Not too long ago we were talking with an insurance company about claims processing and BPM.  Flournoy Henry, with years of experience in the Insurance business, thought he’d share a little bit of our perspective on the topic of BPM in Insurance:

When it comes to insurance, Claims Processing is the life blood of a successful insurance company, second only to policy sales. Unlike product sales or other service industries, insurance companies sell a promise; a promise that when needed, your policy will pay out. If a claim is not processed accurately in a timely manner, that promise is unfulfilled – customers lose faith in that promise and new policy sales suffer accordingly. With a growing number of insurance variations and increased regulation concerns, claims processing often becomes overly complicated and difficult for the insurance company to manage. However, with a disciplined approach to process management and greater visibility into operations, these same companies can turn a difficult situation into a competitive advantage.

When policy sales increase, claims demand follows suit. To keep up, either hire more staff or innovate; it’s just that simple. An obvious choice for innovation is automation; thereby processing more numbers with the same or fewer people. However, what should be automated? What step in the process is most valuable or time consuming? What decision points seem to change most often and require better management? Without the proper visibility into the claims process, we can’t answer these questions with any certainty. And when customers depend on your choices, and your investment dollars are at stake, certainty counts.

In addition to automation opportunities, workload distribution is often an overlooked drain on your company’s ability to execute. Many companies have higher waged Supervisors and Managers spending time dredging through spreadsheets, stacks of work, and outdated reports only to make a decision of who should work a claim. This is not only a misuse of your staff, but a costly choke point in your process. With an enlightened view of your process and real-time feedback metrics, these choke points can often be eliminated to greatly improve the performance of your overall process.

Regulatory constraints are an unavoidable and costly nuisance for almost any insurance process. With each state variation and federal release, are you spending the project budget re-writing applications to handle these revolving issues? Can your claims process adapt quickly and respond to new constraints?

With increased process visibility and performance comes control. The ability to analyze risk, understand your impact, and react quickly to a changing market and increased regulatory concerns will not only keep your policies selling; but will reduce your cost of ownership and increase your profitability.

If your company has already ventured down this road you probably realize that standardizing processes, especially core business processes is in fact NOT easy. There are many reasons why this is a heck of a lot harder than one may think. Let’s start with the big question first – What do we mean by standardization and what is the real business objective in doing it (i.e. who is asking for it)? I have seen quite a few flavors of this over my career; most recently I spent the better part of a year working with a very large insurance company who wants to standardize their claims process across all of their products and regional markets.

When I asked “why standardize?” I received different answers from lots of different people. “We want to make the claims process cheaper and more efficient,” while another person said “We want to be able to centralize the processing of claims,” and yet another “We want the customer to have the same experience in their claims handling regardless of where they are or who they talk to.”  Are they all saying the same thing in different ways? Are these really the same objective? Perhaps, but I and a few others were not convinced. The implication of this question is huge as this will without a doubt dictate what approach will be needed to achieve the goal. Yes, it’s those details again that quite often nobody really wants to face but without them then the whole exercise is just academic and everyone can just standby for a journey that could take a decade to realize, all the while managing ongoing change as the business climate shifts (i.e. competition, regulations, new markets, etc.).
So what does “standardizing” really mean? If we look at the definition of standard and exclude “a grade of beef below good” as one of them, then we see “a basis for comparison; a reference point against which other things can be evaluated”. So said in more of the context of a business process, it is to achieve a baseline measurement and reference model for process performance. So this has less to do with centralizing a process and much more to do with achieving a consistent performance profile to meet customer and/or business requirements.

So then another big question hits home. Do we really need everyone to perform the tasks in the exact same way? Or can it be that we don’t really care how they do things at a procedural level as long as they consistently meet the needed SLA’s, thus making the measurement the real standard? Maybe think of the latter like a technical standard such as J2EE, as long as a software vendor can deliver the functions required that make it J2EE compliant, it doesn’t matter how they actually implemented it. And as we all know there are very big differences between J2EE products. That becomes yet another big question. At what level of a process, if you think in terms of value-streams, should be considered the standard and what can be tailored in any fashion just as long as it can deliver to the specified requirements?As you can see, this whole notion of process standardization creates some very big questions that any company pursuing this strategy will have to answer, and it is not easy. From experience I can tell you that achieving the benefit of standardization does NOT unequivocally equal everyone at all levels of a process doing things the same way.

In fact, that is usually why this work can get very, very hard. Rationalizing activities from an end-to-end standpoint without knowing quantifiably what the performance standard needs to be is a recipe for some major headaches. So maybe another way of approaching standardization is by backing in to it, such as we need to process x-type claims in 72 hours in all markets we serve. Focusing on it from a measurement standpoint is the best way to understand at what levels of a process and more importantly what are the few key activities at those levels which really need to be rationalized. Versus what I have seen so many times, a blanket objective of everyone who is involved in the process must do things the same way. If you are reading this post, then you have probably been in those meetings where you need everyone to agree on “how the process should work”, now multiply that effect by 100 when you begin talking standardizing across products and geographies.
Ironically, everyone agreeing and doing the same work doesn’t guarantee that the measured result will meet the standard, but that is often the implicit assumption in such endeavors…

Happy 4th of July everyone, and think about our armed forces today. Our deepest thanks go out to all of you.