Products & services. Guidewire is a global provider of flexible core systems — for policy administration, underwriting, billing and claims —
that enable P&C carriers deliver insurance the way they want to. designed for maximum flexibility and scalability, Guidewire solutions give carriers
the capability to deliver excellent service to policyholders and agents and increase market share — while lowering operating costs.
Beyond Automation: Insurers’ Policy
Administration Modernization Must Embrace
Precision-Orientation for Profitable Growth
By James McCully
Process automation is one of the great benefits of modern systems, but
insurance executives who equate automation with improved productivity are
missing the bigger opportunity. The real promise of modern systems is not
merely to do more, but to do better. To realize that promise through policy
administration systems modernization initiatives, insurers must reorient
their efforts away from a focus on automation to a focus on precision; they
must shift the emphasis from volume-oriented metrics to quality-oriented
metrics that deliver not only higher volume processing at lower cost, but more
profitable business outcomes.
When compared to other industries, such as manufacturing, agriculture
and transportation, insurance has gained relatively little productivity from
technology. even a century after the Industrial revolution, these industries
continue to make improvements, while insurance productivity has remained
fairly static. That outcome can be explained partly by the differences between
industries that rely on the manipulation of materials, and those, such as
insurance, that deal in intangibles. And yet, insurance processing has much
in common with manufacturing: both include high-volume, highly repetitive,
time-sensitive tasks completed by large numbers of people with similar jobs.
Automation can indeed improve insurance processing in a myriad of ways,
speeding the time it takes to process an application, underwrite a risk,
execute a renewal, etc. Concepts such as straight-through processing and
no-touch renewal of policies resemble nothing so much as an information
technology version of an automated assembly line. And one might say
that the assembly line is the pinnacle of manufacturing — except that it
isn’t. This is where insurers err in their focus on automation in system
transformation initiatives.
In fact, manufacturing has developed insights beyond the assembly
line that are far more relevant to increasing productivity, as opposed to
simple process efficiency. Before World War II, manufacturers measured
productivity by volume-oriented metrics such as total output, output per
worker, total cycle time and total cost of production. The post-war period,
however, saw the emergence of precision-oriented concepts such as “lean”
manufacturing and “just in time” production that introduced measurements
focused on quality more than quantity:
• determine which activities improve the final outcome and measure them
• Produce only what is needed rather than large inventories in advance
• eliminate waste — scrap and obsolescent byproducts
• Tightly control quality
• Strive for continuous improvement
The lesson embodied by these principles might be condensed in the axiom
“don’t work harder, work smarter” — because they transcend the search for
value by simply doing more things faster; they identify the right things to do and
the right way to do them. To a great extent, they liberate manufacturing from the
limits of a rigid, linear process and introduce flexibility.
James McCully is a Product Marketing Manager at Guidewire Software, a
leading provider of flexible policy administration, underwriting, claims, and
billing systems for the property/casualty insurance industry. He can be
reached at jmccully@guidewire.com.
650.357.9100
info@guidewire.com
www.guidewire.com
