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Practice Management > Building Your Business

Despite Potential Advantages, Insurers Cool On Business Process Management

By Ara C. Trembly

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Business process management (BPM) is a technology that can reduce a company’s automation costs and aid in regulatory compliance, but according to one industry analyst, “most of the industry is not doing anything” to implement it.

Speaking at the LOMA Emerging Technology Conference held here recently, Craig LeClair, senior analyst, information management, for Cambridge, Mass.-based Forrester Research, Inc., said that 58% of insurers polled by the researcher reported that they would not buy BPM technology. Just 11% of insurers said they would make a first purchase of BPM, while the remainder plan on upgrades.

Despite those numbers, however, “BPM is on a steady growth curve in terms of purchases [overall],” he added, noting that “2006 BPM implementation in the insurance industry aligns strongly with the total market.”

Generically, BPM is a technology platform that provides a systematic approach to improving an organization’s business processes in order to make them more efficient and improve the bottom line. According to LeClair, BPM provides flexibility for process and rules modification; cost reductions; help in documenting compliance, and legacy systems renewal (by serving as an integration platform).

As applied to insurance, BPM begins with designing a front end function where companies can build workflow processes, establish business rules, and do simulation and testing, said LeClair. Next, platform users need to execute the processes using workflow engine software to control how that happens.

That is followed by monitoring and managing the processes with real-time reporting, he explained. Finally, users can analyze and optimize their processes, leveraging dashboards, further simulation and historical analytics to fine tune.

While BPM holds much promise, it does have some weaknesses, said LeClair. He pointed out that few BPM platforms have “insurance-specific assets” or templates for common insurance processes. In addition, insurers and vendors do not know where BPM should and should not be used, he noted.

LeClair stated that “BPM, in conjunction with new system deployment, is expensive.” He also noted that there is “a steep learning curve” for insurers and a lack of insurance expertise among BPM vendors. In some cases, he added, “vendors refuse to admit where [BPM] doesn’t apply.”

Despite the drawbacks, however, Forrester found that “nearly all insurers said they were expanding BPM use,” he reported. He pointed to the “great potential” of BPM and to the finding that savings from initial applications are “significant,” adding that compliance is “built in” to BPM products.

LeClair asserted that cross-divisional projects within insurer organizations will open the door for adoption of BPM. Shared repositories of BPM implementations include customer information, reusable processes, process knowledge and business rules, he explained.

BPM, he added, can help institutionalize compliance by documenting the policy and control environment and assigning appropriate oversight of compliance management. It can also be used to require personnel screening and access control, and to ensure compliance through training and communication. Control monitoring and auditing and consistent enforcement of the control environment can help prevent and respond to incidents and gaps in controls, he said.

According to LeClair, the changes required to expand implementation of BPM include more insurer experience with the platform and “vendors getting to know insurance better.” Initial BPM applications should be small in scope, and should “yield visible benefits that are observable by others,” he said.

Finally, having “the right human elements” in place within the organization is critical to the success of BPM implementation, he noted.

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