Back-End Changes Equal Front-End Benefits
To respond to customer and business demands, insurers take on billing system overhauls.
Insurance Networking News, 06/01/2010
For many years, formany reasons, billing has been a challenge for many insurers. Now, new billing system options and insights into why this core business process presents challenges may help insurers take action.
The notion that "the system" is broken is a familiar one. "I've been in the insurance industry for more than 20 years, and I've been involved in probably three major billing projects, and it's always because we do such a lousy job as an industry of billing customers," says Michael Foerst, CIO, Missouri Employers Mutual (MEM), Columbia, Mo.
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Survey results, released this month, show that insurers-especially larger insurers-are not confident that their billing systems will be able to meet future business needs. Of the 40 insurers surveyed for San Mateo, Calif.-based Guidewire's 2010 "Billing Market Survey Results," only 17% felt completely confident that current systems would continue to serve them well in the future, with more than a third, 41%, reporting no confidence in this area. The other 42% were somewhat confident (see chart, page 36). The company notes that these statistics are almost identical to its 2008 survey. This overwhelming lack of confidence highlights an eventual problem-the day when a critical business requirement simply cannot be supported by a carrier's current billing system.
While it's a given that billing practices have evolved from the back office to an effective front office tool, many carriers still face challenges in using these systems effectively to improve customer service. For example, of the carriers polled, 59% report that their current billing systems and processes inhibit them from providing superior customer service.
It was a concern over customer service levels that led MEM to consider core systems replacement. "We conducted focus groups with policyholders and companies that weren't currently policyholders, trying to get our arms around what it is that customers were looking for," Foerst says. "We collected great information out of that-information that fit into a strategic planning process that we conducted last summer." It was then that MEM realized if they were going to meet some of the customers' needs, it needed a different billing structure. "There are cost-saving issues related to [a new structure], but the main goal with the billing component was customer focused."
These twin factors are driving many insurers to reconsider both the technology in place and the billing processes itself, says Karlyn Carnahan, a principal in insurance practice at New York-based Novarica. "The billing problems carriers are dealing with are twofold: They're trying to become more customer friendly with their bills, and they're also looking internally at how they can process these bills more efficiently and more effectively. They're asking themselves, 'Can I get a [single] billing system to provide a better level of customer service with more features and functionalities?'"
REPLACEMENT/CONSOLIDATION
In its quest for more flexibility, Catholic Mutual Group, Omaha, Neb., began its search for a new billing system in March of 2008. At the time, the company's existing system was 10 years old, having been designed and developed in 1999. A small firm out of Des Moines had partnered with business and IT staff from Catholic Mutual to develop an application that was designed to meet the insurer's specific requirements. Yet, by 2008, the system was showing its age. "It had more than outlived its usefulness," recalls Mary Ellen Freyermuth, director of MIS at the insurer. "The design of the system was very structured, so making any modifications to it was extremely difficult at best. As our needs and our client's needs changed, it was becoming more and more difficult to upgrade the system and make it more state of the art."
After an extensive search, Catholic Mutual decided on STG Billing from New York-based MajescoMastek to replace the system.
While MEM and Catholic Mutual both replaced one system, many insurers are consolidating their many billing systems to enable account billing, says Kim Morton, global product marketing director at Guidewire.
Morton uses customer Sentry Insurance, as an example. "Sentry had at least eight disparate systems for billing," she says. "Their biggest headache was its inability to send a single invoice for multiple policies." Since going live with BillingCenter, Sentry reached its primary goal, which was to be able to send a single invoice for multiple policies.
Consolidated billing was what Foerst heard the loudest at MEM's customer focus groups, "Listening to some of the stories about how confused we can make a customer with our billing approaches was interesting," he says. "And, I think we opened up a door with that because by the time we finished talking with a sample of customers about their confusion, I think our CEO started getting a few calls from people who took other issues with our billing statements. It definitely escalated it."
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