BPM Goes Wide and Deep in Insurance

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In its 2007 report titled "Insurance 2020: Innovating Beyond Old Models," IBM looked at why insurers, who were among the earliest adopters of information technology (IT) as a group, are also among the slowest to adopt newer IT. The issue is not that insurers and their ecosystem members, such as agents and brokers, are not automated. Instead, IBM found that insurers are not adopting IT to increase return on equity, reduce prices, and so forth. IT has driven similar metrics in the right direction in other industries, but not in insurance.

A related finding was that the insurers tend to automate and optimize their processes as they exist rather than change to suit new technologies. For example, property and casualty insurers have added global positioning systems (GPS), bar coding of parts, and digital cameras almost seamlessly to replace physical maps, inventory tags and the Polaroid camera. When they did, neither adjusters and estimators nor the subsequent workflow had to change.

While insurers certainly want to improve their financial metrics, they do not feel they should have to change processes to do so. Even if they were willing to do so, IT Investment Research hasn't found an ERP software that can accommodate all of the various geographic/governmental, size-of-company, type-of-business-process, type-of-IT-architecture, type-of-delivery, and most important, type-of-insurance permutations possible. Instead, business process management (BPM) software lets insurers work the way they want to work while embracing new technologies such as GPS.

Workflow the way you work

That's why BPM software is so popular among insurers. Suppliers include Active Endpoints, Adobe, Appian, Cordys, Global 360, IBM, Metastorm, Pegasystems, Software AG and almost any BPM supplier with a workflow heritage. Some offer insurance-specific solutions, others offer templates and/or development frameworks and tools, and others have had success although their BPM offering is not insurance specific. Generic BPM is well aligned with insurance ecosystem needs.

IBM provides both BPM software specifically tuned to insurance and templates/frameworks. In May 2008 IBM released its Insurance Operations of the Future (IOF) solution, a composite application that can recognize inbound tasks (including those coming from unstructured sources), interpret information within the source, and route work to a human or straight-through processing (STP) business process set.

IOF's foundation, according to IBM, is its separately available Insurance Process Acceleration (IPA) framework. IPA includes elements from IBM's WebSphere, Information Management, Lotus, and other brands. It lets insurers automate processes such as claims management, policy administration, underwriting, and self-service inquiry not handled out of the box by IOF. IPA won two awards at the 2008 Association for Cooperative Operations Research and Development (ACORD) conference, the key event for insurance industry IT standards development.

Cordys' Business Operations Platform for the Insurance Industry lets insurers manage business processes by integrating legacy systems, disparate databases and even paper. This is another example of the do-it-your-way advantage of BPM. Like IOF, it enables insurers to build new applications through the re-use of discrete, independent components (or composites). Cordys enables cross-selling by creating a single, real-time view of the customer across different lines of business.

Templates and frameworks

Adobe ties together various products more loosely into a BPM offering for insurers. Classic Acrobat document preparation software along with Adobe AIR's run-time support for rich internet applications and LiveCycle ES suite let an ecosystem support property/casualty (P/C) and surety, life, annuity, and health insurance and re-insurance requirements. LiveCycle can support over 600 ACORD P/C forms in .pdf format. It also supports different roles such as for the adjuster, estimator, independent agent, and so forth. In addition, Adobe users can leverage ACORD-standard XML Schemas throughout LiveCycle processes.

Of course any one of the Adobe products can be used individually with other brands to accomplish similar goals. With LiveCycle ES, organizations can automate digital rights protection of documents that need to be shared or collaborated on with the insured as part of a process. This has important implications where Health Insurance Portability and Accountability Act (HIPAA) regulations are an issue.

Pegasystems offers the Claims Repair Solution Framework, a pre-packaged BPM software containing an extensible library of claim edits, HIPAA 837 claim message handling, and best practice pre-adjudication workflows. It is important to look closely at different supplier offerings vis-a-vis specific insurance needs, because the use of the phrase "solution versus framework" can be simply a supplier marketing decision. In healthcare insurance, Pegasystems has landed recent wins at Blue Cross/Blue Shield of Minnesota and Kaiser Permanente.

