BPM Making Sweet Music for Insurers 

SOA allows carriers to prioritize their pain points. "If you have some areas of process improvement or some processes that are sitting in mainframes that are 25 or 30 years old, you can unwind those individual processes and make them more efficient," says Karen Pauli, research director in the insurance practice at TowerGroup. "If you don’t use SOA [in such instances], you are looking at a wholesale rip and repair, and I don’t know anyone who wants to do that ever again."

SOA allows carriers to deal with problems in manageable chunks. That’s important considering the financial restraints most companies have had to deal with for the last 18 months. "What we found throughout all of 2009 was carriers were trying to do short-term deliverable projects—not the 18-month projects, more like the three- to six-month project," says Pauli. "[SOA] allows carriers to achieve change without completely blowing everything out of the water."

The BPM tool set used by Meadowbrook Insurance Group, licensed from Adeptia, lends itself to reusability and standardization of the process, explains James Lee, information systems manager for Meadowbrook.

"The first time we did a commercial lines interface, we spent six months trying to get it right," he says. "My team didn’t have the knowledge of the data itself, and we relied on our business analysts to help us get it figured out. Then we had to take that same process and clone it, if you will, to handle workers’ compensation data. It took about two months to convert [the workers’ comp data] as we redid the mapping, understand the data, and then do the bench testing and production."

Once the rules are defined around the data—how it is handled and mapped—the basic framework is there, explains Lee. That allowed Meadowbrook to define a standard error-handling framework when data comes in.

"The basic framework has been cloned for multiple processes from a data interface standpoint," says Lee. "It has helped to compress the amount of time it takes and given some standard processes so the business knows what the standard routine is. The business knows what to expect and what the regular handling routine is."

One of the factors influencing BPM adoption is the implementation of standards, according to Danielson, as business users figure out BPM is worth doing and there is a business benefit from it.

"It’s driving people to change, and when they do that, the technologists are interpreting ways to apply it," says Danielson. "We are starting to see things such as operating model changes—people taking a look at the fundamental way they structure businesses. Should they have a local structure? A regional structure? Should it be more centralized? These operating models have to change. When we start to do that, it’s much easier to go to a tool such as BPM and standardize, say, a centralized model, define it, document it, and then leverage it using the SOA process rather than keeping it more informal or allow it to be nonstandardized."

At Unitrin Direct, how the carrier operates today vs. how it operated prior to the installation of its BPM solution from DocFinity is drastically different. "It’s a different world for us compared with before the implementation," says Jerel Titus, underwriting manager for the carrier.

Unitrin’s underwriting group before BPM was paper driven, with incoming documentation adding to the normal underwriting correspondence. "We moved to paperless as step one and then to a workflow piece later on," says Titus. "Both those steps were a significant change for us."

Having a content management system in place is an important first step for insurers looking to improve processes, explains Titus. "You could probably do BPM without [content management], but it would be a lot of work," he says.

Unitrin isn’t alone in this regard. Gallo is working with a client that has a paper-intensive environment. The client is "keen on understanding what tools such as BPM can bring," he says. "The modeling aspect allows the company to understand what the impact would be before going down that path and replacing core systems."

Clement Moore, a director in the financial services advisory practice for PwC, adds companies need to lay out a business architecture and how it can be supported in a large-scale transformation effort.

"The BPM solution is the first step in a CIO’s world in terms of understanding how the business wants to drive new functionality," says Moore. "We then can use that to prioritize and develop the technology road map not only on the cost-benefit analysis but also on the market competitiveness derived from different solutions. The package application environment greatly benefits where you can plug and play these applications, and the standardization within an ACORD environment supports what we are proposing. You can show how each of the applications in a BPM environment will play."

Personnel is a major expense for insurers, so if a company can take a major function within the organization, do it more efficiently and with fewer errors, fewer people, and less legal exposure, that’s a huge gain, points out Gallo.

This will become critical because the number of workers entering the insurance industry today is declining. One of Gallo’s clients was lamenting the fact his part of the insurance business is not considered sexy by potential workers, even though it is a critical function.

"It’s difficult to recruit to his part of the business, let alone persuade people from other parts of the company to join him," he says.

That is one reason to take a serious look at BPM, asserts Gallo.

"If he doesn’t find a better way to be better, faster, and more effective, he is going to suffer from a shortage of manpower," says Gallo. "The efficiency and consistency that is brought into the equation as a result of BPM is critical when you look at things such as an aging work force and the reality that there are types of work people don’t want to do anymore. BPM is meant to address those issues in the same way people didn’t want to work on assembly lines forever and robotics came in to take some of the drudgery out of those jobs."

When it comes to labor, Danielson maintains, it is important to look at what employees are doing and how they can do their work smarter and revisit the model the company operates under.

"To do [BPM], you need to spend time and effort—invest a dollar today and see the fruits of your labor later," he says. "It’s not something you can do without an investment."

Organizations also need to look at their rate of return. If they are going to get a marginal return on investment, Danielson believes BPM projects can be too disruptive to go down a path that doesn’t offer great rewards.

