Tag Archives: implementation

11 Keys for Billing Implementation

Insurance organizations striving to maximize revenue and streamline processes may choose to implement modern billing systems. Billing has traditionally been seen as a back-office function; that assessment is no longer true in today’s digital world. Billing is one of the most frequent and important customer touch points. However small or simple an implementation may look, it’s critical to get the implementation right to ensure that the overall cost of operation is reduced and that customers and agents are happy

This paper is focused on carriers that have selected a billing application from one of the product vendors like Duck Creek, Guidewire, Majesco or Insurity and initiated their transformation journey

Here are the top 11 things to keep in mind for a successful billing implementation:

1. Requirement Management — Billing traditionally is managed by the finance team, but looking at billing only as a finance function will not yield the right benefits. Sales needs to be involved because billing plans sometimes play a key role in selecting a policy. The agency management team should be involved because billing and commission management influence the choice of carrier by independent agents. Underwriting and the actuarial team should be involved to understand the kinds of fees and costs that will affect the overall revenue collected under the policy. We recommend an internal survey before starting the implementation of billing changes. 

2. Billing Configuration — Modern billing systems provide flexibility of configuration. However, carriers must understand the complexity that comes with configuring an application with too many payment plans. They also need to understand the downstream problems of defining too many receivables. Carriers should plan for all transactions, like endorsements (and the impact of these endorsements on future revenue) and reinstatement (ensuring that invoices are restored and past premium collected).   

3. Exceptions and Customization — Every insurance company wants to customize the business rules and functionality to maintain its unique characteristics. Depending on the application, some business rules can be configured for easy exception (by line of business, state, agent, etc.). Some may require customization in code. It is important that insurance companies take appropriate decisions related to the benefits of customization vs the cost of maintaining those changes. The more they customize the code, the harder it will be to upgrade the system. 

4. Accounting and Reconciliation — The billing system receives premium from the policy administration and servicing (PAS). The premium is subsequently broken down to receivables and installments. The payments received by the customers are used to settle bills. All these transactions are posted as double entry in the accounting module. Carriers should invest time to understand the various transactions and tie the account back to invoicing and payments. Carriers should also work with partners to create a good reconciliation application to ensure that all financial transactions tie back and have an audit trail.

5. Reports — Billing manages the receivables and payments from the point when the policy is sold, but multiple activities can happen during the lifecycle, like delayed payments, write-offs or suspense money. So, management needs to design reports on top of the billing system, which can help reduce financial leakage.

6. Integration — Billing implementation involves limited but very important and complex integration points. While most applications are within the control of the carrier, it is important to involve external parties like payment gateways and banks right from the beginning of the implementation.

7. Payments Options and Notification — Customers today are looking for multiple payment options from insurance companies. While traditional options like direct debit and check/lockbox are still quite popular, customer preference is changing toward quick online payment options through payment gateways via web/mobile. 

See also: What Makes Insurance Invoicing Different

Customers’ satisfaction soars when they are promptly notified about payments in advance and also when they have missed the payments. Defining the right delinquency process reduces the lapsing of policies.

8. Commissions — If agents are not happy, the insurance company suffers, and many complaints relate to commissions. While implementing a billing system, carriers should ensure that commission statements are generated on time and that commissions are paid promptly for direct bills. Carriers should also ensure that they provide for prompt resolution of discrepancies. 

9. Testing — Billing is a series of transactions that happen over time, but most insurance billing applications do not cover enough scenarios, which can lead to bugs in the production environment. Testing should be one of the most important pieces of your billing system implementation. 

10. Migration — Migrations of billing data can become tricky depending on the quality of data in the historical system. Carriers can adopt a strategy of: a) rollover runoff on renewal, b) open book migration or c) full migration. Carriers should decide early so they can estimate cost and implementation time accurately.

11. Change Management — Many organizational transformations fail because management doesn’t get enough buy-in from stakeholders. Insurance companies should develop a comprehensive change management plan, involving internal teams like operations, sales, call center and finance, as well as the vendors of the IT systems that will interface with the billing system. Carriers should also set up a plan for communicating with agents and customers about the changes they will encounter.  

Conclusion: Billing applications are transaction-heavy and should be carefully discussed and analyzed. Implementation should include in-depth analysis of all scenarios. An up-front investment in detailing requirements can reduce production support challenges. 

What Does Success Look Like?

It seems every press release you read, every case study in the news, every session at industry conferences and every webinar on tap for the next six months will at some point mention the 100% implementation success rate of the vendor involved. That fact, in and of itself, throws serious shade on what really constitutes implementation success and dilutes the impact or validity of the concept as a whole, but should it?

Depending on where a person sits, implementation success can mean different things and may include different elements, technologies or metrics. Implementation success is therefore often qualified by varying criteria that are completely dependent on the role of the individual in the project or the company. To truly guarantee implementation success, all perspectives and perceptions must be considered and incorporated.

