What that comes down to fundamentally is a liberation of the isolated bits of process from where they are typically lodged, according to Sfiso Mthethwa, senior manager, SMART Business Advisory and Consulting (Devon, Pa.). "The institutional knowledge necessary to provide a competitive edge is, more often than not, embedded in legacy systems and spreadsheets, and in processes that tend to be based more on tradition than strategic guidelines and business rules," Mthethwa says. "The discovery and decomposition of this knowledge and how it is applied throughout the value stream is the first and most critical success factor on the road to BPM maturity in insurance."
The visibility that this extraction exercise affords grants insurers the opportunity to better understand their processes, and refine and realign them with strategic objectives, while freeing up valuable people who were tied to certain roles as a consequence of their having internalized parts of the process, Mthethwa relates. When realized within a shared concept of business architecture, it also drives the elusive goal of business/IT alignment, he adds.
"With a process that is mapped out well and decomposed to the right level of detail or granularity, the question of whether or not technology projects are successful is clearly defined and understood even before the implementation begins," Mthethwa asserts. "That's because the process is visible to both business stakeholders and IT, and there are metrics in place. The technology teams are then able to focus on executing shorter, more-focused projects that are targeted at measurable parts within processes."
Within this BPM paradigm there are various routes to success, according to Mthethwa. One is beginning on the business side by establishing enterprise architecture and then building out the technology services. Another is to start from the IT side, take existing services or components and work with the business to flesh out the remainder of the business architecture on a services-oriented basis.
Finally, carriers also can take a more modest "walk before you run" approach, Mthethwa notes. This involves using BPM technology to abstract basic functionalities from legacy systems and combine them with other data streams and applications to deliver improved processes to users in advance of a definitive transition from legacy infrastructure to a full-blown services-oriented technology architecture.
Flexible Quoting Platform
Alpharetta, Ga.-based AIG Agency Auto (approximately $1 billion in net written premium) has taken a similar legacy-extension approach through its use of Pegasystems' (Cambridge, Mass.) SmartBPM technology to deliver a more flexible quoting platform for distributors of its personal lines-focused business. "Because AIG Agency Auto wanted to quickly respond to market conditions with new rates, and also needed to flow pertinent data from each part of the process through the system, they needed to eliminate the islands of information and provide transparency from application entry to generating a quote, to underwriting, binding and issuing a policy," explains Gary Kirkham, director of insurance industry solutions, Pegasystems. "This is especially important to AIG Agency Auto, as they offer a highly regulated set of products across 38 states with different rules."
Between rate changes, regulatory developments and new products policies, the carrier has to deal with more than 600 changes within a calendar year, according to Kirkham. "By eliminating the silos, the insurer not only improves agility but also puts a framework in place to not only respond to change but embrace it to make advantageous decisions -- such as creating new rate structures or other offers -- that help to grow their business," he says.
AIG Agency Auto's E-Rater quoting platform was built to replace its PC-based DRS (Dynamic Rating System) platform. "In the early days we actually sent CDs to our agents when we made product or rate changes," recalls Lucy Evans, the carrier's chief administrative officer. "By 2005 we had begun creating downloads to simplify that process and then later we had taken that same desktop software and Citrix-enabled it. Both of those things allowed us to be more responsive to some of the agents' needs, but it was still constrained by the fact that it was desktop software."
In mid-2005 AIG Agency Auto began implementing a Pegasystems-based solution. "Early on we had to find a way to make rates -- which reside on the mainframe -- accessible for quoting," relates Evans. "Some of the other challenges were around replicating the rules that resided on our mainframe because we are still using it for issuing the policies but want to manage the process outside the mainframe in order to have real-time quoting."
Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio