Business Process Management for the Insurance Industry, FileNet Corporation

Case Studies in Better Decision Making, FileNet Corporation

Insurance companies are all about knowledge and information. They use this information for underwriting risks, managing agents, paying claims, administering policies, providing customer service, complying with regulations, producing statistical reports and supporting employees. For most companies, much of this information exists in electronic format. Unfortunately, it often resides in separate systems and unconnected databases: policy administration systems, claims management systems, agent information databases, financial reporting systems, customer relationship management systems and human resources systems.

The insurance industry also faces efficiency challenges. Today’s economy, with the lowest interest rates in 40 years, shrinking investment income and tightening profit margins, is forcing companies to streamline their organizations, contain costs and focus on operational productivity. New entrants into the insurance business, such as banks, credit unions and investment advisors, are all competing for the same customer. Quality customer service is one of the few differentiators companies have from their competitors. The insurance carrier that can effectively access all of its information, automate and streamline its business processes and provide the full-spectrum of connectivity is the company that will secure a competitive advantage in the marketplace.

Key Business Requirements

To effectively address these industry issues, savvy insurance executives are focusing their companies on several key business requirements that position insurance carriers to survive today and grow into the future:

1. Improve profitability by reducing the cost of operations, reducing processing times and improving accuracy and quality. Business processes must be automated, integrated and transformed across the enterprise, providing instant access to information to the right person at the right time. In today’s business environment, there is little margin for underwriting and claims errors. Insurance organizations must continue to analyze, measure and even simulate processes and workflows to achieve improvements in accuracy. This results in tangible returns, such as paying the right amount for the right claim, on time, one time.

2. Create a customer-centric culture, supported by customer loyalty. Insurance companies are in the service business. They understand that improving customer service, satisfaction and ultimately, loyalty, significantly impacts customer retention. Organizations must focus on reducing the time required to process transactions and address client inquiries to protect their customer base. Having information readily available with automated processes and systems helps companies achieve “first call final”—handling the customer inquiry completely during the first call.

3.Balance electronic and direct delivery channel. Because individuals have different needs, it is important to provide customers, agents, providers, suppliers and consumers with a service choice. The ability to verify the status of a claim from a home computer during non-business hours may be just the advantage necessary for a customer to select one insurance carrier over another.

4. Ensure compliance with evolving regulations and industry standards, verifying that all policies and procedures are consistently enforced. As private information becomes more readily available to users, consumers and others, adhering to regulations is an even more critical business driver. Regulations from the federal government like HIPAA, Gramm-Leach-Bliley and Sarbanes-Oxley are imposing important and far-reaching changes in the way insurance companies must manage information.

P&C—Underwriting

The most common policy in the property-casualty insurance industry is the personal lines automobile policy. Managing the process of underwriting an auto policy is very important, and especially so considering that different jurisdictions have different rules. Some states have limitations on the amount of time a carrier has to decline the risk, if it doesn’t want it. Others have “take all comers” laws that severely restrict (or even eliminate) the ability of a carrier to turn down an applicant. All of these involve significant penalties, and the potential of bad faith claims, if not handled properly.

Underwriting automobile insurance also involves dealing with entities outside the company. A motor vehicle report (MVR) will be ordered for each driver, either directly from a state’s Department of Motor Vehicles or through a vendor. In most or all cases, a “CLUE” report is ordered, and in many states, a credit score will be ordered, again from an outside source.

Internally, there may be an underwriting system to evaluate the applicants, the vehicles, and the various supplemental information that comes in. If it falls outside certain parameters, it may go to an individual underwriter for a judgment call.

FileNet’s Business Process Manager is designed to control the process of underwriting an automobile policy. It can start the “clocks” that need to run, and keeps track of all the applications and where each is at every stage of the process. Automating the control of the underwriting process assures that the rules will be followed, that applications won’t get stuck on someone’s desk, and that the applicants are treated in a consistent, even-handed manner.

A Property & Casualty Success Story

AAA of Missouri, in addition to being an auto club, is a major writer of automobile insurance in Missouri and a number of surrounding states. Unlike most other carriers, AAA of Missouri uses two different sales channels, getting business both from a network of independent insurance agents, as well as from sales employees in its 60+ offices, where it sells insurance to visiting members.

Prior to installing FileNet’s Enterprise Content Management (ECM) solution, AAA Missouri was processing auto policy applications by hand. The process was slow and inefficient, involved multiple steps and multiple systems, and was paper-oriented. Applications would flow into the company’s St. Louis processing center from various agents’ offices, as well as the company branches, totaling 1,500 or so each month. Workflow was uneven, and it could take up to seven days just to approve a policy. Utilizing its ECM capabilities, FileNet was able to control the process of underwriting, automating the exception handling and reducing the involvement of people to those exceptions where a qualified underwriter’s decision was necessary.

