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Transform your Insurance Processes with BPM and Decision Management

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This is the presentation given by Vincent M Price during Impact 2012 in Mumbai. It's a walk through of how do you transform your insurance processes for greater competitive advantage with BPM and decision management

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Transform your Insurance Processes with BPM and Decision Management

  1. 1. Transform Your Insurance Processesfor Greater Competitive Advantagewith BPM and Decision ManagementVincent M Price
  2. 2. IBM Software GroupAgenda Business Drivers And Challenges • Life and Non-Life Building Smarter Processes Across The Enterprise • Improve Profitability, Reduce Costs, Improve Agent/Customer Interaction, Up-Sell and Cross Sell IBM WebSphere Solutions For Insurance • Speed, Transparency, Collaboration2 © 2012 IBM Corporation
  3. 3. IBM Software GroupAgenda Business Drivers And Challenges • Life and Non-Life Building Smarter Processes Across The Enterprise • Improve Profitability, Reduce Costs, Improve Agent/Customer Interaction, Up-Sell and Cross Sell IBM WebSphere Solutions For Insurance • Speed, Transparency, Collaboration3 © 2012 IBM Corporation
  4. 4. IBM Software GroupIndustry going through major changes since 2009-10 – productinnovation being the need of current times Emergence of New Bancassurance, direct selling agents, brokers, online distribution, corporate agents such as non-banking Distribution Channels financial companies (NBFCs) and tie-ups of para-banking companies with local corporate agencies ( in remote areas. • Consumers’ need for higher levels of customization has led to product innovation leading to greater Product Innovation operational efficiency • E.g. ULIPS, Pension products etc • In life insurance segment, share of the private sector in total premiums increased from 2 % in 2002–03 Growing Market Share of to 29.1 per cent in 2008–09. Private Player • In non-life insurance segment, share of the private sector in total premiums increased from 9.5 per cent in 2002–03 to 40.9 per cent in 2009–2010 • Entry of many companies in the domestic insurance segment due to its significant potential • Increasing competition in easily accessible urban areas, FDI limit of 26 per cent and the recent Consolidation in Future developments in equity markets have impacted their growth prospects. • Consolidation will lead to fewer but stronger players in the country and also generate healthy competition. Large insurers continue to expand, most focused on cost rationalization and aligning business models to Mounting focus on EV ground level realities to realize reported embedded value (EV) and generate value from future new over profitability business Capital requirements across the sector are likely to increase due to: Rising Capital •Higher sum assured driving sum at risk Requirements •Greater allocation to policyholders’ assets due to lower charges •Back loading resulting in high new business strain, and expense overruns due to low productivity of newly set distribution network © 2012 IBM Corporation4
  5. 5. IBM Software GroupComplexity exists internally within organizations andexternally within the broader business networkCompanies need end-to-end process management To orchestrate human tasks… … to increase visibility… Agents & Partners & Producers Re-insurers Insurance Carrier Internal Employees Con- Auto sumers Commercial LOB Con-sumers LOB Home LOB DMV Out- Financial sourced Service Institutions Providers 3rd Party Services … to manage exceptions and cases… … and for scalable transactions… … everything you need to manage end-to-end business networks © 2012 IBM Corporation
  6. 6. IBM Software GroupInsurers’ Top Business Drivers Across IndustrySegments 8% 7 G o i g h b s es rw te ui s n n 8% 0 Es o di g ae f on 7% 4 b s espo ues ui s( rd cr n ) 4% 0 3% 9 C srd co ote ut n i 7% 0 I rai g n es c n 4% 2 poi a ii y rf b t t l 5% 0 Es o di g ae f on 2% 3 b s espop c ui s( rset n s 4% 0 a d och l r n p l o es iy d ) 3% 5 A ii y gt l 2% 0 Source: Celent Le e l i / ah fH t Po et C sa y rp r /au l y t © 2012 IBM Corporation6
