Aspiring to a Zero Back Office for Your Insurance Operations

Related Topics: Digital Strategy, Insurance, Intelligent Innovation

by Eunice Abarilles and Charles Sybert – 

Most people will start their day with a simple question, what time is it?  Whether they look at an analog or digital clock, the process is the same, look at a simple face and determine if they can go back to bed or have to get up.  This process is straightforward and efficient, but there is a complex set of mechanisms such as multiple sets of gears enabling the interface to work seamlessly in the background.  Similarly, in most large organizations there is a complex backend that most of us do not see, and these days there is race to make that backend as efficient as that of a clock’s. Enter the Zero Back Office (ZBO). ZBO allows organizations to automate complex processes to create a simplistic insured interface.

Over the past decade, the cost of the back office continues to increase even with investments in new digital technology.  Applying ZBO will not only add to the bottom line but will improve customer and employee satisfaction.  Achieving this goal requires process changes, investment in enablement technology, and an organization shift to align to the vision.

What is a Zero Back Office?

The insurance company back office is a set of complex systems that require continual maintenance and upgrades with a level of human interaction.  These systems can range from agent licensing to policy updates to document management, naming a few.  ZBO’s goal is to free the staff from highly repetitive and mundane tasks allowing the team to leapfrog the competition with innovative solutions.   ZBO uses a variety of modern automation technologies such as Robotic Process Automation (RPA), Artificial Intelligence (AI), and Optical Character Recognition(OCR) to automate the tasks.  The vision is to automate all back-office tasks leaving any manual tasks purposefully manual.

Applying technology will partially achieve a ZBO; to harness the full capability, a shift in the organization must occur.  The mentality of “we have always done it this way”, or “we can’t do any better” needs to be replaced with how can we automate this or how can we simplify the process to become more efficient.

Implementing a Zero Back Office

Creating the ZBO involves more than deploying technology, there must be a solid foundation of data, process, systems, and organization to build upon.

Establish a Modern Data Foundation

RPA’s effectiveness is correlated to the quality of the data and clarity of actions to be taken.  In our experience, we have found insurance companies continue to struggle with consistent and actionable data. Some data challenges come from disparate systems, redundant systems, out of date technology, to name a few. The lack of system clarity can cause data to become convoluted and difficult to dissect as the levels of granularity and traceability become muddled.  Solving this challenge requires a few different tactics, clarifying the system landscape, organizing data to be traceable at similar levels of granularity, and employing an enterprise data usage strategy.

Implement Periodic Process Reviews

Before applying ZBO principles to current workflows, RCG has found it helpful to perform a business process review to confirm the business need for each process.  The study will examine the business value of each process, level of repetitiveness and make recommendations for adjustment to drive future efficiencies.   Too often, business processes remain unchanged because no one took the time to ask why or how this could be done better.  Using the ZBO review allows the opportunity to develop a deeper understanding of the business and reduce process time through process updates and system enhancements.

Conduct System Reviews

ZBO can bridge gaps between systems due to technical challenges such as lack of interfaces. Before building the bridges, review the system landscape for opportunities to sunset systems, enhance existing systems and improve data access.  Simplifying the systems will streamline the ZBO and reduce overall process cycle time. While it does take time to organize systems, ZBO can adjust with the landscape and move lockstep with phased updates.

Change the Organization to take advantage of a Zero Back Office

The success of any project is not the technology but the people that use it.  When implementing ZBO, special care must be taken to assure current staff they are not losing their jobs, this is a tool to remove the simplistic tasks.  The team must be given opportunities to retrain into the more analytical type of roles, offered the chance to maintain the ZBO technology or other efforts that are suited for their talents.  The next hurdle to overcome is a mind shift from doing everything manually to automation focused. Then the team needs to be trained to question the process and apply technology to eliminate the process or reduce the required manual efforts.  Arguably, this is the single most crucial aspect of a ZBO.   If the staff does not embrace the change, ZBO will temporarily move the needle, and the organization will quickly fall back to inefficient habits.

Examples of ZBO in action in Insurance

Implementing a ZBO does not require the whole process to be automated but rather automation of portions of a process.  For example, data entry into a third-party system or collating results for separate systems.

