BPM and Insurance Industry
Srikanth Venkatesan
Practice leader - Insurance
Agenda
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BPM - In Principle
BPM - In Practice
What effective BPM can do to your business
BPM and Insurance Industry in matured Markets
BPM adoption in Indian Insurance context
BPM adoption - Key questions
BPM adoption - Critical success factors
Insurance operations of the future
BPM Solutions and IBM
BPM
Optimize
Automate
Integrate
BPM - In Principle
“Business Process Management, a software segment for end-to-end management of business processes,
from modeling and design to deployment and execution,
to monitoring and optimization of business processes involving both people (workflow) and systems (automation).
Some use BPM to mean Business Performance Management which related to business intelligence and BAM .”
“
BPM disciplines make process explicit (visible and independent of its implementation) using
models. Models are increasingly executable, not just documentation.
“
BPM suites are the most complete set of integrated composition technologies for managing all
aspects of process — people, machines, information, business rules and policies.
“
BPM disciplines are just emerging, although many BPM-enabling technologies are quite mature.
“
BPM is a technology-enabled set of disciplines to better address today's more-unpredictable
market dynamics by applying explicit process management approaches. And if a process is
transparent, effective and agile, it is likely to be perceived as innovative by internal employees,
and external customers and partners
Gartner Research
BPM - In Practice
V Applied as a discipline combining software and business consulting
expertise to accelerate process improvement and facilitate business
innovation
V Used as an approach that involves managing the entire lifecycle of a
process
V Applied to Govern an organization’s cross-functional, customer-focused,
end-to-end core business processes
V Used as a principle of continuous improvement, perpetually increasing
value generation and sustaining market competitiveness (or dominance) of
the organization.
Key Challenges Facing Insurer Leadership Worldwide
How do I respond quicker
to my customers, agents,
and partners?
How do improve innovation
and agility while leveraging
past IT investments?
How
How do
do II comply
comply with
with
government
regulations
government regulations
and
and Industry
Industry standards
standards
(Solvency
(Solvency II,
II, ACORD,
ACORD,
GDV,
...)
GDV, ...)
How do I continue to
reduce costs and
consolidate operations?
CxO Challenges
Business Process Management delivers immediate benefits
and represents a longer-term business discipline
BPM solves common business challenges . . .
Empowers business users
Identifies and Removes
Bottlenecks
Streamlines complex integration
across multiple processes
Provides Clear Visibility into
Business Processes
Enables Process
change
Simulates / predicts
outcomes
BPM includes
Integration
Modeling
Events
Monitoring
Models
Software
Forms
Active Content
Rules Engine
Process Knowledge
Metrics
Expertise and Assets
Workflow
Policies
Business Logic
BPM governs organizational and operational activities
Methodology
What Can BPM Do for Me?
Companies are Using BPM to Provide a Variety of Benefits
9 Empower business users
9 Enhance collaboration
9 Provide actionable insights
9 End-to-end process visibility
9 Improve business agility
9 Boost worker productivity
9 Reduce costs
9 Improve customer service
BPM Aligns Business and IT to your
Business Processes and your Changing
Business Needs
BPM tools Empowers You To Embrace Change and
Continuously Optimize Your Business
Model and
Simulate
Rapidly Deploy
and Change
Continuously Optimize
Sales
Operations
Partners
End-to-End Processes
Monitor, Predict and Act
Finance
Businesses today must adapt to faster and more
transformative change
Global Competitors
Industry
Consolidation
and M&A
New Regulatory
Requirements
Macro-Economic
Changes
Power Shift to
Consumers
Insurance Industry and BPM - Key Findings
•
BPM Use Within Insurance Is Limited – Used primarily in non core areas,
Insurers slow to adopt
•
Not Integrated with core business systems – 10 out of 16 companies
used BPM for stand alone functions
•
Few BPM vendors had Industry experience – Basic BPM frameworks
don’t do well in helping organizations realize business benefits
•
Lack of clarity on usage of BPM – Lack of business case behind
investments in BPM
•
Perception of High cost - No view on TCO for a definitive period
Forrester research 2006
Insurance Industry and BPM - Key Findings
“ Lack of experience in using BPM tools – as ETL ?? As front end ?? As
transaction systems ??
