Peel Back the Onion

Is business process management (BPM) underappreciated in the insurance industry? The answer is most certainly yes, according to Marek Jakubik, cofounder and managing director of the Insurance Technology Group. "It's like anything else you and I do in life," he says. "When we automate something and we repeat it, it has two effects–it becomes easier and more efficient. So, it's a double win."

Still, while BPM may not garner a lot of praise, it certainly isn't neglected. Janelle Hill, research vice president for Gartner, believes just about every carrier in the insurance industry is doing something with business process management. "It's way beyond just the top tier of insurers," she says. "It's much, much deeper."

Jakubik takes a different view, though, seeing most BPM investments being made by large insurers. Some have gone to the level of adopting stringent programs and procedures, such as Six Sigma. "That's a very complex and expensive program," he points out. "It's only done by the largest insurers." For smaller companies, Jakubik suggests the interest dissipates proportionally with size. "The smallest carriers have the least of the [process] problems, but they also do the least," he says. "[Process] is simpler for them because they usually have single channels, and the whole process of communication is much shorter for them. If I had to guess, I would say probably 30 percent in total are doing something about BPM, 30 percent talk or pretend they do, and the rest just don't pretend–they don't do anything."

Mike Sciol?, CIO of the IFG Companies, sees BPM's value as adding an element of transparency to a carrier's operations and being able to forward information automatically to the appropriate person based on the metadata that's involved with that particular piece of information. He feels carriers should monitor that process in order to ascertain hard benefits, but in terms of quantifying the benefits, it depends on what metric is being used.

"When you go out and surf the marketplace, you get some feeling [BPM] adds to the overall business process," says Sciol?. "Even when a company is going to spend more on IT, [BPM] can make sense from a business perspective–more touches, customer experience, facilitating a process. There are those who don't see the value and are more comfortable with the paper process or a manual process. It can be difficult to quantify what the actual gain or benefit is going to be by putting it in place. It comes down to it's a business decision, and that decision is part and parcel to how they want to quantify the benefits to it."

The level at which carriers are performing BPM varies, Hill observes, depending on the maturity or expertise a company has in process management and discipline. "Most [carriers] don't have a lot of experience in process management, so we have seen a wealth of project-based initiatives, primarily around claims management and benefits administration," she says.

Initially, insurers sought to streamline processes, explains Hill, as they worked to reduce cycle time or reduce the number of exceptions. But as the insurers have gained familiarity with process management and some of the newest technologies to support BPM, the initiatives are getting broader and cross-functional. "One of the big things we see happening as a result of their focus on process is BPM is at a point now where it is beginning to transform the operation," she says.

Many insurers–particularly multiline companies–have organizational structures based on product line, continues Hill, and prior to BPM, there had been a tremendous amount of duplication of function by product. "Every product had claims, enrollments, risks, and underwriting functions," she says. "It was a tremendous duplication of functionality. By focusing on process, what is changing now at many companies is a complete restructuring either based on process or based on function."

In today's financial climate, the first question companies ask themselves, Jakubik claims, is whether they can afford a solution such as BPM, not whether it is worth investing in. "I've seen two schools of thought," he says. "I have seen executives with a forward-looking stance say when the going gets tough, this is the time to improve how we operate. I've also seen those with a personal trait of hunkering down. They minimize anything that costs money, and everything goes."

TOOLS AVAILABLE

Hill describes BPM tools as falling into three categories. The first area is business process analysis tools. "These tools are business-user friendly and business intuitive," says Hill. "They help you to model work, simulate the work, and do what-if analysis for different possible process designs to help you get to a more optimal design," she says, adding these modeling tools have come down in price, are more focused on process, and are more accessible to non-IT roles.

The second area of technology tools involves business rules engines. "The insurance industry always has been aggressive about what used to be called artificial intelligence technology and what is now known as business rules engines," says Hill. New technology makes it easier for business people to engage in defining what their rules are and the life cycle of the rules without having to rely exclusively on IT to do that, she explains.

