we had to stack some wins, but we really did focus on doing everything together,” he says. “We tried to create shared understanding, shared vocabulary. This is where the product came into play because we were able to get the process clear and explicit and we were all talking about the same things.”

When the business side began to see some results, credibility and a relationship of trust were fostered. “When you build a new BPM team, every person has to add credibility to that group, so we did go after some of the best folks we could [from within IT],” says Hanson. “We had some of the sharpest people because we knew the promise of value is not yet realized and IT for a long time has been a bit of a failed business model. [Business users] have heard it all before that this is the magic bullet to fix everything, so we tried to stay away from that kind of talk. We tried to focus on the business problems and how we can help them to manage them. Those types of conversations helped with our credibility.”

STRATEGIC LOOK

Conseco Insurance has different operational areas and found some of the processes weren't consistent, relates Loree Haisley, vice president of operations for Conseco. The insurer had various workflow applications, but over the last few years, the carrier underwent a strategic look to understand from both a business and a technology perspective the specific applications and processes. From there, adds Haisley, the carrier began the job of streamlining the processes.

“We married [the processes] from a technical perspective and a business perspective to try to come up with a best practice and make sure we are meeting the needs of the business; making sure we are meeting customer demands,” says Haisley. “From a technology perspective, we needed to ensure we are using the application to the best of our abilities in order to meet the needs of our business.”

Haisley works hand in hand with her partner on the technology side and believes it's been a learning experience for both from a standpoint of sharing ideas.

“We can throw out a process issue [to IT] and say, 'Here are our thoughts. What do you think?'” says Haisley. “It's taken some time to get to where we can have those conversations and come up with a great product. We had to take baby steps to make sure the business and the IT teams were having that conversation. It's a mindset change within big organizations. It's relatively easy to make great improvements over the years.”

BUSINESS USERS

Getting the knowledge from business users was tricky, Haisley indicates. If the business users were versed in technology and understood more about the process, it was easier to have some type of continuity. For those users who knew the end result and didn't know how it happened, trying to get that type of communication and a holistic view was challenging, she reports.

“We did design sessions where we pulled both parties in and discussed how we get to an end result, which allowed for continuity and open communication,” she says.

Conseco is undergoing some reengineering and looking at the business processes. “We need to make sure we have the IT partners involved,” says Haisley. “We need to continue to remind folks they are our partners, and we have to work hand in hand to push that down to the process owners and our front-line associates so they are continuously thinking about that.”

Conseco has been blessed with dedicated IT partners who have opened themselves up to understand what the business side is doing, Haisley notes. “They know from the technology perspective how to code the application, but they also have been able to shed light on [the process] and glean some information from the business side,” she says. “It helps both sides in the end to understand the process as a whole and how the two sides marry together.”

JUDGING EFFECTIVENESS

From a workflow perspective, Conseco has been able to allow managers to have more reports available to help make decisions on how they establish their work and how they reallocate their resources from a volume perspective, according to Haisley.

“They've been able to take that information and look forward to determine how they can accomplish the work,” she says. “Prior to some of the business process implementations, it was more, 'We think we have this much work and this number of resources,' but we didn't know what is coming into the hopper. Do we need to offset the staff? Reallocate resources? Pull in other resources from within the organization? From a data perspective, we now have that data immediately.”

Conseco is looking at evaluating some of its current processes. “We believe it's a continuous process to see whether there are improvements or new technologies,” says Haisley. “In 2010, we're focused on our customers–meeting their demands and satisfying their needs.”

By improving efficiencies, Haisley contends, Conseco can improve the process and reduce human touches to improve quality and turnaround time from a processing perspective.

“We'll continue to look for ways to improve a process,” she says. “As we evolve and our customer base evolves, our customers want and expect different things, so expectations change, as well. We have to keep the pulse on that to make sure we understand customer satisfaction. That drives how we accomplish those goals through operations and assistance with our IT partners.”

The BPM solution is driving process metrics for West Bend, according to Hanson, so the carrier needs to get visibility into the processes. “The things that drive your processes are your decisions within the process,” says Hanson. “By coupling a rules engine with a BPM suite, you get business decision management as a byproduct. You understand how you can manage your processes and the decisions of the processes broken down into a finite level to make your processes better. We've had a lot of success with that and delivered business intelligence information.”

THE PUSH IS ON

For West Bend, BPM was a twofold push. “We had set a new direction out of our enterprise architecture group to go after a few things that were fundamentally different from the way we had done things before,” says Hanson. “We wanted to focus on some SOA principles–repeatable services, composite development, and ROI. We wanted to focus on increased visibility into our business operations.”

An important factor for West Bend was improved agility, notes Hanson. “We wanted to create more maintainable applications that really supported speed to market or rapid change,” he says.

At the same time West Bend was undergoing this change, the carrier launched the biggest project the company has ever taken on–a new product called Smart Business, a small commercial offering, explains Hanson, who was brought in to West Bend in 2007 to start the BPM program.

The team Hanson established is known as business agility services. “We thought the ultimate result of BPM and business decision management implementation would result in tremendous agility for our organization,” he says. “What we've seen is when you couple the rules engine and the BPM techniques, the changes that regularly took us 30 days to 90 days now are taking one to three days.”

