Piece by Piece
Carriers increasingly are connecting disparate business processes that take place over and over–assembling them into a single, coherent entity and user experience. Utilizing business process management, workflow, business rules, and other processes become repeatable throughout the enterprise, enabling carriers to contain costs and become more profitable.
Insurers have lived with inefficient practices for years, but as the awareness of business process management (BPM) grows within the industry, carriers are learning efficiencies throughout the enterprise can increase profit and growth. Whether addressing how a company does business internally or with its customers, the processes require both the business and IT sides to develop and manage a plan of operation.
Insurers are paying greater attention to BPM, according to Cynthia Saccocia, director of the consultancy TowerGroup, while extracting benefits from traditional transactional tools. They are looking at BPM as a way to manage the business more efficiently from end to end through the steps of their processes. "There have been some tools introduced in the marketplace that couple all of these things together, but suites are difficult to find that pull together the elements of content, process, and data," she says. "BPM really is a discipline. It's a means by which you create the process flows, work on your process management, understand your business rules, and use what tools are available to move things through the different steps in the process and have the necessary handoffs. 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, offers a somewhat different view of BPM. "I see BPM as the natural evolution of simpler forms of automation that over time have evolved to become the more holistic picture BPM represents–the natural maturation we've gone through," he says. "In the past, we would focus on individual processes and build, maybe, one-off solutions for image and workflow, and we would have different technologies supporting those [solutions]." Technology and business people need to define BPM, and based on that definition, Bethiel believes they are going to determine a strategy that would reflect their view of the processes.
One strategy may focus on the administrative work force in the back office, which may achieve increased job satisfaction by using well-defined BPM solutions with image and workflow automation, suggests Bethiel. For instance, by replacing and eliminating paper and allowing employees to focus on meaningful work, which is just one aspect of BPM, the back office could experience increased retention rates and decreased rollover and training costs. "Taking the bigger picture, what BPM brings to the table is an absolute boon in both cost savings via commonality as well as growth," he says.
But BPM involves more than auto-mating your existing processes, maintains Ross Rosen, vice president of marketing at solution provider Riskclick. "It's really a chance to improve those processes and make them more efficient," he says.
It is unrealistic for an insurance carrier to have a single monolithic application to address every need, Rosen believes. "You use 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 the back-end systems." Most back-end systems are too narrow to serve as a BPM solution. "They may be very good at what they do, but they're just 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 companies are doing is extracting some of the rules from traditional policy administration systems, [assessing] the processes of the business function they are trying to complete," says Saccocia. "That's from the point of contact through the end result. It's a means by which [carriers] evaluate the handoff; the connections between content and the user, between data and the user; and how that influences the processes."
o Business activity. This component establishes where different business activities are in the steps of processes, according to Saccocia. "Are there any bottlenecks occurring? Where are the volumes coming from?" she asks. "Some tools help monitor the process flow and where different activities are occurring."
o Workflow management. "This is similar to process management," says Saccocia. "But where process [management] allows you to describe and document the processes, workflow really is the automation of the specific steps from one connection to the next."
o Business rules. In lockstep with process management are business rules, but this BPM component also describes the rules by which certain events or services occur, according to Saccocia. "[Business rules] are creating definitions based on particular conditions within the business," she says. "Some of the more robust business rules provide you with much more than that, such as the business logic residing behind the decisions."
o Exception management. "This component of BPM exposes the events that create ways for management to deal with exceptions in the process and whether a new rule needs to be created," says Saccocia. "It's a means to monitor things that aren't flowing in your workflow management."
When to Worry
Paul Armborst, application analyst with Westfield Group, advises carriers not to spend too much time documenting what they are doing now, doing so only to the extent they might need that information to 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 to figure out how you're going to get there," he says. Westfield is project oriented, he continues, so what BPM means for the company is creating a series of projects to actualize the "to be" model. "You want to monitor things as you go along because you might find what you thought you wanted as the outcome isn't quite what you want now that you've started to gain more experience," he says.
Over time, technology and philosophy have evolved to take on a more holistic view of business processes resulting in BPM, Bethiel believes. "With BPM, you manage the business process from end to end, and you account for the ongoing change associated with the process itself," he says. Steps being taken at MetLife on behalf of BPM include a focus on strategy, more architecture involved in the solutions, commonality in procedures and the components being developed, the core infrastructure the carrier runs on, and the groups supporting that infrastructure. A support team was established by the carrier across the environment that links together the business units, their requirements with their IT partners, and the enterprise technology resources that support the technologies. "That's all part of the bigger picture, which now has been defined as BPM," says Bethiel. "In the past you had those monolithic waterfall approaches that would try to capture an entire business process and spend a year or more defining it and subsequently 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 side where IT would define smaller chunks of work related to core business processes. "You allow that as a solution to evolve, which simultaneously supports change in the business process itself and the continual improvement you are looking for, so the business process and the automation of that process continually is enhanced," he says.
Making Money
There are two great ways, Bethiel points out, for carriers to increase profitability–reduction of costs and organic growth. He believes BPM plays a role in both of those dimensions. "Being about profitability and recognizing the profitability associated with well-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 support services required for the care and feeding of your technologies; fewer people; and simpler processes that relate to reduced operational expenses," he says.