“ Business process complexity – Ever changing needs and lack of right
combination of business and BPM skills lead to discontinuation of usage
“ Measurement of benefits – Not being able to calculate tangible benefits as
the benefits span across functions / silos
Market size of BPM solutions will grow at a rate of 21% CAGR and will
be expected to be approximately at 3 billion USD
Forrester research 2006
BPM adoption in India - so far
♦ Restricted to specific functionalities
♦ Restricted to Document centric process management
♦ Viewed as Imaging and workflow management only coupled with some
content management
♦ Not Integrated with enterprise architecture
BPM adoption - Key Questions
6 What is the vendor’s installed base in terms of number of insurance
companies and in the current geography ?
6 How many internal resources are dedicated to insurance?
6 How differentiated is the pre - built insurance-specific software that is
included with the product?
6 How easily does this integrate with core Insurance solutions ?
6 How sophisticated is the product’s set of tools for monitoring and managing
processes including change in rules and modifications in the processes?
6 Total cost of ownership
Key roles and Best Practices in BPM Implementation
Role
Best Practice
Business process expert
Focus on process first, then technology.
Retain process intellectual property.
Implement cross-departmental processes.
Use collaboration for targeted business processes.
Make the processes transparent
Enterprise architect
View metadata broadly.
Use process standards.
Provide foundation for reusable tasks
IT operations professional
Be sure underlying infrastructure is ready.
Help select the right BPMS tool for your business
users.
Application development
professional
Help insulate process experts from underlying
technology.
Support goals of the enterprise architect
BPM vendor
Identify low-hanging fruit for initial applications.
Standardize templates with ACORD business
process and data models.
Provide business cases.
Promulgate best practices
Critical Success factors
♦ Emphasis on the business process and overall objectives
♦ View process knowledge as a strategic asset
♦ Select cross system / functional processes for Implementation
♦ Use collaboration tools in the right context
♦ Measure results and improvise
Insurance operation of the Future
Mailroom
Prep
Index
Route
Process
Application
Output and Storage
Data
Traditional Paper Operations (Human Centric)
50
50 –– 60%
60%
Workflow Enabled Operations (Content Centric)
Filenet
Data
15
15 -- 30%
30%
Operational efficiency limited by Knowledge worker
being the “Integration” layer between Documents and
Applications
Operations of the Future (Integration Centric)
Process
Server / Fabric
Input
Management
TIFF
Document recognition, work task automation maps, and
exposed SOA Services enable “Lights Out” Automation
and intelligent work task assignments
XML
Processes
Data
Automated
Services
55 -- 10%
10%
Insurance Asset Intensive Solutions
Separating process from system through service orientation
creates a new level of flexibility
Access
Consumer
Consumer
Direct
Direct Sales
Sales
Website
Website
Easy to use
access for
Agents and
Consumers to
buy and
service on line
Agent
Agent Self
Self
Service
Service Portal
Portal
Self Service
Solution
Life:
Life: NAVA
NAVA
STP
STP Solution
Solution
Self Service access Core
System Functions
Self Service Interactions
trigger Automated
Processes
Customer Data
Management
Operations of
the Future
Automating business processes
triggered by inbound documents, calls,
self service requests, etc.
Input
Input
Management
Management
Core Insurance
Solution
Processes consume
Services from the Core
Applications
Process
Automated
Automated
Intelligent
Intelligent Task
Task
Management
Management
P&C:
P&C: Series
Series IIII
Modernization
Modernization
Solution
Solution
Processes
Processes
Execute
Claims:
Claims:
Application
Application
Modernization
Modernization
Core systems
that process
the business
transactions –
ideally service
oriented
Insurance Operations of the Future helps address new challenges
Insurance Companies are facing a challenging time where Expenses are growing
while Revenues are shrinking
•
Since the mid-50’s, the Insurance
industry failed to turn an underwriting
profit – profit earned by taking in more
premium than it pays out in losses
•
This changed in 2001 when the Industry
began recording it’s most profitable years
since the Depression
•
However, the industry started trending
backwards in 2007 when, expense
growth outpaced premium growth as
revenues started a decline due to
softening rates
Industry trends and expense challenges
Expense growth outpaced premium growth by 3.7%
SAN FRANCISCO Jan. 31, 2008
•
Standard & Poor's Ratings Services has published a report that says U.S. property/casualty
insurer expense ratios are expected to rise in the coming years. The report, titled, "How High
Can U.S. Property/Casualty Insurer Expense Ratios Go?," notes that the average expense ratio of
its rated P/C insurers is expected (once all data is in) to have risen in 2007 compared with 2006.