What has allowed that is the insurer has embraced the concept of offering and consumption, continues Hanson, adding the idea behind that is to take as many of the changes out of the hands of the developers as possible.

“We want a process or rules analyst to make rapidly changes that aren't in code, without going through the full change management cycles,” he says. “We literally have saved the project on a number of occasions by taking changes that would have derailed us in the past and turned them around.”

ACCURACY

West Bend has delivered solutions to the business that were ahead of schedule, Hanson reports, and supportive of business relationships with remarkably few defects. “Our entire rules effort for our first project was significant, and we had one defect,” he says. “That's pretty much unheard of.”

The reason for such accuracy, indicates Hanson, is a coupling of methodology and technology. “We have focused on making sure we have not just good development people but also the associated analysts working with [IT] and the business,” he says. “We have embraced a collaborative development model.”

Lombardi taught West Bend what Hanson calls a “playback strategy,” which is a concept where IT and the business side get together regularly and play back the solution as it is being developed.

“You use it to mitigate risk and meet the requirements properly,” says Hanson. “Often, the business people driving the meeting create a shared ownership of delivery and really good results. The accuracy we've had here has been fairly unprecedented.”

REASONABLE EXPECTATIONS

Univita Health's BPM tool from Global360 is an operational tool supported by IT, according to Paul Kay, Univita's CIO. “We make sure it is properly deployed and tightly integrated with our back-end administration system,” he says. “The role played by operations is it has to pay the offshore and onshore resources dedicated to case management. Where I'm trying to add value is in lowering the costs.”

Univita has a workflow/BPM process that offers a reasonable expectation of the amount of work it takes to process a particular unit of work, Kay explains. “We are using the product to see where we are spending time and measure time for these processes,” he says. “We set up a reasonable expectation and measure people on it. That helps drive cost out of the operational equation.”

Univita traditionally has maintained long-term care coverage as its base but has switched to a different business model–home-based healthcare, relates Kay. The company saw the aging of the population and inadequate care available for the elderly. “We looked at it as something we can do to lower the cost of healthcare for the elderly because the population is aging,” he says. “The only economic model that works is if you allow people to age in their home. To do that, you have to provide a core set of capabilities to engender that, and that's what this is all about.”

That is how Univita is using its BPM tool, notes Kay. “We have to be more efficient in processing cases,” he says. “The businesses we are partnering with all have some form of workflow, and we need to take that process, turn it into a proper BPM process, and take advantage of the synergy you get when you do that.”

OUT OF THE GATE

At Genworth, the carrier has leveraged technology and process improvement to streamline processes so duplication in the supply chain can be eliminated, McLaughlin remarks. Genworth gets the right information the first time out of the gate so as not to put the client through difficulties, and it has allowed the carrier to open up new markets.

Most Americans have been underserved in the life insurance arena, McLaughlin asserts, with 60 percent of middle-
market households lacking individual life
insurance.

“For agents to approach a customer, it has to be profitable for them, and for distributors to approach middle-market America, it has to be profitable for them,” she says. “Leveraging technology such as an e-application process through iPipeline ensures the agent can touch the client one time and get all the information upfront.”

This process helps the client, the agent, and the distributor, McLaughlin emphasizes. “We have a short application where we have the agent get the basic demographics and suitability for the customer, and then we will have a fulfillment center complete the rest of the application,” she says. “We've designed these models based on a 'day in the life' of an agent and asked [agents] how to make it easier and simpler for them and allow them to focus on the core work to get the potential insured the right product.”

Genworth joined the appropriate process and technology to eliminate non-value-added steps, so [agents] can touch more clients in a more powerful way. “It enables the distributors to get the right tools and products in the agents' hands,” says McLaughlin. “We want to make sure [agents and distributors] have all the information and tools they need. Now that we have better measurements around our processes, we can hone in on the inefficiencies quickly and repair them.”

BPM can orchestrate the process flow of what happens when a submission comes in, points out Light. “If the insurance company is more responsive and easier to do business with, that can help the flow of business and growth,” he says. “In the background, there is a little BPM engine chugging away.”

SIZE MATTERS

Integration is something insurers have to pay attention to when implementing BPM. “If you leave it as a stand-alone product on an island, it's not going to be successful,” says Kay. “[The solution] required a little care and feeding for us, but it's certainly written with best practices. It looks seamless to someone using the system. You can't go in thinking it's a turnkey, shrink-wrap piece of software because it's not.”

BPM's penetration into the insurance industry tends to follow the size of the insurer and the size of the IT group, Light observes. “The large and very large companies have BPM systems in place,” he says. “How much they use it can vary, but they all have some BPM system kicking around. When you get to the midsize companies, [a BPM solution] is rare. If you gauge the outlook for BPM, vendors have to extend their footprint within large insurance companies and discover a way to find value quickly in the midsize or upper end of the midsize.”

As long as the industry is facing tough times, Light maintains, IT groups are going to be pressed to do more with what they have in place. “Extended uses of BPM or the acquisition of a BPM tool are ways of accomplishing that,” he says. TD

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