  7. 7. IBM Software GroupInsurance – Growth Factors & Challenges Growth Factors •Increasing awareness and low penetration •Tax savings from purchasing policies •Increased disposable income •The massive rural market •Favorable Government & Regulatory Initiatives •Fast progressing medical technology and increasing demand for better healthcare has resulted in rising demand for health insurance •Innovative products & new distribution channels Challenges •Product distribution complexity •Aggressive pricing post-deregulation of the industry •Heightened competition and the need for product innovation •Lack of regulatory-mandated capital •Reconfiguring operations for an optimal business mix •The need to enhance efficiencies © 2012 IBM Corporation7 Source: ibef
  8. 8. IBM Software GroupKey Challenges that needs to be quickly addressed for furthergrowth of the industry • With the recent de-regulation a price war has emerged with companies Pressure on Bottom-line • This has directly resulted into pressure on bottom-line of the companies • Insurance Business comprises of various processes and is still on multiple legacy systems Disparate operational • With market evolution products also have evolved systems • With complex product there is a need to have robust operational support to service clients • Profitability linked to customer base & their retention Demanding Customer • Great challenge due to price war, absence of a single view of the customer and resultant poor customer servicing due to old operational systems Regulatory requirements • Strict regulatory compliance & complex reporting • With new distribution channels increasing the conflicts is increasing as well in terms of Channel Conflicts commissions and servicing provided to these channels • Insurers have to look into solving the conflicts and optimizing the distribution channel • Profitability of insurance companies depends on quality of risk underwritten Integration of risk • Good underwriting activity requires historical data about risk and claims & getting this data considerations into their is a challenge decision making and strategic execution • Industry is now looking at IT & web enablement to mitigate the pain point and create sustainable value © 2012 IBM Corporation8
  9. 9. IBM Software GroupFactors Impacting Costs and Bottom LineDisjointed, silo’ed No consistency in Lengthy cycle for Lack of transparencyand manual how UW, claims or implementing changes, and audit trails inprocesses corporate guidelines Introducing new light of regulations are enforced across products channels Limited portalMultiple legacysystems in place that Unable to settle claims, capabilities thatlack flexibility, costly to Inaccurate assessment or deliver products and do not supportmaintain and integrate of risk, unable to easily services in a timely and up-sell/cross-sell identify suspicious cost effective manner or guided interactionDecisions claims and reduce loss(business rules) ratios Poor alignmentare hard coded and Unable to do ‘what if’ between ITdecentralized or scenarios objectives andreside in manuals business strategies © 2012 IBM Corporation9
  10. 10. IBM Software GroupInsurance Operations TodayFragmented, Complex, Inflexible and Costly Self Service Underwriting Policy Administration Claims Billing New Business Processing Customers Regulators 3rd Party Agents Service Providers © 2012 IBM Corporation
  11. 11. IBM Software GroupCarrier Focus Areas Distribution Core Operations Focused on third party distribution Core and non-core insurance processes to including agents/producers, brokers, reduce cost and improve service financial advisors Process Process Management ManagementAgent and  Self ServiceDistributors  BPM for new Claims  STP business and post  Claims assignment issue STP  Case ManagementPolicy Servicing  STP policy changes  Compliance  Premium billings  Subrogation  Disputes Legal  ComplianceNew Business  Processing of applications  Case ManagementSubmissions  STP for certain risks  Segmentation Underwriting  Eligibility &  Complex risk and Enrollments resource alignment  Exception  New business processing streamliningBillings  Premium billings  STP for certain risks11 © 2012 IBM Corporation
  12. 12. IBM Software GroupBPM Landscape Operational Processes Customer Facing Processes • Self-Service • Product Sales External • Compliance • Dispute Resolution • STP for certain risks • Agents/Brokers • Eligibility & Enrolments • Claims & Policy Servicing Processes Participants • Underwriting Internal • New Hire On-Boarding • Claims • Workflow and Process • Policy Servicing • Vendor management • Invoice & Billings Core-Back Office Distribution/Customer- Front Office © 2012 IBM Corporation12
  13. 13. IBM Software GroupAgenda Business Drivers And Challenges • Life and Non-Life Building Smarter Processes Across The Enterprise • Improve Profitability, Reduce Costs, Improve Agent/Customer Interaction, Up-Sell and Cross Sell IBM WebSphere Solutions For Insurance • Speed, Transparency, Collaboration © 2012 IBM Corporation
