Why Decision Management Is So Important to Insurers (especially in Northern Europe)
cheryl wilson 270003VHSH firstname.lastname@example.org | | Tags:  claims-processing fraud-prevention price-rating fraud-detection insurance decision-management business-process-improvem... eligibility business-rules-management risk-management business-rules
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Mark Robbins, IBM BPM Consultant, is our guest blogger this week. Enjoy his post here.
Exceptions aside, insurers can lag behind other industries in technology adoption, especially in my homeland of Europe. Perhaps it’s a by-product of too many disenfranchised LOB execs experiencing failed projects that promised to "change the business” and then didn’t. See the book “Leading Change” by John P. Kotter for a comprehensive diagnosis of why many transformation programs fail or go with this executive sound bite: "Culture eats strategy for breakfast"(to quote the CIO of Caterpillar at the recent IMPACT event in Vegas). For these and other reasons, I know I may be fighting an uphill perceptional battle when advocating that insurers look to the adoption of decision management technologies, especially business rule management. But they should, now more than ever, if they hope to turn “change the business” theory into best practice and tangible results.
Decision management technologies, in particular business rule management, will enable insurers to gain top line competitive advantage in two hot areas:
1. Automating Eligibility, Risk and Price Rating. We know that the world’s consumers are increasingly going digital, and businesses are following in order to reach them where they are. To maintain relevant and real time communication, even the neighborhood insurance agent/advisor/broker is seeing the value of digital (portal) interaction over the good ol’ fax machine which means a major shift is occurring (caveat: other geos are ahead of Europe and can feel smug). In the UK, for example, the Retail Distribution Review will change how Independent financial Advisors are commissioned – they will get their cut from the customer not the insurer. As a result, savvy insurers are pro-actively investing in agent portals to attract customers with ease of use "one stop shops.”
With the expansion of these agent portals, the infrastructure will be in place for probably the most popular entry point by insurers into the world of decision management.-- Automated Eligibility, Risk and Price Rating. This solution can positively impact top line, particularly during this time of change in the UK, and the first insurers to align this solution to a customer-centric, one-stop shop portal experience could capture significant market share while gaining agility and business ownership of Eligibility, Risk and Price changes outside IT change cycles. The use of business rule management software here will enable insurers to take control of their eligibility, risk and pricing rules and decision factors and control their evolution outside of IT change cycles (with the necessary business governance) thus limiting the requirement for end to end testing.
There are not many solutions that can promise and deliver top line growth and business agility in today’s insurance market, but this is one of them. Of course, this will only be the case while competitive advantage is maintained. It is also true that these solutions are more prevalent in the General Insurance Market; here the rewards will go to those who can master the more complex implementations, such as small commercial risks in Property and Casualty. The UK market is different here with Polaris (http://www.polarisukltd.org/) offering a bureau service (underpinned by a technology platform) for intermediaries and insurers to transact business, but there is plenty of potential in Europe for building and sustaining competitive advantage.
2. Fraud Prevention and Detection. Another opportunity for UK insurers to gain competitive advantage using decision management is fraud. With the advent of the Insurance Fraud Bureau, it’s critical that insurers tackle this problem properly because statistics around fraud and successful prosecution will become ever more transparent leading insurers into a more public forum about what is happening in this sector. The morally correct stance here is to reward the honest customer by efficient service (straight through processing of claims where possible with efficient exception management where required) while limiting the cost impact of fraud prevention on the policy holder.
Adopting decision management technologies aligned with Underwriting and Claims operations (and business process management technologies for automation, efficient business control and operational transparency) can help provide fairness and decision transparency. Packaged applications no longer cut it and this can be seen by the movement of niche solution providers (who have typically used packages) towards a rules-based solution. Business rule management solutions can help provide the required long term decision transparency, enabling insurers to efficiently progress suspect cases. They can focus on the real culprits, leveraging their limited expertise over the right targets with a full audit trail of decision making to justify actions and, if required, move towards successful prosecution.
So, I’m not saying this will “change the business,” but there’s real potential for improved top line growth, business agility and social responsibility with one technology offering. What more could an insurer in Europe ask for? The growth potential of India and China, I suppose, but those days are gone in Europe.