The third category is BPM suites, Hill indicates, which converge different technologies together to support process improvement, starting from discovery of having a process failure all the way through modeling analysis design, implementation, monitoring, and ongoing optimization. "These tools are business-user friendly and allow the business people to work closely in collaboration with IT professionals to support their business processes better rather than traditional coded applications," she says.

A BPM suite unifies about 10 different technologies that used to be available as stand-alone technologies, according to Hill. The suite has a modeler, a rules engine, some BI and reporting capabilities, and optimization and simulation capabilities and has dashboards for real-time monitoring of work. "That's a unification of what used to be stand-alone technologies," she says.

All of these tools use explicit process management technology now, Hill maintains. They offer graphical models as a representation of work rather than text. "The old adage of a picture is worth a 1,000 words is, in fact, a true statement here," she says. "A pictorial representation helps [users] understand what the process is, what parts are supported by systems, which are supported by people, what are the business rules that drive the decisions–all the aspects that contribute to successful work processes are made explicit in a graphical way. That advancement has been a breakthrough for many industries, not only insurance."

MANUAL LABOR

When Xbridge was launched eight years ago, the insurer's proprietary technology platform was a pure transaction platform, explains CIO David Brakoniecki. "It allowed us to amend policies, change the number of employees, do midterm adjustments," he says. "It didn't control any workflow."

Much of the work was being done on a purely manual process, which Brakoniecki asserts worked well when there was an average of 1,500 inquiries a month and six people in the contact center. Today, there are 20,000 inquiries a month and more than 60 people in the contact center. "Dealing with that volume, the manual processes we had were no longer suitable," he says. "One of the things we pride ourselves on as a smaller company is we think a lot of our competitive advantage comes from use of technology combined with insurance product development."

Xbridge felt it was losing its business flexibility because the manual processes didn't allow the insurer to make decisions or change direction quickly enough. "A good example of this is the process every day was we would get the leads from the previous day and send them in an Excel spreadsheet to our 60 consultants [Xbridge's term for CSRs]," says Brakoniecki.

Under that kind of process, Brakoniecki notes, it took Xbridge 30 days to determine whether the process was working and another 30 days to make any changes if it was not working well. "From a business standpoint, a lot of our customer acquisitions move at the speed of the Internet, but the process in the contact center could be changed effectively only three or four times a year," he says. "That wasn't fast enough."

Brakoniecki believes Xbridge was fortunate in that the insurer wasn't looking to integrate with a lot of legacy systems. For the initial rollout, it wiped out all the manual processes. Built in with the BPM system the insurer installed from Lombardi, known as Teamworks, was the ability to measure what was happening at every step of the process, including how many leads were generated, where, and why.

"We learned a lot about our business very quickly," says Brakoniecki. "The orthodoxy within the business was always that every lead got one phone call. Everyone believed that. We discovered within a week of having BPM that not every lead got a phone call. About 10 percent never got a call for a variety of reasons."

Xbridge also discovered the lack of call-backs didn't necessarily matter because the company wasn't very good at closing the sales. "Until we got the right product to serve the market, spending resources chasing a different sector wasn't exactly clever on our part," says Brakoniecki.

BPM maintains rigid processes within the contact center, so the contact center representative has only one choice–to get the next piece of business to work on. "That kind of control allows us to determine which lead out of the current pile of unworked leads is the best to give to that consultant at any given time," says Brakoniecki. "A lot of people are looking for a cost-savings play [with BPM], but it's about getting more efficiency. For us, it's about not having to hire more consultants and also about revenue generation. A lot of what we use BPM for is to allow us to manage our growth about when we should add resources and what we should focus those resources on. That's a little bit different in some cases than what other people might be using BPM for."

RADICAL CHANGE?

