The path of change: Implementing business process management technology at a mid-sized insurer

During the fall of 2005, Meadowbrook Insurance Group took on a challenge, an endeavor that started innocently enough. An internal review of some recently purchased integration technology led some folks to start thinking about change. The previous CIO had purchased Adeptia’s BPM software shortly before leaving the company, however, the technology had been used for one integration project and nothing further. Adeptia’s CEO was pushing the current CIO of Meadowbrook to use the technology to the technology’s full capacity, urging Meadowbrook to use both the integration and workflow components of the product. The group met and really dug deeply to understand the technology and then started to get excited – the kind of change the group started imagining was revolutionary. They envisioned a company with no barriers – no barriers among the internal departments and no barriers between them, their vendors and their sales force. Everyone agreed this kind of change would require companywide support.

Selling the need for change internally
Companywide support in a company with over $300 Million in Gross Written Premium and operations so diverse they include management of self insured groups to being the largest agency in the state of Michigan would be no easy feat. With 648 employees focused on various opportunities and businesses, it would be difficult to focus any major effort involving the entire organization. Additionally, Meadowbrook’s culture reinforces individualism and tailor made insurance solutions; this was not the environment one would expect to spawn an initiative that could turn an entire organization upside down.

The pioneer executives decided the place to start was the top. A series of meetings were held to introduce top level executives to the idea of this type of change. Still, at first, a lot of blank stares were encountered; the message just wasn’t clear. The message was about technology and about how it worked. This is fascinating to the technology expert but seemingly mundane to business leaders.

The group decided to take one last hard run at convincing the executives to embrace a change. An adjunct professor from Northwestern University was invited to speak about a changing world. He described a changing world that is all about companies providing their goods in the most efficient manner given a global economy. The US insurance industry is infamously inefficient in distributing their products. Large companies can solve this by acquisition. Small companies await possible acquisition. How could a midsized company like Meadowbrook improve efficiencies at the rate of the larger companies without large scale acquisitions? Improvement. Business executives have been talking about this goal for a while. How would this be different? The pioneers painted the picture of change.

What is the return?
It was difficult for the team to really wrap their arms around how to calculate the rate of return for implementing this change. The team could estimate the cost of the software without issue. Meadowbrook owned an enterprise license, so further use would actually reduce the effective cost of the software. Services would be necessary but could be predicted pretty easily.

The question really came from the expected savings. We could estimate reduction in head count for certain clearly defined manual process elimination – but these items were just the tip of the iceberg. The real savings would come from things harder to estimate, such as improved customer satisfaction, error reduction, error detection cost reduction, maintaining good will – returns that are difficult to quantify.

In the end the group had to take a stab at it. It was agreed that the functions that comprise company operations would be identified and classified. The resulting process categories included:

  • Accounting;
  • Underwriting;
  • Claims;
  • Internal system integration;
  • External system integration (third party administrators and agencies);
  • Compliance and reporting; and
  • Administration (such as human resource planning and expense report processing).

To be conservative, the group only considered the reduction in head count and elimination of expense in return on investment (ROI) estimates. The group determined that implementation of the software would produce a positive ROI in the second year after implementation. The total annual return was estimated to be in the millions of dollars. It was agreed that during the governance process our actual return would be measured against the baseline estimates.

Path of discovery
In order to achieve the estimated returns and really make the impact expected, the company would have to look at every process within the larger categories throughout the organization. Mission critical processes, regulatory processes, and administrative processes would all be open to review. Every company has their portfolio of home grown processes known as the “way we’ve always done things.” Each process touches another process – but every process has one thing in common: they all involve people and data. Meadowbrook was no different than any other company. Employees knew how to interact with data and they knew how to interact with each other (and customers, vendors, etc.), but there was no highway of communication that included both people and data in the same process flow. Data and people occupying the same highly visible workflow (i.e., workflow that includes real time tracking and resource accountability) represented a big change. “What does this all mean to us and the company?” was the chorus heard throughout the company, and so it became apparent that a real world example had to be provided.

The best received example was about relationships with Managing General Agencies. Meadowbrook maintains many such relationships.  If an agency acts as an MGA for your organization, they are interacting with your organization from both a people and data perspective. The people interact for accounting reconciliations and underwriting approvals. The data interacts when the agency enters data in the company system and the company reviews the data to make sure the premium entered matches the premium received. What if this could be streamlined into one process with no breaks end to end? How would that look? By taking each process in detail, the group was able to demonstrate that by integrating the agency system with Meadowbrook’s policy system and automating workflow around the integrated data, a streamlined process could be created. When data were entered, human processes would be automatically kicked off. Some would be automated, such as simple underwriting decisions, and some would trigger human interaction, such as underwriting referrals. The fact that humans are involved in the workflow with a trigger allows the human portion of the process to be monitored as well. How long does it take for humans to react in the process? Are there bottlenecks? Can we eliminate redundant processes? Are more resources needed?

This example helped the executives to see the vision. Immediately, ideas began to flow as people began to visualize the potential for their own processes and data. All parts of the organization were touched.

Commitment to change
Change is hard. People began to question the need for certain improvements or integrations. Many folks expressed suspicions that the change wouldn’t produce the anticipated reduction in cost. Many folks felt the changes recommended were already being put into place without the BPM software the company had purchased. Fortunately, the early buy-in from top executives in the company helped Meadowbrook’s initiative survive the first wave of change resistance.

To move forward, a governance committee was formed that created top-level oversight of the initiative with business ownership for change. Each profit center would be accountable for producing the change they identified as necessary to drive long-term efficiencies. Projects they identified would be reviewed by a governance committee to ensure they would produce real long term improvement in the business. The work was about changing the company as well as reducing costs and inefficiencies. Each business unit was encouraged to look for changes that would help process more business, not just reduce current costs.

The governance committee was charged with making sure that, as projects were identified, they right ones would be done in the right area to produce the greatest change impact. The work of the governance committee will continue for years.

Re-evaluation of change
The process of  various business units identifying areas of change led to further doubt and confusion. Even the compelling example initially provided came under question. The business didn’t believe the cost could be reduced as much as predicted by the pioneers. However, each bump in the road produced further resolve on the part of senior executives to see the process through. Each business unit has been encouraged to think about changing their business with a fresh perspective. They have been encouraged not to take the thoughts initiated by others but to think for themselves. A liaison committee was created to give the businesses a forum to communicate ideas and encourage the process of change. A top-notch leader was given the responsibility to coordinate the liaison group.

Multiple projects have been identified. Several projects have been completed and are producing results. The governing committee continues to monitor progress to make sure we’re leveraging the technology to the best of our ability and implementing change that will last.

Path to change as an ongoing commitment
As Meadowbrook continues on this journey, more will be learned and mistakes will be made. However, the resolve and commitment have proven strong enough to pass the test of time. Meadowbrook has made a significant investment in the people and time necessary to change their business in a way that will allow them to compete in the new global economy. Future articles will detail projects and improvements as Meadowbrook proceeds down the path to change.

Becky Colucci is Senior Vice President for Meadowbrook Insurance Group, heading up the Adeptia Insurance Practice initiative. Prior to accepting this assignment, Becky led Meadowbrook’s Agents’ Edge division which sold insurance products through an innovative web-based system that includes automated underwriting and pricing features. Her experience in implementing Internet-based insurance products coupled with extensive underwriting experience has provided Meadowbrook with the knowledge necessary to automate underwriting and other company processes, resulting in significant operating efficiencies. Prior to joining Meadowbrook, Becky held several positions in the insurance industry, including a Reliance National, Kemper and AIG. She has obtained the Associate in Underwriting designation and is a CPCU candidate.