Carriers Look to Spruce Up with BPM
Insurance Networking News, June 2008
Softening markets usually don’t portend lavish times in the IT departments at insurance companies. Yet, even as insurance companies are looking to tighten their belts, many are investing in business process management (BPM) solutions as a means to improve efficiency across the enterprise, and as a hedge against falling rates.
So what specific efficiencies can a carrier investing in BPM expect? Simply, as the name implies, more efficient processes. While insurance companies tend to pride themselves on the efficiencies of their processes, there is always room for improvement. So, somewhat perversely, the worse off an organization is prior to BPM implementation, the more it stands to gain.
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At its most basic level, BPM affords carriers visibility over their processes, enabling them to get a better handle on workflow. BPM also promises carriers flexibility and the assurance that as their businesses change, their infrastructures will have the ability to do so as well. By consuming information in interchangeable chunks, it can extend the life and functionality of existing systems. Additionally, BPM also can be a precursor to the automation of processes and, consequently, to straight-through processing initiatives.
For all its promise, BPM is still in the early phases of mass-market adoption. Some see existing document management legacy applications as a barrier to the widespread adoption of BPM. Indeed, some carriers with robust document management systems with work flow capabilities already in place may well question their need for BPM. Also, as with anything new — especially anything that promises big things and comes sporting a three-letter acronym — there is always a concern among potential customers that the hype of a new solution won’t match the reality.
Nonetheless, a recent survey by Boston-based Celent of insurance industry technologists, “Insurance CIO/CTO Pressures, Priorities, and Plans in 2008: U.S. Survey Results,” found that this fear was not much of a deterrent as BPM was a top IT initiative for nearly 80% of the large P&C insurers in the survey.
PHILOSOPHY OR TECHNOLOGY
Enumerating the potential benefits of BPM may be easier than nailing down a precise connotation of it. Just as some still quibble whether a tomato is fruit or vegetable, BPM seems perched on the precipice between business philosophy and technology.
“From a purist perspective, I view BPM as more of a philosophy that is enhanced and enabled by technology,” says Chris Smith, principal technologist, at Raleigh, N.C.-based Genworth Mortgage Insurance Corp.
Michael Lees, director of BPM Product Marketing at Germany’s Software AG and coauthor of the book “BPM Basics for Dummies,” says BPM is as much a management discipline as it is a technology, albeit one that is strongly facilitated by technology. Lees says it’s this technological base that differentiates BPM from other management disciplines such Six Sigma. “If you just do BPM technology without the management discipline, your chances of failing are higher than if you did BPM as a management discipline with no technology,” he says.
What’s more, even proponents of BPM acknowledge that it is not a panacea, and that much of the success of a BPM implementation depends on having good models in place for the processes it overlays. “You can take a bad process and implement BPM and you still have a bad process,” notes Genworth’s Smith.
This need to adopt the methodology and fix underlying processes means that, unlike a pure technology, the returns from BPM implementation are not often readily realized. Similar to a point guard basketball who makes the players around him better, BPM’s greatest value to an enterprise might lay in helping IT departments derive value out of previous expenditures. “People have spent as much as they can stomach on packaged applications and need something to fill the white spaces,” Lees says.
The lack of instant gratification inherent with a BPM implementation is all right by Steve Paquette, VP and CIO of claims for Hartford, Conn.-based Travelers Cos. Inc., who is in the early stages of adopting a BPM solution. “We look at this as a long-term strategy,” he says.
Paquette says the company decided to invest in BPM only after a long, rigorous look at its needs as the organization convinced him that there was a need for a solution. “We felt good about where we were,” he says. “There was no crisis facing us and we were doing things efficiently, but we wanted to look down the road three to five years from now and figure how we wanted to position ourselves.”
It was only after the claims organization understood how to leverage some of the concepts and turn them into an executable strategy that the focus turned to the technology. “When we went into this, it wasn’t as a technology, it was to have more flexibility and integrate some of the separate processes and workflows we have today into more of a holistic, integrated service delivery model within claims,” he says. “We want to institutionalize processes, but we have learned over time that the best processes are the ones that we can change quickly due to market conditions.”
For the technology, Travelers opted for a rules-centric system from Cambridge, Mass.-based Pegasystems Inc. “What we liked about Pega was the combination of business process and business rules,” he says.
INTEGRATION
As with many carriers across the industry, Paquette was confronted with a mix of modern and legacy systems when implementing the system. He says, perhaps not surprisingly, the more modern legacy applications the company employs have been easier to assimilate than the older COBOL-based systems. However, overall, he is content with the integration. “From a pure infrastructure perspective, the BPM solution we have fits nicely with our infrastructure.”
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