A lack of market differentiators in the insurance realm makes it easier for individuals to switch companies without many material changes in service. Other than cost, customer service and fast processing are the prime differentiators that can make the difference between solid customer retention or an outpouring of customer attrition. IT departments that commit resources to proactive improvements of user experience processes give their businesses a leading competitive edge.

Although the industry has seen gains in moving away from legacy systems, the pace of change remains slow. Typically, insurance is an industry that carefully weighs positive and negatives before instituting change, especially when it comes to IT vendors.

Insurers need to continue the modernization trend to not only improve the end user experience, but also to satisfy a demanding agent network. With agents able to switch insurers without many obstacles, agent retention can be aided by ensuring streamlined processes.

For insurance IT departments, the lowering of operational costs remains a priority. In a recent Forrester survey titled Tech Opportunities in North American Insurance IT Firms, industry executives were asked “What are your firm’s three most important corporate business priorities over the next 12 months.” The number one priority out of eleven possibilities, selected by 59 percent of respondents, was to lower the firm’s overall operating costs. Growing overall company revenue was chosen by 53 percent and acquiring and retaining customers was at 43 percent.

According to Forrester nearly 30 percent of insurance industry respondents predict 2011 will be “somewhat” or “very good.” On the face, perhaps not too impressive of numbers, until compared to last year’s nine percent figure. This cautious optimism reflects a perceived ending of the recession as well as pressure to grow the business through improved customer retention and attraction.

The IT Department Challenge

According to the Forrester report, 74 percent of technical issues at insurers are found and noted by customers and users, not the IT department. The report further states it takes up to six help desk interactions between multiple individuals or departments in order to identify the owner of the problem and then start the process of resolving it.

This can unfortunately evolve into a blame storming session where IT issues are looked at from a silo with everyone placing blame.  It becomes a very expensive process to resolve a problem.  This impacts the insurance provider in multiple ways including: escalating support costs, reduced productivity and poor service to customers.  Even more insidious is that most of IT talent gets pulled into fixing problems instead of working on developing new services to attract new business.  As such, IT is stuck fixing the business instead of helping grow the business. 

Insurance processes and their underlying IT infrastructure can be complex utilizing service oriented architecture (SOA),  messaging middleware and multi-tier transactions. In a claims processing application, there are multiple transactions including a credit bureau check, age lookups, or rate checks. Tracking the lifecycle of an individual transaction in real-time through the middleware running in both distributed and mainframe environments is key to managing risk and avoiding business process disruption. IT departments that can’t provide deep visibility into the process risk process failures – an expensive and business impactful proposition. This lack of visibility is often exacerbated by shrinking IT budgets, as departments are consistently asked to perform more tasks with no increase in staff or equipment capital.

Insurance IT groups do have monitoring tools, but they simply cannot handle the complexity of transactions that span IT silos and therefore are unable to discover actionable root causes. IT often does a less than optimal job of recognizing problems before they result in user impact and business process disruption. There are too many specialists in IT, who work on their own set of technology, without a broader view of the overall business process and how it should be optimized.

How BTM Can Help

According to Forrester, nearly 40 percent of insurance firms predict demand for business analysts will increase by between five and 10 percent. How does this relate to IT? It’s all about alignment with business objectives. IT departments can relay technical answers, but often lack context in the business problems that need to be solved.  This lack of understanding is a real hindrance when managing complex systems with multiple stakeholders.  In fact, the Information Technology Infrastructure Library (ITIL) v3’s vision of helping in the effort to integrate IT with the business is much more powerful than the prior directives to help align IT with the business.  BTM can help leverage processes and technology to make the goals of IT and the goals of the business one and the same.  It can provide businesses with the ability to understand the services that depend on the IT infrastructure. 

Enabling IT to be a proactive entity that actively seeks and finds mission critical glitches will result in operational (OpEx) savings. Additionally, less time spent on issue identification means more resources for the CIO’s other projects that can grow business including innovative types of policies focused on new constituencies, CRM and streamlining the end user’s application or claim experience.

