Akash recently posted a comment and asked me a question - what metrics to consider to see how the use of business process management systems (BPMS) and business rules management systems (BRMS) can help the insurance industry compared to non-BPMS/BRMS. Now metrics are always a fun question so I thought I would respond in a post. Software Development benefits first. These come from the basic fact that automating processes with a BPMS and decisions with a BRMS is easier, faster, cheaper etc.
- Cost of initial development
Should probably eliminate the cost of the learning curve from this
- Cost of ongoing development
Most studies, and the insurance industry is particularly prone to this, show that the total lifetime cost of an application is dominated by its ongoing maintenance and development with IT departments often spending 75% of their budget on maintenance. BPMS and BRMS are foundations for systems that are easier and cheaper to maintain.
- Cost to make a specific change
Such as implementing a new regulatory requirement
- Time to make a specific change
Can be significant as fines might accrue while the change is unmade and competitors may take market share away from you until you respond
There are others but those should get your started. More interesting to me are the business costs/benefits and these include but are not limited to...
BRMS and BPMS tend to make decisions and processes more accurate and so less prone to fines
- Cost per transaction
Reduced staffing costs are often a consequence of more thorough automation
- Straight Through Processing rate
The percentage of transactions decided automatically can be a good measure for success
- Consistency across Agents
The acceptance rate and other metrics of Agent behavior should be more consistent with automation as individual mistakes/hidden preferences are eliminated
How many prospects or customers appeal the price for a policy or the payment/non-payment of a claim? More accurate decisions and processing should reduce appeal rates
- Reports ordered
A common business cost in insurance is the purchase of external data such as Motor Vehicle Reports or house inspections. Automation using BPMS and BRMS can reduce the need to order these reports, and so save money, by only ordering them when they would make a difference
- Mail, fax and shipping costs
Many organizations find they can reduce their fax, mail, FedEX/UPS and other shipping costs when using BPMS/BRMS to automate processes and decisions. The automation of links between units and parts of a process eliminates the need to print and mail things to people.
- Cross-sell/Up-sell rates
Organizations often find that using BRMS (and analytics) to manage up-sell and cross-sell within a process is more reliable than hoping that individuals will do a good job of it. The increased revenue from these better decisions can be significant
Hopefully you get the picture. Automating decisions and processes more effectively can have real business benefits not just software development ones. I would also encourage you to consider the impact of analytics in improving the decision-making being automated by the BRMS. This is enterprise decision management at its core - picking decisions out of a process and then automating them with business rules and improving them with analytics.
Decision Yield is a metric Fair Isaac has begun to use to assess decisions. Although there is a lot more on it in the Decision Yield section (with a basic introduction here), it boils down to using 5 dimensions to compare a company's performance in a particular decision area (underwriting, quoting, claims, etc) to its competitors and market best practice:
- Precision or how accurate and profitable is the decision
- Consistency across channels, time and geography
- Agility in terms of time and cost to change the way a decision is made
- Speed in terms of how fast a particular decision is made
- Cost in terms of how much staff time, resources and cash must be spent making the decision
It too might be a useful thing for you to consider.
For some examples, check out this case study on Auto Club Group, this one on Unitrin Kemper or this one on the California DMV (a nice legacy modernization one). This presentation on the ROI of agility by Avnet might also be interesting
Technorati Tags: agility, analytics, Auto Club Group, Avnet, Blaze Advisor, BPMS, BRMS, business process, business rules, change time, decision yield, EDM, enterprise decision management, insurance, predictive analytics, STP, Straight Through Processing, Unitrin Kemper