Policy Administration

The majority of insurance companies have straight-through processing on their core lines of business, but even they have exceptions to the process, which requires underwriting to review and make a decision.  The delay takes time, costs money, and allows the prospect to shop for another insurance company.  ZBO can be applied to either perform actions the policy administration can not, such as extract data from a third-party system or score the application before underwriting review reducing the overall cycle time.  Through ZBO, IT can now have multiple systems interact without having to develop expensive and cumbersome interfaces.  ZBO tools provide the ability to extract, evaluate the situation with business rules and perform the business action.

Claims

Every day the claims department receives countless digital and physical pages of paper, inquiries, and updates on a claim process.  Most claims systems tend to be heavy and difficult to customize without significant investment and removal from the upgrade path.  ZBO is light enough to sit on top of the existing claims system without significant impact and flexible enough to adjust to the new business dynamic quickly.   ZBO can sort through the inbound documentation, establish the claim number through basic information, log it into the document management system, and even notify the adjuster.  ZBO can also help with inbound requests by reviewing the unstructured data, determining the type of question, formulating a response based on predefined templates, and logging the answer in the claim file. The outbound process can also be helped by ZBO when the existing claim system cannot combine multiple sources of information such as documents, standard letters, etc.

Accounting

The accounting department faces the unique challenge of managing financials from multiple inbound policy systems matching the billing system(s) and outbound financials from the claims system.  The payments are complicated by using various third-party systems that have their own unique error and management processes.  Payments are complex due to the necessary support of invoice matching, vendor verification, and payment methods which can have multiple failure points.  All of these need to be brought together to balance against the bank and, in some cases, meet public reporting requirements.  This results in a semi-automated process as the effort to fully automate and build interfaces is very costly with a more extended return on investment.  Using the ZBO toolset, a majority of the manual processes can be simplified or fully automated.  For example, invoice matching can use a cognitive robot that learns where to extract critical data.  That information is then matched to the claims system approved amount and, if matching, can be entered into the GL system for payment.  If a payment request is a new vendor, the GL system will present an error kicking off ZBO to start the vendor verification process and acquire a 1099.  Machine learning would be applied throughout the process, allowing the accounting team to train the robot and perfect the technique.  As invoices, data entry, new requirements, and other aspects of the process change ZBO are flexible to address the transition with minimal investment.

Agent Management

Commercial applications have been built to assist in managing the agency force ranging from ensuring licensing, set up within the systems, continuing education credits, territory management to which lines of business they sell, to name a few tasks. These systems have offloaded some of the work, however there is still much that is manual when updating state regulatory bodies, filing for license updates, etc. Usually, building-specific interfaces, data extracts, and other regulatory needs are not high on the priority list due to the limited number of impacted users and many unique requirements.  ZBO can meet these needs through its lightweight, flexible, and end user friendly approach to producing output.  The IT department is still required to provide access, ensure security and other environmental setup items, but ZBO enables the user limitless options.  Now the agent management team can automate all of their interactions with the regulatory bodies, allowing the team to focus on exceptions and updates.

Contact Center

As millennials become more of the insurance purchasing demographic, the focus is being shifted to meet their digital interaction demands. The new format puts strain on the current systems as the need is now to provide a highly personalized data-rich experience.  The communication methods are now chatting, application-based, and even through social media.   Meeting this demand requires more personnel to respond to questions and direct access to data.  Using the ZBO concepts enables reduction of staffing needs through automated chat responses using AI with natural language processing(NLP) to respond to initial questions, improved self-service portals allowing customer-driven requests of complex endorsements, etc.  ZBO can provide the user experience and bridge the back-end system gaps to gather the data without human interaction and bring all of the needed details into a single usable format.

Aspire to Your Zero Back Office

Every time a staff member touches or interacts with the insurance life cycle, it costs money and time.  Some interactions are necessary, such as answering complex policy coverage options or claim adjudication.  Other interactions can become fully digital such as when is the next payment due, purchasing coverage, but only if the back-end systems can provide the data and speed necessary. Most system landscapes have soft spots that prevent a fully immersive digital experience, but Zero Back Office frameworks and concepts can help bridge the gaps with flexibility and speed.  The impact to the organization is not only additional profit but protecting the most valuable asset, employee satisfaction.

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