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SOA, BPM and Event Driven Architecture SOA, BPM and Event Driven Architecture
Applicability to Financial Services' Business Issues?Applicability to Financial Services' Business Issues?
Object Management GroupObject Management GroupSan DiegoSan Diego
March 27March 27thth, 2007, 2007Presented by -- Presented by -- Cindy MaikeCindy Maike
P&C Insurance Carriers—P&C Insurance Carriers— Claim costs have to decrease dramatically Claim costs have to decrease dramatically
Hand-off increasing lifecycle and cost of claim Skilled staff tied up on routine and largely manual process Number of fraudulent claims Legacy systems non-integrated but difficult to replace – ‘rip out and replace’
pain too big Expensive multi point-to-point technology development and maintenance
costs
Required changesChallenges & Changes
Customer satisfaction
Qua
lity
Tim
ing
Costs
Challenges (as formulated by participants)
“More emphasis on automatization.” “Get rid of the paper mountain and welcome imaging” “Integrate certain processes using the Internet” “Change from product oriented claims processes towards process oriented
behavior. Uniformity is key.” “Fighting fraud is becoming a major assignment for us.”
Required changes (as formulated by participants)
Source: Trend & Benchmark Study June 24, 2003
Challenges in claims managementChallenges in claims management
The challenges and changes
required can be categorized
into 4 main areas:
Costs
Quality
Customer Satisfaction
Timing Challenges & Changes
Challenges & Changes
Customer Satisfaction
Quality
Tim
ing
Costs
Combined Ratio
Customer Satisfaction
Source: Trend & Benchmark study June 24, 2003
The Combined Ratio & the Customer Satisfaction are The Combined Ratio & the Customer Satisfaction are influenced by a number of indicatorsinfluenced by a number of indicators
NOT EXHAUSTIVE REPRESENTATION OF VALUE DRIVERS
Combined Ratio
Combined Ratio
Average payment per
claim file
Average payment per
claim file
Cost per claim fileCost per claim file
ALAE ratioALAE ratio
ULAE ratioULAE ratio # Claims per claims
administrator
# Claims per claims
administrator
Customer SatisfactionCustomer
Satisfaction
Average claim cycle
time
Average claim cycle
time
Fraud ratioFraud ratio
Recovery ratio
Recovery ratio
IT assessment
IT assessment
Percentage files closed
without payment
Percentage files closed
without payment
Complaint ratio
Complaint ratio
Best Practices in claims focus on three key value leversBest Practices in claims focus on three key value levers
Improve customer satisfactionImprove customer satisfaction– Improved retention and increased Improved retention and increased
revenuesrevenues
Reduce operational expensesReduce operational expenses– Loss adjustment and Allocated Loss Loss adjustment and Allocated Loss
Adjustment expensesAdjustment expenses
Reduce loss costsReduce loss costs– Indemnity paymentsIndemnity payments
– Eliminate fraudEliminate fraud
– Reduce leakageReduce leakage
– Accurate and stabilized reservingAccurate and stabilized reserving
Customer Service
Loss Adjustment
Loss
Customer Service
LossLoss Adjustment
What it is
• Accessibility
• Responsiveness/ courtesy
• Speed of settlement
• Process and payment explanation
Current state of market
Objective: Address and satisfy customer needs
What it is Current state of market
• Focus on refusing claims to the detriment of customer relationships
• Excessive investigation and decision support
• Excessive specialization, increasing staff costs
Objective: Minimize leakage
• Work flow differentiation
• Actual vs. appropriate payment
• Anti-fraud efforts
• Supply chain management
• Speed of assignment
What it is Current state of market
• Reluctance to change claims
• Limited specialization – focus on total service teams
• Excessive staffing levels and limited IT leverage to support uneconomic service levels
Objective: Reduce friction costs & increase in efficiency
• Increase efficiency of adjusters
• Focus special services/resources
• IT enabled and leveraged
The claims process can be decomposed into three broad sets The claims process can be decomposed into three broad sets of activity categories, each with its own objectiveof activity categories, each with its own objective
• Focus on increased throughput and reduced overhead
• Performance based on claims throughput productivity (tendency to overpay to expedite claims
• Reduced specialization to balance loads
Source: IBM analysis.
Evaluating the Claims Value Chain/Process lends insight Evaluating the Claims Value Chain/Process lends insight into the value leversinto the value levers
Notification Assignment Coverage ContactInvestigation
&Evaluation
Negotiation&
Settlement
LitigationManagement
Recovery&
Salvage
Management, Supervision & Review
Could we Instrument the Process for the component Could we Instrument the Process for the component metrics based on process events?metrics based on process events?
Notification Assignment Coverage ContactInvestigation
&Evaluation
Negotiation&
Settlement
LitigationManagement
Recovery&
Salvage
Management, Supervision & Review
ProbePoint
ProbePoint
ProbePoint
ProbePoint
ProbePoint
ProbePoint
ProbePoint
ProbePoint
ProbePoint
ProbePoint
ProbePoint
Event Repository
Evaluating current position – generating eventEvaluating current position – generating event
LossSustainable 63.5
Hollow 67.5
Destroyers 68.5
Total Industry 69.1
Reserves Not Within 5% of actual payout*
Not receiving Field assignment on serious claims*
Trigger components
Business Response
Allocate more staff to audit claims and correct combined ration
Action
Fire Excessive Loss Event
Operational Profiles provide for implementation of specific Operational Profiles provide for implementation of specific “business policies” to respond key activities/events“business policies” to respond key activities/events
Profiles define explicit policy responses to events triggered Profiles define explicit policy responses to events triggered via modelvia model– Business rules that should be invokedBusiness rules that should be invoked
– Specific processes that need to happenSpecific processes that need to happen
– Values that make sense for the contextValues that make sense for the context
Needs to support both internal events (based on model) Needs to support both internal events (based on model) and external events, such as pending weatherand external events, such as pending weather
Loss
Customer Service
Loss Adjustment Loss
Customer Service
Loss AdjustmentSustainable 63.5
Hollow 67.5
Destroyers 68.5
Total Industry 69.1
Sustainable 13.2
Hollow 10.0
Destroyers 11.1
Total Industry 11.8
Sales Processing Index
Claims Count Litigated
Number of Service Complaints
Average Telephone Wait Time Natural Disaster
Natural Disaster
Could an Event Repository help drive analytical analysis and Could an Event Repository help drive analytical analysis and lead to the activation of an operating model/profile?lead to the activation of an operating model/profile?
Loss
LAE
Non-Loss Related
Severity
Recovery
Frequency
ULAE
ALAE
Employee
Customer
Enterprise
Loss payments Fraud payments and overpayment Deductible application
Subrogation Salvage
Underwriting Education
FTEs Travel Shared services (e.g. IT, Legal, Real Estate)
3rd-party appraisers 3rd-party adjusters Outside counsel
Turnover, recruiting Productivity, training
Retention Acquisition/new business Cross sell
Enterprise integration Process & organization enablement
Event Repository
Analytics
Loss
Customer Service
Loss Adjustment Loss
Customer Service
Loss Adjustment Loss
Customer Service
Loss Adjustment
Value of Event Modeling Standards – Insurance IndustryValue of Event Modeling Standards – Insurance Industry
Modeling for Predictive Analytics leading to autonomic Modeling for Predictive Analytics leading to autonomic processesprocesses– Examples of Operational Profiles:Examples of Operational Profiles:
Operation Profiles for Catastrophes Operation Profiles for Catastrophes
Enhance Catastrophic ModelsEnhance Catastrophic Models
Seasonal eventsSeasonal events