Using core BPM

Global 360's Case360, although not unique to insurers, is very well suited to general, health, life, reinsurance, and indemnity business process sets. Per an IT Investment Research survey, insurers typically deploy Case360 solutions to sign up new customers, underwrite, manage claims, research fraud and manage subrogation claims -- that is, basically wherever the set can be looked at as a "case."

In independent insurance agencies, Case360 works as a component of a hosted agency solution. This recent ebizQ case study of BPM users illustrates a Global 360 user in the insurance industry.

Metastorm BPM and Metastorm Integration Manager (MIM) combine to form a horizontal suite that supports insurers that especially need to model and monitor human-centric sets, and enforce processes for compliance and governance (see recent ebizQ article "Five Ways BPM Enables Enterprise Governance"). MIM provides an environment for small insurers and independent agents to manage business processes that span outside of their agencies. Larger agencies can use the software to support processes that run behind an agent portal.

Generic Appian Enterprise and Appian Anywhere can also automate and manage the lifecycle of a case and provide status visibility with real-time alerts and key metrics reporting. Self-service Appian capabilities let customers and independent agents interact through a multi-channel strategy. Software AG's webMethods BPMS Process Designer lets insurers design and implement complex process "as is," another example of the key advantage of BPM in insurance: if the insurer does not want to change proven business sets, the technology should not force such a change.

Development tools for BPM in insurance

Often, to achieve competitive advantage where a function is not tied to regulatory or other demands, insurers want to develop special BPM capabilities in house. Two offerings announced in mid 2008 illustrate tools that can help such efforts. Active Endpoints, an early mover in the Business Process Execution Language (BPEL) standard, released ActiveVOS 6.0 in September 2008. ActiveVOS 6 0 is an all-in-one development system that permits insurers to create and execute web services-based applications. It contains an integrated complex event processing function, which lets insurers respond to changing work output and quality conditions.

Other middleware and tools can be used to build a development and on-demand delivery environment

About the Author

Dennis Byron brings three decades of analyst experience to his role as ebizQ's Community Manager for Improving Business Processes. This community covers Business Process Management (BPM), Process Modeling, Process Analysis, and Business Alert Monitoring (BAM), among other topics.

As Community Manager, Byron will blog and podcast to keep the ebizQ community fully informed on the latest news and breakthroughs relevant to enterprise BPM. Byron will be responsible for bringing you breaking news on BPM daily, writing feature articles and sourcing content from other analysts, industry associations and vendors for publication on ebizQ. Finally, each week, Byron will compile the most important news and views in an e-mail newsletter for ebizQ's ever-growing BPM community.

Byron is ideally suited to the job, as he has researched and analyzed all areas of IT and information-systems use for the past 30 years. Byron looks at BPM market dynamics backed up by facts, while taking into account the perspective of the IT and business person. He is a frequent speaker and moderator on business processes, which will also be one of his roles as Community Manager.

Byron was the ERP and Middleware Analyst with the Datapro division of McGraw-Hill and IDC from 1991 to 2006. In these roles, he was the primary analyst for Business Process Management. He has conducted over 500 specific information-systems case studies. He has contributed to Application Development Trends, IT Business Edge, Research 2.0 and other publications.

Byron is also the principal of IT Investment Research, which is aimed at institutional and individual investors in IT, or anyone who enjoys peering under the covers of "the financials," where large companies and emerging IPOs like to bury their most interesting facts. His main area of interest is investment opportunities in enterprise software.

More by Dennis Byron

About ebizQ

ebizQ is the insiderís guide to next-generation business process management. We offer a growing collection of independent editorial articles on BPM trends, issues, challenges and solutions, all targeted to business and IT BPM professionals.

We cover BPM standards, governance, technology and continuous process improvement, as well as process discovery, modeling, simulation and optimization, among many other areas. We follow case management, decision management, business rules management, operational intelligence, complex event processing and other related topics. We closely track important trends such as the rise of social BPM, mobile BPM and BPM in the cloud. We also explore BPMís use in functional areas, such as supply chain and customer management, and in key verticals, such as financial services, health care, insurance and government.

ebizQ's other BPM-oriented content includes podcasts, webcasts, webinars, white papers, a variety of expert blogs, a lively online forum and much more.