  14. 14. IBM Software GroupIBM is partnering with our clients to create innovative solutions that will allow them to grow their current investment in BPM solutionsFor example, imagine if an insurancecarrier could… • Ensure consistency of business decisions, meet regulatory demands that govern how you do business in a uniform fashion • Automate the underwriting and claims process so new tasks are sent directly to the handler based on availability and skills, decisions are made automatically and manual processes are reduced or eliminated • Perform finer segmentation of new business submissions to provide more competitive pricing based on risk exposures • Improve customer service streamlining policy changes and enrollments Business Outcomes: Detect and respond to events and risks Recognize trends in real-time to meet customer demand © 2012 IBM Corporation
  15. 15. IBM Software GroupBusiness Scenarios • Automated Underwriting and Rating • Smart Claims and Fraud Detection • Commissions • Customer Service © 2012 IBM Corporation
  16. 16. IBM Software GroupSpecialty Lines InsurerIncreases New Business Growth By 30%Business Challenge: Business Solution:• Private client group experiencing • Enabled distribution of all processing functions to rapid growth internal staff and independent agents via web• Accommodate expansion without browser increasing resources. • Streamlined core business processes• Isolated systems to support core • Enabled capabilities including; processing, processes, including billing, automated task management, reporting, tracking, underwriting and claims auditing. processing • BPM and BRMS used to automate underwriting functionsWhy S ma rt In s u r a n c e ?It reduces time for new business quotes by 30%. Improves • IBM WebSphere® Application Serverup-sell capabilities which led to business growth of • IBM WebSphere® JRulesapproximately 30%. Increases speed to market by 50%(implementing rule changes in days versus months) • IBM WebSphere® Process Server • IBM WebSphere® MQ © 2012 IBM Corporation
  17. 17. IBM Software GroupBuilding A Smarter BPM & DM-based UnderwritingProcess © 2012 IBM Corporation
  18. 18. IBM Software GroupRisk Assessment - Based On Scoring and PatternMatching Pattern Matching Scoring © 2012 IBM Corporation
  19. 19. IBM Software GroupScenario: Risk Assessment © 2012 IBM Corporation
  20. 20. IBM Software GroupScenario: Scoring Scorin © 2012 IBM Corporation
  21. 21. IBM Software GroupScenario: Rating © 2012 IBM Corporation
  22. 22. IBM Software GroupScenario: Rating © 2012 IBM Corporation
  23. 23. IBM Software GroupImpact Analysis Monitor business KPIs to predict impact: • Run simulations before live deployment • Simulate on historical data • Measure impact between various alternatives © 2012 IBM Corporation23 Template Documentation 06/07/12
  24. 24. IBM Software GroupComprehensive Audit Trails of Rules and Decisions  Rule History Management © 2012 IBM Corporation24
  25. 25. IBM Software GroupFortune 500 P&C Insurance CompanyUnderwriting (Commercial Lines)Business Challenge: Business Solution:• Rules were hard coded and • Carrier embarked on a legacy modernization decentralized project and built a web-based underwriting• Manual processing system• Carrier was unable to enforce risk • Based on WebSphere infrastructure and underwriting guidelines and BRMS• Build an agile underwriting system that supports growth strategy and speed up requirementsWhy S ma rtIncrease in straightc e ? processing rate from 17 to 76%. I n s u r a n through • IBM WebSphere Application ServerIncreased new business quotes by 40%. Speed to market gains • IBM WebSphere ILOG JRulesof over 50% with rule changes in less than a week vs 5 months. • MQ WorkflowAble to obtain underwriting decisions at multiple points during theprocess and proactively segment unacceptable business © 2012 IBM Corporation
  26. 26. IBM Software GroupFortune 500 P&C Insurance CompanyUnderwriting (Commercial Lines)Additional Metrics• Quotes submitted per month increased from approx 20,000 in 2005 to 60,000 in 2010• Policies in force increased from less than 700,000 in 2005 to over 900,000 in 2010• Quotes by agents up by 25%• Approx 3000 rules in production across SMB commercial lines• 100% of underwriting rules (creation, testing, what if scenarios) done by business users (business analysts, underwriters and actuaries working with analyst) © 2012 IBM Corporation
