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Insurance Companies can outsource processes and differentiate them too

Mark Cecere over at Forrester just published this piece Process-Oriented Insurance Will Drive BPO(subscription required) and he makes some great points about the potential for BPO in insurance. Regular readers of the blog will know that I believe strongly that Enterprise Decision Management and decision automation have a key role to play in BPO. Mark, in common with many writers on BPO, focuses on the value of outsourcing commoditized processes. He says:

[insurers] will identify processes that can be implemented with common systems and configured for local needs. This trend will increase the use of business process outsourcing (BPO) as carriers outsource non-differentiated processes.

It seems to me that this is setting the bar unnecessarily low. A process may be differentiated because you execute the process differently but it may also be differentiated because you make decisions within it differently. how you handle claims may differentiate you from you competitors but does it do so because you process them differently or because you make decisions about which ones to pay, which ones to follow-up and which ones to deny differently? If it is because you take different decisions then you could still outsource the process as long as you control the decision. Indeed you may also have processes you want to outsource because you think they are well-defined but it turns out your business rules are different from anyone else's. Are you out of luck or could you still build an outsourcing relationship while getting the flexibility to control your business rules?

How does one go about this. Well there are two ways. Firstly business process outsourcers can use a business rules approach to automate the key decision points in the process and give companies control of those decision points. That way a company can "customize" the process without compromising the basic repeatability of the process so key for cost effectiveness on the outsourcers part. Secondly companies themselves could use a business rules approach to automate decisions and make them available as web services for the outsourcer to call whenever a decision is needed. These rules might cover escalation, routing for manual review, customer outreach or whatever. Anytime the process needs to make a choice before continuing, companies need the option to make that choice differently to ensure that your customers feel they are getting the service they deserve and not a "one size fits no-one" process (I posted on this beforeat outsourcing and business rules).

Why does this approach work for everyone?

  • If a BPO vendor wants to provide a single set of processes and process options to multiple clients then they are going to have to let each client set the rules for decisions within those processes differently and that will be much easier if some of the services are rules-based and expose the rules to the clients for them to manage directly.
  • If BPO vendors offer more and more standard processes then those that allow their customers more easily to customize and manage the decision points within those processes will be the only ones not competing purely on a lowest cost basis.
  • If companies would use EDM to manage the key decision points within their processes then they would be able to outsource or insource processes much more freely, knowing that the key decisions which make their business different from their competitors were under their control.

Mark goes on to say

...deploy systems that provide the flexibility to accommodate local needs without complex development efforts.

And I would have to agree with him. This is why outsourcing needs decisioning and why this approach helps resist the commoditization of processes.

BTW I posted on the future of insurance before and discussed how outsourced elements must be outsourced in a way that allows different companies to use those outsourced services slightly differently. There is, in fact, a whole section on the blog regarding Business Process Outsourcingand it is also possibleto outsource some of the decision-making to a Decision Service Provider. But that's a different conversation.

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