•
"Insurers benefited from relatively low claims activity and robust earnings in 2006 and 2007, but
are now finding themselves increasingly challenged by the double-edged sword of
increasing expenses and the cyclical decline in premium growth," noted Standard & Poor's
credit analyst Michael Gross.
•
These pressures do not bode well for 2007 or 2008 expense ratios. For the five-year hardening
premium rate environment of 2002-2006, expense growth among Standard & Poor's rated
insurers outpaced premium growth by 3.7 percentage points.
•
P/C insurers seeking to rein in expenses will face increasing challenges in 2008. Expense
ratios at many insurers have room for improvement. "However, given the soft market's continuing
headwind, we believe expense ratios are likely to increase before they start to decline," added Mr.
Gross.
Changing demands from customers, regulators and agents
Carriers must invest in order to respond
•
Consumers:
– Expect rapid turn around via
multiple channels
– Demand more innovation in
products and services
•
Agents:
– Will trade commission for
ease of doing business
•
•
Regulators:
– Regulation is increasing in
scope and complexity
•
Carriers are still investing in
new systems, channels,
processes, and organizations to
respond to a changed
demographic
•
Carriers are investing to either
create – or respond to – new
innovations…something new to
this industry
•
Carriers are having to compete
for the agents customers on
more than just price and
commission – and also need to
be easier to do business with as
well
•
National and Local regulations
are on the rise – accounting for
ti
bl
t
f
Employees
– Skilled resources are
becoming scarce and
expensive
Success Stories
Insurance Carriers strive to better align their business initiatives with existing resources and
technology to achieve a higher level of operational efficiency
“The Zurich Way”:
ƒ Focus on core markets
ƒ Focus on core processes
ƒ Increase operational efficiency
ƒ Standardization of methodologies and processes
“3+One Strategy”:
ƒ Protect and strengthen capital base
ƒ Boost operating profit
ƒ Reduce complexity
ƒ Increase competitive strength through customer focus and sustainability
Source: Company Annual report 2005
Source: Company Annual report, 2005
“Accelerating the pace of change” as the programme for 2006-2008:
ƒ Operational improvement
ƒ Growth & innovation,
ƒ Capital optimization,
ƒ Enhanced governance
Further industry concentration:
ƒ Individual Capital Adequacy
ƒ Growing investment in technology and service
Critical success factors in the UK market:
ƒ Flexibility in Distribution
ƒ Efficiency in Capital Management
ƒ Brand Awareness
ƒ Delivery Capabilities
Source: Company Annual report
Source: Company Annual report 2005
Company objectives:
ƒ Provide more cost transparency to clients
ƒ Reduce expenses and increase return on equity
ƒ Reduce claim processing time
ƒ Provide high quality customer service based on accessibility and professionalism in
customer care
ƒ With one group-one system philosophy, use Danish Insurance system as a model for
further development of its international activities
Source: Company Annual report 2005
… while preparing for future
growth and business models
at the same time.