  27. 27. IBM Software GroupBusiness Scenarios • Automated Underwriting and Rating • Smart Claims and Fraud Detection • Commissions • Customer Service © 2012 IBM Corporation
  28. 28. IBM Software GroupClaims Process-Business Process Automation TI VE A TR Traditional Human Workload Balancing is combined with dynamic Skills-Based Process Routing to ensure the right claim is assigned to the right handler at the right time. Skills criteria is a business-driven design element of a business process execution engine that S allows classification of employee skills and associated skill maturity matched with the requirements of specific claim scenarios and events. LU Application and Systems Integration that is orchestrated with an ESB and within a business process, allows manual tasks to be automated, audited, and monitored. Business process combined with Business Rules Management Engine enables the capture of IL policy coverage information (e.g. Limits, Dates, Vehicles, Locations). The automation of tasks like this reduce the claim workload of individual claims handlers, resulting in shortened call times and claim durations, and helps prevent human errors. Claim documentation requirements can be automatically sent to involved parties via BPM Process orchestration by a process engine. In most cases, all outbound and inbound paper communications can be managed electronically. Outbound forms and paperwork can be embedded with barcodes to allow for automatic electronic recognition and processing on inbound return. For situations requiring phone calls and follow-up work, tasks can be automatically routed to a lower-cost employee to complete. Depending on the Insurer’s Handling Philosophy, this step could be completed by a lower-cost/lesser-skilled Triage Analyst. After gathering incident details, Predictive Modeling, combined with Claim Segmentation, enables the decision to fast-path claims or keep them in the traditional business process. Every time claim data is modified in material fashion (New Witness, New Doctor, or Potential Subrogation against a 3rd Party), the Analytical Engine is running against the Claims Database to identify any new patterns that may result in claim escalation. 1 2 3 4 © 2012 IBM Corporation
  29. 29. IBM Software GroupClaims Process-Business Process Automation After gathering incident details, reviewing claimant information and eliminating fraud possibility with Fraud solution, the Claims Handler is able to apply their professional expertise in conjunction with existing applications to make an initial valuation. Based on Claim VE Segmentation and Small Loss Thresholds using Business Rules, an estimated 20% of Claims could be processed on a Fast-Path to reduce cycle time and prevent the opportunity for the claimant to obtain legal representation or other measures which would prevent TI paying more than necessary. TRA Manual activities, like building tasks lists, can be replaced with Business Rules and Human Business Process Management. The automated checklists are automatically built and updated based on real-time status of the required information. Forms and other US documents managed with and processed via Advanced Case Management solutions are automatically processed-outbound documents are created managed by Business Rules and automatically stored in a Content Management repository. The Claims Handler task LL list will automatically alert them, that this checklist item has been completed. 5 I 6 © 2012 IBM Corporation
  30. 30. IBM Software GroupClaims Process-Business Process Automation Investigation and Determination of Fraud should be happening throughout the lifecycle of the claim to help control the indemnity cost of the claim. For example, when 3 days into the claim lifecycle, a new witness is identified, the Fraud Modeling and Predictive Analytical systems should be triggered to analyze all involved parties from previous claims to see if this witness is actually a known person who is part of a fraud ring. This type of party identity matching should be used whenever new parties (e.g. witnesses, Doctors, attorneys) are added to the claim. When new medical information is updated on the claim that shows the injured party has more substantial injuries, the Predictive Modeling should begin to analyze and predict whether or not this claim is likely to have Severity Deterioration. TI VE T RA US 7 I LL © 2012 IBM Corporation