Jakubik describes BPM, generally speaking, as revolutionary and continuous rather than radical. He explains Six Sigma is an example of a methodology that promotes looking at anything and everything and then taking steps to improve continuously even small parts of the processes. "You train people and instill in them a way of thinking that encourages them to make small and incremental improvements, and that's what leads to success," he says. "It's a huge accomplishment for any organization to instill this kind of culture in a company. That's why [Six Sigma] is so difficult to implement because it takes multiple years."

BPM has made some radical differences to Xbridge's business, according to Brakoniecki. "Before, we couldn't change the processes because we didn't have enough information," he says. "Now, we either have too much information or we have a lot of information for which we still are trying to figure out all the contexts and how to interpret it."

Brakoniecki concedes Xbridge is not tearing down an old legacy application and replacing it. "We're putting a second system next to our production system, and we're getting those two systems to talk to each other," he says. "One of the things the Lombardi guys say is you shouldn't think of BPM as your system of record. Your policy documentation should live in whatever your production environment is. BPM should control the workflow around it. If you take that approach correctly, it doesn't need to be a radical change, [though] it might feel like it at the beginning."

However, BPM can offer a radical change for some insurers in Sciol?'s view. "It has a lot to do with how the business is structured and how you want to operate," he says. "It radically can change the business if you have an operation in place that seems to be ineffective–too long to get a quote out, issue a policy, or get a premium audit completed."

GETTING RELIGION

It often takes someone in the organization to develop "process religion," Hill contends, to get the business fully on board with BPM. "They heard about it from their peers, through an industry organization, or perhaps they have a consulting background and learned these skills and disciplines elsewhere and brought them to the company," she says.

Other carriers have looked to BPM when some part of the organization is feeling a particular pain, perhaps from too much of a workload. "At that point, they pull people together to see whether the business process is resulting in all this work, and that's the time they step out of their role and see their contribution to a broader process," says Hill. Process management also occurs because of changes in state regulations or through mergers and acquisitions. Additionally, there is a trickle-down effect from the largest carriers that have been very aggressive about BPM for multiple years, adds Hill.

Jakubik believes it takes an enlightened executive to drive BPM within a company. "The company has to have a [BPM] champion," he says. "If there's a champion, it will get done. If there isn't, it's very hard. [BPM] is all-encompassing. It touches jobs, people, skills, capacities, technology. That's why you need someone who can pull it [off]."

EFFICIENCY EXPERTS

The focus in BPM has to be business efficacy, sums up Sciol?. "You want the business to run faster and be more effective," he says. These traditionally are viewed as soft-dollar savings. "Larger companies are going to talk about cross-selling opportunities and how many quality touches a day they have with the customer," he says. "A more facilitated sales process makes the customer experience that much better."

But Sciol? believes whatever a carrier possibly could be saving in soft dollars is going to turn around and be put into IT expenditures. "You are willing to take on the soft-dollar benefits at the hard-dollar expense in order to make things better," he says. "The balance really needs to be what's the business value–soft dollars and hard dollars–and how deep you want to take it from a technical perspective."

Those companies on a structured BPM program such as Six Sigma probably review the processes at least twice a year, according to Jakubik. For most carriers, though, there is no single formula. "It's a question of priorities," he says. "If BPM was the only thing companies had to worry about, they'd be all doing it, I suppose. You know how life is: There always is a combination of priorities–something gets done, and something else doesn't get done."

BALANCING DECISIONS

Sciol? has been involved with companies that wanted to ratchet up BPM to a high degree and at places where they didn't believe in it at all. "There's a balance," he says. "You can write BPM rules 25 layers deep that handle every single circumstance. What business value you may gain from that you will make up for in IT expenditures and maintaining that process. On the flip side, doing nothing doesn't take advantage of the technology that facilitates business process management."

As the scope of process management gets broader, Hill believes carriers are uncovering that different parts of the business have invested separately in various process technologies. "The minute your process scope spans more than just function and goes cross-functional," she says, "that's how carriers are uncovering they actually have multiple technologies installed and are rethinking whether they should rationalize some of those investments." TD