Operations of the Future Business Objectives
In moving to the Service Oriented Enterprise, Operations of the Future addresses 4
strategic imperatives while responding to changing market expectations
Reduce
Cycle Time
•
Customers begin to expect instantaneous response to requests through policy life cycle
•
Agents place business with carriers that deliver accurate results quicker – at times
demonstrating a willingness to take lower commission
> Mega-trend indicates processing efficiency becomes a competitive differentiator equal to and
possibly more than commission to respond to changing demographic
Reduce
Expense
Optimize
Resources
•
Softening market and other competitive pressure require reduced cost of operations
•
Once a new baseline is established on reduced labor from global sourcing – pressure will
move to automation – removing labor costs entirely
> Mega-trend indicates that operational innovations will be required to maintain bottom line
competitiveness – especially in the face of outside entrants into market
•
Skilled resources are graying and becoming harder to find – especially in the claims,
underwriting, and agent skill classes
•
At the same time, the market is demanding more complex and diversified programs to
differentiate through product innovation
> Mega-trend indicates that productivity of skilled resources will need to increase
dramatically in order to respond to market demands and changing demographic
Increase
Agility
ƒ Technological advances are allowing for increasing innovations in product design and
expectations
> Mega-trend indicates that traditional claims operations will not be able to support
“processing as usual” as carriers will have to rapidly change and modify their operations
to support new and innovative products and product lines
Automation
@
Business logic, business specific functions, data, employees
IT-Infrastructure
Agents
E-Mail
Internet
@
Process Choreography and Management
On-site Support
Telephone
Self Service
Self Service
Internet
1st Level
(CSR)
mail
Output Management
Telephone
E-Mail
Customers
2nd Level
Back
Office
(Specialist)
mail
Input Management
Agents
On-site Support
Operations of the Future Solution Concept
Service Orientation enables a transformation from document
centric workflows – to completely automated processing of
inbound mail, e-mail, calls, and faxes
Customers
Insurance Operations of the Future Solution – Asset View
Available Today
Available through Business Partner
Filenet
Insurance
Insurance
Self
Self
Service
Service
Solution
Solution
Input Management
Work Management
Scan and Interpret
Inbound work
tasks
Assign and
Route Work Tasks
Traditional WF
Automated
In POC
Manual Work Tasks
NAVA ATP
PLM ATP
Web
E-Mail
Mail
Phone
Team
Lead
Lev 1
Emp.
Manager
Consumer
Agent
Provider
3rd Party
Web
E-Mail
Mail
Phone
“Lights Out”
Automation
“Lights
Out” of
Pers Auto Claim ATP
Documents
Automation
“Lights
Out” of
Documents
Automation
of
Automated
Documents
Processing
of
Work Tasks
Disability Claim ATP
Lev 2
Emp
Core
Core Insurance
Insurance Solution
Solution
Process Mgmt
Output Mgmt
Dynamic Folder
Monitor processes
and tasks
Process Work
Task Output
Organize &
Manage Work
Folder Content
Auto Claim
Services
PLM
Services
Disability Claim
Services
NAVA
Services
IBM Asset
IBM Business Partner
In Development
Available Through Business Partner
Solution Outline
SWG Offering
Insurance Operations of the Future: POC Operational
View
The Benefits of a Strategic Transformation through Tactical
Deployments
Today, the typical insurer may automate 10 to 15% of their tasks. By moving this to 70% - which
appears reasonable by applying Service Orientation – this could result in as much as 66% operational
costs reduction
Type of Work
Current State
% of Work
Cost
Future State
% of Work
Cost
Fully Automated Tasks
15
15
70
70
Simple / CSR Tasks
40
1000
20
500
Manual / Advanced Tasks
45
2250
10
500
100%
$3,265
100%
$1,070
An example of a task is the work required to process an inbound piece of mail. It would also include tasks
resulting from emails, Web interactions, and phone calls
Items are relative: Automated = $1; CSR Tasks = $25;
Specialist Tasks = $50
Note: Numbers are not sourced to a commissioned study – they reflect observations and projections from customer experience but are not yet referenceable
Solution Applications
•
Mail Room Operations:
– Streamline operations and automate sorting, indexing, and routing
•
Mature File Net Operations:
– Move from document handling automation to lights out processes
– Automated indexing and routing
•
Workforce Management
– Automated / Optimized assignment of tasks from multiple channels (eMail, Phone, Web,
Mail, etc.)