  31. 31. IBM Software GroupWorksafe Victoria Reduces Claim and FraudReduce Costs from 5% to Less than 0.5%Business Challenge: Business Solution:• Needed a modernized claims and • Modernized claims and fraud detection fraud detection system • Went from claim validation, adjudication,• Manual processes and long settlement payment and settlement to identifying and cycles with greater potential for fraud routing suspicious claims • Delivered agile payment processingWhy S ma rtImproved u r a n c e ? by 300%. Reduced I n s invoice throughputpayment cycle from 30 days to 1 day. Increased STPfrom 40 to over 80% © 2012 IBM Corporation
  32. 32. IBM Software GroupWorksafe Victoria Legacy Systems © 2012 IBM Corporation Analytics
  33. 33. IBM Software GroupWatch The Video © 2012 IBM Corporation
  34. 34. IBM Software GroupBusiness Scenarios • Automated Underwriting and Rating • Smart Claims and Fraud Detection • Commissions • Customer Service © 2012 IBM Corporation
  35. 35. IBM Software GroupMajor Life Insurance CarrierReduces Time to Market for Promotions and Incentives by 70%Business Challenge: Business Solution:• Needed an update payment process • Revamps commission payment process with• Needed more flexibility in WebSphere ILOG BRMS management of commercial terms and • Process supports a homogenous multi-channel conditions strategy. BRMS used for validation, commission calculation and stimulation for and automate regulatory rules W h y S m a r t e r In s u r a n c e ? With the new system, carrier has more flexibility in the management of specific commercial terms andconditions; easily enforce regulatory rules that vary from country to country and support new policy sales, anniversary payments, renewals by agent/broker. © 2012 IBM Corporation
  36. 36. IBM Software GroupWebsphere BRMS Within a Commissioning System Input Interfaces Administration Querying Repositories Websphere BRMS • Rules Calculation • Parameters Publishing • Commissions Simulation • Historical Data Reporting Output Interfaces © 2012 IBM Corporation36
  37. 37. IBM Software GroupBusiness Scenarios • Automated Underwriting and Rating • Smart Claims and Fraud Detection • Commissions • Customer Service © 2012 IBM Corporation
  38. 38. IBM Software Group New York Increases speed to market by 50%Smarter health plan servicesLeading healthcare company in “Providing innovative products and services whilewestern New York state created a improving the availability, quality, and cost ofstreamlined and efficient enrollment healthcare is central to our corporate vision. We chose to partner with IBM as their suite of technologies metand plan change process for members our business and IT objectives at an enterprise-wide level. Websphere Process Server and ILOG JRules have enabled us to automate, optimize and monitor critical business decisions within our core processes such as member enrollment while delivering tangible benefits.” —John Walsh, Chief Enterprise Architect, Results / Ability to Change HealthNow New York Inc.  Speed to market gains of over 50%  Ability to introduce new behaviors into systems in days rather than weeks or months  Reduction in enrollment time and administrative costs  End-to-end visibility in enrollment process for greater clarity, accuracy and consistency  Increased collaboration between business and IT  Productivity gains with fewer people and man hours spent to create, test and deploy rules  Comprehensive audit trail of rules and decisions rendered38 © 2012 IBM Corporation
  39. 39. IBM Software GroupSmarter Enrolment with Intelligent Decision Management Reject www N N Enrolment Eligible? Plan Submission Direct Sales Manual Y Assessment Y Underwriting Bind Broker / Partner © 2012 IBM Corporation
  40. 40. IBM Software GroupSmarter Enrolment with Intelligent Decision Management Operational Decisions… Reject www N N Enrolment Eligible? Plan Submission Direct Sales Manual Y Assessment Y Underwriting Bind Broker / Partner © 2012 IBM Corporation
  41. 41. IBM Software GroupProcess - Before  Decision logic Less Automated, Less Precise/Flexible embedded in Reject the process www model or code N 78% N  Limited Enrolment Eligible? Plan? Submission straight-throughDirect Sales Manual processing Y Assessment Y  Lack of personalization Underwriting Bind andBroker/Partner specialization © 2012 IBM Corporation
  42. 42. IBM Software Group Process - After More Automated, More Precise/Flexible  Decision logic externalized Reject www  Highly N N 0-18% automated Risk Eligible? Eligible?  Context- EvaluationDirect Sales Manual specific Y Assessment Y consistent and granular Underwriting Bind throughoutBroker/Partner  Decision logic Less Automated, Less Precise/Flexible embedded in Reject the process www model or code N 78% N  Limited Enrolment Eligible? Plan? Submission straight-throughDirect Sales Manual processing Y Assessment Y  Lack of personalization Underwriting Bind andBroker/Partner specialization © 2012 IBM Corporation
