Transform your Insurance Processes with BPM and Decision Management

Transform Your Insurance Processes
for Greater Competitive Advantage
with BPM and Decision Management
Vincent M Price

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

2 © 2012 IBM Corporation

IBM Software Group

Agenda



IBM Software Group

Industry going through major changes since 2009-10 – product
innovation 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 Corporation
4

IBM Software Group

Complexity exists internally within organizations and
externally within the broader business network
Companies 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

IBM Software Group

Insurers’ Top Business Drivers Across Industry
Segments
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
6

IBM Software Group

Insurance – 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

7 Source: ibef

IBM Software Group

Key Challenges that needs to be quickly addressed for further
growth 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
8

IBM Software Group

Factors Impacting Costs and Bottom Line

Disjointed, silo’ed No consistency in Lengthy cycle for Lack of transparency
and manual how UW, claims or implementing changes, and audit trails in
processes corporate guidelines Introducing new light of regulations
are enforced across products
channels Limited portal
Multiple legacy
systems in place that Unable to settle claims, capabilities that
lack flexibility, costly to Inaccurate assessment or deliver products and do not support
maintain and integrate of risk, unable to easily services in a timely and up-sell/cross-sell
identify suspicious cost effective manner or guided interaction
Decisions claims and reduce loss
(business rules) ratios Poor alignment
are hard coded and Unable to do ‘what if’ between IT
decentralized or scenarios objectives and
reside in manuals business strategies

9

IBM Software Group

Insurance Operations Today
Fragmented, Complex, Inflexible and Costly

Self Service Underwriting Policy Administration Claims Billing New Business
Processing

Customers Regulators

3rd Party
Agents Service
Providers


IBM Software Group

Carrier 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 Management
Agent and  Self Service
Distributors  BPM for new Claims  STP
business and post  Claims assignment
issue STP
 Case Management
Policy Servicing  STP policy changes
 Compliance
 Premium billings
 Subrogation
 Disputes
Legal  Compliance
New Business  Processing of
applications  Case Management
Submissions
 STP for certain risks  Segmentation
Underwriting
 Eligibility &  Complex risk and
Enrollments resource alignment
 Exception  New business
processing streamlining
Billings  Premium billings
 STP for certain risks

IBM Software Group

BPM 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
12

IBM Software Group

Agenda



IBM Software Group

IBM is partnering with our clients to create innovative solutions that will allow
them to grow their current investment in BPM solutions
For example, imagine if an insurance
carrier 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

IBM Software Group

Business Scenarios

• Automated Underwriting and Rating

• Smart Claims and Fraud Detection

• Commissions

• Customer Service


IBM Software Group

Specialty Lines Insurer
Increases 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
functions

Why S ma rt
In s u r a n c e ?
It reduces time for new business quotes by 30%. Improves • IBM WebSphere® Application Server
up-sell capabilities which led to business growth of • IBM WebSphere® JRules
approximately 30%. Increases speed to market by 50%
(implementing rule changes in days versus months) • IBM WebSphere® Process Server
• IBM WebSphere® MQ


IBM Software Group

Building A Smarter BPM & DM-based Underwriting
Process


IBM Software Group
Risk Assessment - Based On Scoring and Pattern
Matching

Pattern Matching

Scoring


IBM Software Group

Scenario: Risk Assessment


IBM Software Group

Scenario: Scoring

Scorin


IBM Software Group

Scenario: Rating


IBM Software Group

Impact Analysis
Monitor business KPIs to predict impact:
• Run simulations before live deployment
• Simulate on historical data
• Measure impact between various alternatives

23 Template Documentation 06/07/12

IBM Software Group

Comprehensive Audit Trails of Rules and Decisions

 Rule History Management

24

IBM Software Group

Fortune 500 P&C Insurance Company
Underwriting (Commercial Lines)

• 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 requirements

Why S ma rt
Increase in straightc e ? processing rate from 17 to 76%.
I n s u r a n through • IBM WebSphere Application Server
Increased new business quotes by 40%. Speed to market gains • IBM WebSphere ILOG JRules
of over 50% with rule changes in less than a week vs 5 months. • MQ Workflow
Able to obtain underwriting decisions at multiple points during the
process and proactively segment unacceptable business


IBM Software Group

Fortune 500 P&C Insurance Company
Underwriting (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)


IBM Software Group

Claims 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


IBM Software Group


 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


IBM Software Group


 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


IBM Software Group

Worksafe Victoria Reduces Claim and Fraud
Reduce Costs from 5% to Less than 0.5%

• 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 processing

Why S ma rt
Improved u r a n c e ? by 300%. Reduced
I n s invoice throughput
payment cycle from 30 days to 1 day. Increased STP
from 40 to over 80%


IBM Software Group

Worksafe Victoria

Legacy Systems
© 2012 IBM Corporation Analytics

IBM Software Group

Watch The Video


IBM Software Group

Major Life Insurance Carrier
Reduces Time to Market for Promotions and Incentives by 70%

• 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 and
conditions; easily enforce regulatory rules that vary from country to country and support new policy sales,
anniversary payments, renewals by agent/broker.


IBM Software Group

Websphere BRMS Within a Commissioning System

Input Interfaces

Administration Querying
Repositories
Websphere
BRMS

• Rules
Calculation • Parameters Publishing
• Commissions
Simulation • Historical Data Reporting

Output Interfaces

36

IBM Software Group

New York
Increases speed to market by 50%

Smarter health plan services
Leading healthcare company in “Providing innovative products and services while
western New York state created a improving the availability, quality, and cost of
streamlined and efficient enrollment healthcare is central to our corporate vision. We chose
to partner with IBM as their suite of technologies met
and 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 rendered

IBM Software Group

Smarter Enrolment with Intelligent Decision Management

Reject
www
N N
Enrolment Eligible? Plan
Submission
Direct Sales Manual
Y Assessment Y

Underwriting Bind
Broker /
Partner


IBM Software Group

Smarter 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


IBM Software Group

Process - 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-through
Direct Sales Manual processing
Y Assessment Y
 Lack of
personalization
Underwriting Bind
and
Broker/Partner
specialization

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-
Evaluation
Direct Sales Manual specific
Y Assessment Y consistent and
granular
Underwriting Bind throughout
Broker/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-through
Direct Sales Manual processing
Y Assessment Y
 Lack of
personalization
Underwriting Bind
and
Broker/Partner
specialization

IBM Software Group

Agenda


IBM Software Group

DNA 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

44

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 Performance


IBM Software Group

Process & Decision Management Bring Order to the
Chaos
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


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
47

IBM Software Group


Blueworks Live

Manager Management




Business Monitor

IBM Blueworks Live is a cloud based business process
management tool
48

IBM Software Group


Blueworks Live

Manager Management




Business Monitor

IBM Business Process Manager v7.5 is a comprehensive and
consumable BPM Platform
49

IBM Software Group


Blueworks Live

Manager Management




Business Monitor

Websphere Operational Decision Management (BRMS)
50

IBM Software Group


Blueworks Live

Manager Management




Business Monitor

IBM Websphere Business Monitor is comprehensive business
activity monitoring (BAM) software
51

IBM Software Group

IBM WebSphere Ranked #1 In All Categories
Over $5,000 BPM Customers

Business Rules • SOA • BPM •
Application Integration Middleware • Connectivity


Transform your Insurance Processes with BPM and Decision Management

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