•
Straight Through Processing for:
– Auto Claims and Claims Payments
– Straight Through Policy Processing
– Customer Service Requests
•
Dynamic Folder:
– Renewal processing
– Claim processing
– Complex commercial lines
•
Output Management
– Automated document generation (Thunderhead)
BPM Solutions & IBM
Wave chart from Forrester
Accelerate Your Success with BPM
Leverage expertise and pre-built industry solution accelerators
Information
Agent
Customer
Applications
Loss
Adjuster
Call
Centre CSR
Key Agility
Indicators
People
Industry
Domain Models
Acquisition
Planning
Sales
Market
Research
Market
Information
Business
Architecture
Service/
Sales
Admin.
Insight
Customer
Portfolio &
Analysis
Business
Unit Tracking
Alliance &
Authority Mgmt
Fixed Asset
Register
Segment
Analysis &
Planning
s
vi
En
Customer
Servicing &
Sales Planning
es
s
Envision
Assess
Define
Execute
Optimize
Customer
Behavior
& Models
Business
And Resource
Planning
ƒ Evaluate current
business
strategy
ƒ Review and
evaluate
strategic
objectives
Process
governance
e
De
fin
e
miz
Opti
Industry
Content
Packs
As
s
n
io
Execute
ƒ Select
opportunities/
projects for
improvement
ƒ Assess and
document
current business
processes
ƒ Assess current IT
and current
organization
ƒ Document
current business
rules
ƒ Analyze process
capability gaps
ƒ Develop future
business
processes
ƒ Develop new
organization
ƒ Develop KPIs
ƒ Perform process
benchmarking
ƒ Simulate future
business
processes
ƒ Develop highlevel service
model
ƒ Export first-level
Business
Process
Execution
Language (BPEL)
ƒ Install/configure
business
process management system
(BPMS) runtime
environment
ƒ Choreograph
processes
across applications and SOA
services
Process governance
ƒ Optimize
measurement
management
framework
ƒ Optimize
business
processes in real
time
In-bound
Call Center
CBM
Case
BusinessHandling
Components
Customer
Contact
Handler
Corres
pondence
Financials
Consolidation
Campaign
Execution
Advertising
Campaigns
Dialogue
Handler
Credit
Management
Relationship
Management
Teller
Services
Self-service
Channel
Applications
Smart
Routing
Branch Cash
Inventory
Channel/
Distribution
Mgmt.
Local
Branch
Admin.
Financial
Control
Distribution
Treasury
Product
Management
Product
Development
& Deployment
Marketing
Production &
Product
Directory
Inventory
Management
Retail
Securities
Portfolio
Trading
OTC
Services
Retail
Lending
(Mortgages)
Securities
Market
Analysis
Customer
Account
Customer
Profile
Alliance
Administration
Document
Management
Product
Tracking
Settlements
Reconciliations
Deposits
(DDA)
Application
Processing
Operations
Administration
Servicing
Management
Wireroom
(S.W.I.F.T.)
Valuations
Authorizations
Collections
& Recovery
Product
Processing
Acquisition
Administration
Portfolio
Administration
Trading
(Front Office)
Confirmations
Contract Notes
Statements
Collateral
Handling
Custody
Administration
Trading
(Back Office)
Contact/
Event History
Operations
SOA Business
Management
Services and
Applications
Payments
EnablingFinancial
Capture
Platform
Billing
Business Management
Merchant
Operations
Rewards
Management
Manufacturing
Risk
Management
Securitization
Loan
Syndication
Processing
Finance
Policies
Customer
Credit
Admin.
Business
Policies &
Procedures
Customer
Accounting
Policies
Business Management
Industry Best
Practices
BPM Methodologies
Industry models and best
practices
Fund
Management
IBM Benchmark Wizard
Asset &
Liability Policy
& Planning
Consolidated
Book/Position
Maintenance
Risk and Financial
Management
BPM and Industry
Expertise
Audit/
Assurance/
Legal
Accounting
General
Ledger
BPM from IBM Delivers Unrivaled Customer Value
#
1 in BPMS market share
Over 2850
9
9
BPM
customers in over
9
30 countries and
growing
9
Market leading
products
Deep industry
knowledge and prebuilt assets
Largest partner
ecosystem
Global reach and
scale