A remedy for reactive troubleshooting is business transaction management (BTM), a system to monitor business processes comprised of applications, the transactions they invoke and the middleware that interconnects them for patterns that identify imminent failures. The software needs to be able to monitor increasingly complex systems made of many composite application parts that span the distributed, mainframe and cloud tiers. These systems are themselves dependent on other complex processes that are prone to failure, including networks, storage, security, firewalls and even the electrical power grid – any of which could cascade into a serious business impacting problem.

BTM solutions give true deep visibility into transactions from the business perspective. Customer satisfaction and the visibility provided by BTM are intertwined. Once middleware and related processes begin to conflict and slow down, end users experience session time outs related to new application versions or scalability problems. IT departments need visibility to see these bottlenecks to better serve both internal agents and customers.

BTM enables real-time visibility into a variety of insurance transactions including; claim processing, underwriting, quotes, self-service portals, CRM or other contact management systems, agency portals and interactions.

Additional benefits of robust BTM systems:

  • Historical data is easily accessible for sharing with auditors and compliance officers. According to Forrester, nearly three fourths of survey respondents indicate defined strategies for compliance and managing risk were top priorities.


  • The BTM process itself creates valuable assessments of both the performance of the application or claim process, and also data on the end-user experience. CIOs and other IT heads need such data before embarking on further modernization from legacy systems or the introduction of new middleware.


  • BTM strips the insurer’s processes of complexity, improving efficiency and allowing the creation of new data that can be used to correlate business process speed to revenue and other business performance metrics.

To begin the BTM process, the software first needs to clearly define normal behavioral benchmarks. BTM systems can use a combination of complex event processing (CEP) with policies to determine normal or abnormal behaviors compared to the business’ expected results

Establishing the “normal” first involves establishing a base line of user-defined samples for certain sets of key performance indicators. Computation of statistical indicators then follows which measure rate of change, momentum, exponentially moving averages and other analytics. The system then compares the newly made samples to the continuously learning base line to understand if there is a deviation from normal behavior and determine if this will have business impact


A BTM system needs several steps to begin proactively detecting abnormal processes:


  • Business processes and the application, transactions and middleware that comprise them must be automatically discovered and cataloged, and measured against service level agreements (SLAs).


  • CEP helps detail the meaningful events and establishes normal/abnormal patterns.


  • State modeling entails simply comparing what is observed against the actual desired outcome, which helps find deviations from what the user expects.


  • The ability to statistically analyze every key performance indicator including deviation, momentum, advance and decline ratios and other similar data.


Implementation of sound BTM processes can proactively address problems before they result in the stoppage of business processes. A complete shutdown of service will spur customer attrition and related fallout from board members, investors, and other stakeholders.

An effective BTM solution should monitor transactions and interrelated middleware to proactively find process issues. In addition by leveraging CEP it can prevent the impact of a problem via the automated dynamic invocation of business rules

So what’s the big picture result? Implementation of BTM will result in lessened mean times to resolve problems, and greatly reduce the time between system failures, thus, freeing up IT resources to help build the business.

Outlook Changes for 2011:

According to a Forrester poll of insurance IT managers, nearly 30 percent expected an increase in IT spending of five to 10 percent in 2011, and another five percent forecast a spending increase of more than 10 percent. These budget projections show a sense of optimism and increasingly pressure for the business to grow revenue. Over half of the respondents to the survey stated a growth in revenue was a top three priority for their firm.

Lowered costs through operational efficiencies will always be a priority for insurance IT management. However, saving money isn’t strategy, it’s a tactic. No insurer can claim saving money internally is a competitive differentiator. Saving money will remain the number one priority, but 2011 should see a focus on other initiatives including growing revenue and improved customer satisfaction as companies begin to focus on growth instead of recession-induced survival. The industry should also see the rise of social media and mobile device services for claims submittals and processing. These new developments will follow the IT rule of thumb that dictates the easier a process is to use, the more complex it is to develop.

Insurance company IT departments can meet the challenge of lowered operational costs through forward thinking strategies including business transaction management. Additionally, the proactive identification and fixing of application and claims processes can be a direct driver of customer retention and acquisition.