  43. 43. IBM Software Group Agenda Business Drivers And Challenges • Life and Non-Life Building Smarter Processes Across The Enterprise • Improve Profitability, Reduce Costs, Improve Agent/Customer Interaction, Up-Sell and Cross Sell IBM WebSphere Solutions For Insurance • Speed, Transparency, Collaboration © 2012 IBM Corporation
  44. 44. IBM Software GroupDNA of the Agile Enterprise Process Management Decision Management • Defines and orchestrates the end-to-end • Defines and executes specific decision points in process processes and applications • Combines automation with user interaction • Is focused on automating and improving decisions • Is fundamentally concerned with • Is fundamentally concerned with the operational operational efficiency of the intelligence of the organization organization © 2012 IBM Corporation44
  45. 45. IBM Software Group Typical Process Problems Customer Service Finance Account Administration and Ops 1 Unstructured Tasks and Communication Executive 6 (ex Paper or email) Management 1 3 2 Inefficient Working Environment Spans Systems 3 Inconsistent Invoice Prioritization Reconciliation 4 Teams Incomplete or 2 Inaccurate Data Flow Between Systems 5 Lack of Control Over System and Business 4 Events (Exceptions) 6 Poor Visibility Into 5 Process Performance45 © 2012 IBM Corporation
  46. 46. IBM Software GroupProcess & Decision Management Bring Order to theChaos Finance 1. 1 Automate workflow & and Ops decision making Risk Account Executive 2. 2 Reduce errors and Management Administration Management improve consistency Teams 3. 3 Standardize resolution Customer across geographies Service 4. 4 Leverage existing systems and data Decision 5 5. Monitor for business Management events and initiate actions 6. 6 Real-time visibility and process control Process Customer Benefits: • Huge Reduction in Manual Work, Errors • Faster, More Consistent Issue Resolution • Easier to Manage the Business © 2012 IBM Corporation
  47. 47. IBM Software Group IBM Products for Business Process & Decision Management Blueworks Live Business Process Operational Decision Manager Management Process Center Decision Center Process Server Decision Server Management of all process components Management of business rules & events Business Monitor Work together to deliver effective solutions for business operation improvement © 2012 IBM Corporation47
  48. 48. IBM Software Group IBM Products for Business Process & Decision Management Blueworks Live Business Process Operational Decision Manager Management Process Center Decision Center Process Server Decision Server Management of all process components Management of business rules & events Business Monitor IBM Blueworks Live is a cloud based business process management tool © 2012 IBM Corporation48
  49. 49. IBM Software Group IBM Products for Business Process & Decision Management Blueworks Live Business Process Operational Decision Manager Management Process Center Decision Center Process Server Decision Server Management of all process components Management of business rules & events Business Monitor IBM Business Process Manager v7.5 is a comprehensive and consumable BPM Platform © 2012 IBM Corporation49
  50. 50. IBM Software Group IBM Products for Business Process & Decision Management Blueworks Live Business Process Operational Decision Manager Management Process Center Decision Center Process Server Decision Server Management of all process components Management of business rules & events Business Monitor Websphere Operational Decision Management (BRMS) © 2012 IBM Corporation50
  51. 51. IBM Software Group IBM Products for Business Process & Decision Management Blueworks Live Business Process Operational Decision Manager Management Process Center Decision Center Process Server Decision Server Management of all process components Management of business rules & events Business Monitor IBM Websphere Business Monitor is comprehensive business activity monitoring (BAM) software © 2012 IBM Corporation51
  52. 52. IBM Software GroupIBM WebSphere Ranked #1 In All CategoriesOver $5,000 BPM Customers Business Rules • SOA • BPM • Application Integration Middleware • Connectivity © 2012 IBM Corporation

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