Life Insurance & Annuities—Application Processing

Application processing in the life insurance and annuity business has all of the elements and issues that Enterprise Content Management is designed to meet and solve. Life insurance companies deal with very large amounts of content, of all kinds and from many different sources. Even as the traditional paper business transitions to more electronic forms and information, the quantity of the data and the number of sources it comes from seems to grow. Applications, physical examinations, financial documents, supplemental applications... the list sometimes seems endless.

The workflow and other processes need to ensure that all the pieces go to the right people in the right order, with appropriate audit trail information being documented as the process happens. Often the various departments that handle the work are spread throughout the country, or even outsourced abroad (now an increasing trend, fueled by the ability to deal with data electronically instead of in a paper form).

The connectivity between the carriers’ own systems (such as policy processing systems or agent portals) and outside systems (such as MIB or credit suppliers) is increasingly important and more so as the numbers of these systems increase. Business Process Manager helps make sure that the information comes in when it is supposed to, gets put where it belongs and gets to the right people or process when it has to, to improve both the quality and speed of the carrier’s internal processes.

Life Insurance & Annuity Success Stories

One very large and well-known Eastern U.S. carrier has moved heavily into the annuities business. This company used FileNet to automate their entire application process for their 3,000 users.

This carrier, now grown to be one of the country’s largest writers of annuities, credits the efficiency of the application process as one of their key advantages when dealing with their agents.

Another carrier, a large Midwest U.S. carrier, has a number of companies in its group, and sells through multiple distribution channels. As a result, it deals with roughly 90,000 agents (both captive and independent) and processes upwards of 500,000 life and annuity applications per year.

The carrier happens to use activity-based costing and can easily measure their results since implementing FileNet’s ECM solutions. The new system saves $15 per application on life insurance applications and helped cut two days off the processing time for annuities. Combined, the savings amounts to about $6 million per year.

Health Insurance—Claims Processing

Health insurance claims is one of the most transaction-laden areas of all kinds of insurance. Over a person’s lifetime, he or she may have few, or no, auto accidents, and will only die once—in theory, at least—but is likely to have far more health claims than all other types combined.

There are many different kinds of health insurance plans available. They range from pure reimbursement plans (usually called “indemnity” policies) at one end, to totally providing services (health maintenance organizations, or HMOs) at the other. Between the two are a myriad of other types of plans, with PPOs (preferred provider organizations) as one of the more common.

Regardless of the type of plan, or plans, that a health insurance carrier offers—and most offer multiple ones—they all have one thing in common: every time an insured gets treatment, there is a resulting batch of paperwork that follows.

The amount of content involved in the health insurance claims area can be overwhelming. Medical treatment results in highly complex bills, which are often paid in various percentages for different insureds, based on the plan that’s in effect. Those bills are tied to medical treatment records, which are tied to the individual’s medical file. One hospital stay might involve bills and records from a dozen or more different doctors, pharmacies and outsourced treatment centers, in addition to the hospital’s own charges and records.

Superimposed over all of this complexity are the new and very important requirements and limitations imposed by recent legislation. Two of the best known of these are HIPAA (Health Insurance Portability and Accountability Act) and GLB (Gramm- Leach-Bliley Act, formally called the Financial Modernization Act). Between them, they significantly affect the process of handling health insurance claims. GLB, for example, imposes the privacy restriction that health insurance claims workers only see the minimum amount of personal and medical information necessary to process the claim.

Because of the large number of entities (physicians, hospitals, pharmacies, clinics, etc.) involved in this area, the connectivity issues become very important. Each entity has its own set of systems, and information—data—has to flow between these systems. The more inefficient and time-consuming the process is, the more costly it is. The potential for Enterprise Content Management to provide for timesavings, cost reductions, and service improvements is as great or greater in this area than any other in insurance.

A Health Insurance Success Story

PacifiCare Health Systems is a large and growing regional healthcare services organization. At last count, they had over $11 billion in revenue, and service over 3 million individuals, mostly in California and a number of other mostly western states. Like many of its competitors, they provide not only health insurance products, but also Medicare coverages, life insurance, and dental and vision products as well. Its service area stretches from as far east as Texas and Oklahoma, to as far west as Guam.

FileNet’s ECM solution was operational nine weeks after PacifiCare contacted FileNet. It immediately began to improve control over all the varied content in PacifiCare’s underlying systems, as well as the steadily increasing amount of new claims. By automating and improving the process of handling claims, PacifiCare was able to eliminate paper routing, and saw an overall 20% gain in productivity.

Combined with improvements in connectivity within its own systems and with others, PacifiCare was able to shorten specific operation cycle times from hours to just minutes, resulting in a measurable 12% reduction in general and administrative expenses.

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For additional information on how FileNet’s ECM solutions can assist your company in solving its strategic business challenges and achieving its competitive edge in the marketplace, please contact FileNet at 1-800-FileNet or visit FileNet.