If a carrier does these things, it ends up, essentially, building a better mouse trap, Bethiel asserts. By improving the business processes, carriers have a population of users–thousands of agents supporting a large insurance company, for example–who become satisfied customers because easier business processes and faster turnaround time make agents want to do business with carriers, Bethiel adds. "This leads to money in their pocket–increased compensation–when it is easier to do business with you as a company because you have well-defined processes being maintained through something such as BPM," he says.
As for mergers and acquisitions, BPM may not affect the make or break of the deal, but Bethiel believes it is the make or break of the realization of any benefits. "You can go out and buy the best company and not integrate it well and not get any benefit out of it," he says. "At its core, the concept around BPM facilitates standardization and business process definition and maintenance of that common business process. If you are [involved in] a merger or acquisition and the standards environment is comfortable with the notion of taking common processes or making processes common, you can take that acquisition partner and introduce it into an area where it will fit well. If you've applied [BPM] properly, then you've architected solid common processes that will adapt to the needs of the new businesses you are pulling in as part of that growth strategy, and it makes it easier for you to incorporate them."
True Value
Carriers may rely more on the vendor and its professional services to help with some of the more complex systems, notes Saccocia. But she feels confident about the IT department's ability to support BPM with the technology that is available today. "Our concern really lies with the business's ability to define the business rules and the processes," she says. "That's where things can be challenging."
Two words describe BPM's value to insurers–control and optimization–according to Donald Light, senior analyst for Celent. "Insurance companies have a higher stake than ever, given the regulatory climate we live in, to make sure the business processes are done the way they are supposed to be," he says. He describes the old approach to doing business as accumulating all kinds of methods, procedures, training, and managerial supervision and then auditing after the fact. "One way of thinking about BPM solutions is they provide an automation of a lot of the process steps you'd otherwise try to control through those other means," he says. "The level of uniformity of how those processes are done is higher because you are dealing with a system that restricts choices, gives specific guidance, and records results."
Insurance companies need to perform due diligence to see whether they are getting what essentially is a beefed-up workflow program or a tool that is more horizontal and has the different components they've identified in terms of design, monitoring, and optimization, advises Light. "The value in the horizontal solution is you can apply it anywhere and everywhere it fits," he says. "The advantage of a workflow capability within policy admin or claims is it sits there fully integrated into that specific application or process. But a good workflow capability within policy admin buys you 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 partnerships with content providers or document management providers," she says. "The documents or the content [components] that either are captured, imaged, or created have an influence on the process. You need to have a partnership with those involved in data integration so you are passing and receiving the appropriate data into the workflow management tools." She adds SOA and the use of Web services are helping to make all this possible. "What we've seen is the advancements of the technology have allowed business process management to be more viable such that you are able to string together the steps in the process from the minute it occurs to the minute it closes."
Three years ago, when TowerGroup began studying business-IT alignment, analysts felt the two sides really were coming together with integration between the teams, in the strategy, and in the prioritization. "The rapid change in the technology and the influence of technology such as Web services and XML-enabled standards have started to create a bit of a void as business and IT are starting to drift apart again," observes Saccocia. "IT recognizes it can be more nimble with SOA, but the business doesn't really understand that. The CIO recognizes there is opportunity here, but articulating that and getting business on board are where we see an ongoing challenge."
Light has noticed a reasonable amount of market activity for BPM solutions among insurers. The fit in terms of size and complexity of insurance companies, he says, starts with fairly substantial midsize companies–$500 million in written premium. To deploy a BPM solution across an entire process (such as new business) or across several sub-processes, Light continues, requires a reasonably sophisticated commitment of higher-level resources (such as business or systems analysts) to learn the package, use the package, and then continually reuse the package. "The availability of those resources is more likely to be found among the midsize insurance companies and up," he notes.
Purchasing a software solution isn't always the solution for problems, Armborst believes. "To make use of [tools], there is going 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 in and say, 'Here, you've got to use it.' It's got to be business driven. But then it becomes kind of a joint journey because business needs to say, 'Here's where we need to be.' And IT then needs to be an enabler for that."
Armborst indicates once you get closer to the "to be" model, the process then becomes a constant. "Another term at that point would be 'continuous improvement,' which we've heard before," he says. "But to some people, business process management includes business process reengineering. It depends on the company and in some cases on the individual and how each defines it."
The problem insurers find with different processes within the enterprise is both a quality issue and potentially even a compliance problem, Light reports. A BPM solution can reduce significantly those risks of variation from office to office within the company. "Getting good value from a BPM solution implies putting the resources into understanding current processes and committing to a continuous cycle of improvement," he says, "which a lot 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 need to perform due diligence and understand the options in terms of technologies. "You need to make an evaluation and come up with a good decision on a standardized technology, but then, when it comes time to implement it, you have to understand your limitations," he cautions. "We found it has been a significant contributing factor to leverage the vendors themselves as well as their value partners as systems integrators to come in and facilitate the early implementation at least until the point we have sufficient hands-on experience and internal expertise to own it ourselves."
The Real Thing
The hype/reality ratio applied to BPM is improving, contends Light, with the hype going down and reality going up. "I think BPM, as a class of solutions, certainly has proven it has value within the insurance sector and is going to be around for the long haul," he says. "I would not say it is supplanting many other kinds of software or it is becoming dominant, but it has taken its place in the 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
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