"The bar isn’t set high enough if it’s only incremental improvement," he says. "This type of change in the process and eliminating whole steps is painful for an organization, and you need to get a rate of return for the investment. When people lay out programs, they need to demand [ROI] and plan for the result rather than the incremental change you might see."

Lee was brought to Meadowbrook to implement the Adeptia BPM tool three years ago and to manage the projects that would be utilizing the services the tool would provide.

"The primary goal from the beginning was to automate the existing manual processes related to bringing data from external sources into our environment and also from other systems that weren’t connected," says Lee.

Meadowbrook had grown over the previous years, and Lee indicates, not all the systems talked to each other nor was there an automatic integration path.

"A customer would send us data in an Excel spreadsheet; our people would print out the spreadsheet and then keypunch that data back into the policy management system or into the claims processing system," relates Lee. Meadowbrook’s goal was to load that data into the back-end systems and eliminate as much manual intervention as possible to minimize human error.

There is hesitancy within any organization to adopt such major changes, Lee notes, citing the well-worn rebuttal: "This is the way we’ve always done it."

Meadowbrook used Adeptia as leverage to get people not just to automate the process but to look at how things were done and then redesign the process.

"The only thing worse than a broken process is automating a broken process," says Lee. "If you are going to the trouble of automating this step, let’s take a look at what we are trying to do and try to get some gains."

The biggest learning curve for departments, Lee continues, is thinking about how they can do the job differently. Meadowbrook spent a lot of time detailing to business users what BPM can do for them.

"In some cases, [users] just weren’t ready for everything, so we had to go incrementally," he says. "It depends on the comfort level of the business community. For some folks it took only one instance of getting changes, and they jumped in with both feet and have since come back and asked us whether [the system] could do other things. Part of my job is to get business users to understand what the tool provides and the benefits we can give them from a business standpoint if we use it properly."

Virtually every insurance carrier at least is thinking about the advantages BPM can bring to an organization, Gallo observes, adding some carriers have gone the next step and purchased a vendor tool set. "They believe it can bring great efficiencies to what they are doing," says Gallo.

The third class of adoption includes the insurers that have not only purchased and implemented BPM solutions but realized the efficiencies and cost savings.

With a system in place, "you can do more work with a smaller and more effective team," says Gallo. "The business case around this is it enhances profitability and revenue. Even though you have to spend money to make money, this is the direction you have to take."

Unitrin Direct is a member of the third group. Rob Shaphard, assistant vice president of operations, reports once the carrier’s IT people learned how to develop the BPM system, they were able to translate that knowledge to other business units.

"From a customer experience perspective, it really has helped our customer service reps," he says. "They have the information at their fingertips. It is easy for them to talk with the customer now."

In addition, staffing issues have provided a huge benefit for Unitrin. "We can handle, say, a 50 percent increase in work, but we wouldn’t need to increase our work force by 50 percent," says Titus. "It’s much easier to grow."

Danielson believes in the service function of BPM, as well. "If people measure the number of times they spoke to a customer and got a certain result that wasn’t a sale, it would drive behavior. You might find people spending more time on the phone helping customers understand either the product they’ve got or whether there is a new product that can help them," he says, which can produce a sale.

"You tie data to behavior, and that is clearly linked to the processes—the steps that people follow," he continues. "BPM is not necessarily looking at identifying more steps or taking steps out but to better understand how to streamline things. If you can automate them, that’s great. If there is no reason for people to touch a process manually because you can use some technology tool, such as a business rules engine, and apply it to a standardized process, that’s a great thing to do and that’s what BPM will do."

BPM also is important for enabling customers to interact with a carrier as they choose—whether through a Web site or a mobile connection, points out Pauli.

"If your internal processes are a mess and you don’t have things such as straight-through processing or aggregated data and information, you are going to alienate your customers if they have to go to multiple places to do simple things such as change an address," she says. "They get that kind of [positive] experience with other industries. Companies need to look at their processes before taking on any big customer initiatives—not the reverse."

Getting a grip on process improvement gives carriers a cost benefit, adds Pauli.

"It makes it easier for the consumer and for the distributor, and it saves money," she says. "You are impacting three business drivers with one basic initiative around BPM technology. That’s a major win."

Gallo believes BPM will move beyond being a solution in its own right to become a part of a broader software solution. "Over time you will see vertical solutions within the insurance industry begin to adopt BPM capability within their tool," he says. "[Software] will not only be industry specialized, but you will be able to tailor the BPM to your own organization."

But all these benefits come with a warning, cautions Danielson. If a carrier is looking to make significant changes in business performance, Danielson suggests the company first consider potential risk and impact. Plans need to be in place to mitigate risk and be proactive.

"People need to understand this is a dramatic change," he says. "The way they do that is address change management and talent issues that happen."

These fears won’t cause carriers to shy away from BPM, predicts Danielson. "Those that actually recognize the potential risk, deal with it," he says. "These are not small marginal changes; these are things that can make big improvements. So, there’s a trade-off. I think it’s worth it, and clearly the data supports it."