For the CEO, it’s all about the big picture. Sure, nearly all CEOs want an increased ability to process new business and grow the company organically, but time and again individuals in this role will focus on these key questions:

  1. Did we implement what we set out to implement?
  2. How will this implementation affect our ability to modify existing products or launch new ones?
  3. Does this implementation support our construction of a future-ready technology environment?

For the CFO, everyone instantly assumes a successful implementation is simply about being on-time and on-budget, and while those factors are definitely important, CFOs additionally want to know:

  1. What is the maintenance and licensing like on this new technology product, and how does it affect our total cost of ownership (TCO)?
  2. Does this implementation make other downstream or supporting systems obsolete, requiring the company to make additional technology investments in the coming year(s)?
  3. Does this implementation allow the company to retire existing legacy systems and recognize cost savings in maintenance and support of these systems?
  4. Is support or the professional services required to implement changes included in the initial contract price, or is it an additional, and continuing, charge?

For the CIO, data conversion is a crucial, yet truly not sexy, part of the package that allows one system to be turned off and the other turned on, so to speak. It is important to understand that while CIOs are often thought to have the most interesting, cutting-edge piece of the insurance technology puzzle, these individuals are not easily distracted by solutions, tools and gadgets that turn out to be little more than bright, shiny objects. Questions CIO typically focus on when measuring implementation success include:

  1. Does my internal team have the expertise today to maintain the new solution, including making simple changes without deep technology programming expertise or the ability to create and implement custom coding?
  2. Will I be able to easily integrate emerging technologies as the need arises?
  3. What is the upgrade path for this solution that will clearly demonstrate my company is not implementing legacy?

Other players, including the company’s heads of claims, underwriting and customer service, are counting on achieving a certain percentage of straight-through processing (STP), decreasing the time from first notice of loss (FNOL) to claim resolution, and still others are rabid about mobile access and self-service capability delivered via a portal. Alternatively, FAIR Plans, for example, are less concerned about growth and bottom line profits, but instead are focused on increasing internal efficiency and delivering a top-quality customer experience. Different strokes for different folks.

So, maybe it’s time to acknowledge that the magical middle ground that will make everyone happy likely doesn’t exist. It’s back to the old saying that it’s impossible “to make all of the people happy all of the time.” The trick is knowing which stakeholders’ happiness is on the nice-to-have list and which is on the must-have list. Keep in mind, there are degrees of happiness, and incorporating even small pieces of capability can be important when it means validating stakeholders’ priorities and implying broader ownership across the enterprise.

Ultimately, what composes implementation success is unique to each company and should be well-defined for each company before the start of the project. All projects should have a well-defined set of expected outcomes from both business and technology that need to be achieved to have that project defined as a successful delivery. While budget and schedule can be a part of the objectives, they should not be the primary drivers. A successful implementation is one the delivers the required business and technology outcomes.

When the core system implementation itself is done right, with the right partners and a well-defined set of objectives, it leaves room for peripheral goals to be achieved at the same time with a faster ROI and the ability to get back to the business of insurance.

The Formula for Getting Growth Results

Real growth — not incremental improvements to last year’s numbers, but big results coming from new opportunities you manage to seize and commercialize — is hard to come by.

There are so many distractions, so many rabbit holes you can fall into — the lure of a cool technology, a move by a competitor that appears to be smart, a high-pressure conversation with a board member, a convincing argument from a colleague on why an idea will or won’t work or a CFO waving a red flag.

There are also so many ways to convince yourself that the status quo, at least for now, is tolerable — the comfort of a good current quarter, the reassurance of lots of money being plowed into new technology, the establishment of an innovation team or being recognized with an industry award.

But somehow, things still don’t feel quite right. You wonder why, in spite of upbeat business reviews from trusted employees, the new product pilots aren’t quite panning out. Some new start-up (or two, or three or more) seems to be whipping up a storm in the market, and you feel left in the dust (or left to contemplate paying a hefty premium to buy what someone else managed to build right under your nose).

What to do?

The answers are astoundingly simple, so simple, in fact, that they elude the very smart, big-school-degree types running around corporate America today. These leaders are fully in control of their growth destinies, yet all too often are unable to deliver and either blame some externality or create a mirage that all is well.

Here’s the three-step formula to get real growth:

  1. Define the customer problem you are solving. This is the first, almost painfully obvious step. Yet, consider how many people in big roles define their business’ marketplace value around internally generated definitions of value, claim to know customers’ needs but never talk to customers or allocate resources to deploy new technologies with no connection to how customers act or how they lead lives in which your business probably plays only a teeny, tiny role.

Let’s parse what this first step means.

  • Define: with absolute clarity, in a way that lets you understand the total scope of opportunity, not just what’s in front of your nose and linked to today’s P&L drivers.
  • The: one, with focus.
  • Customer: the people who take their wallets out of their pockets and give you their money – not the internal lobbyists.
  • Problem: a real pain point, not something that merely makes people feel good. People will prioritize getting rid of their pain as way more important than a gratuitous feel-good purchase.
  • You: the bigger you, the organization, mobilized around your singular focus.
  • Solve: dramatically better than anyone else, so you have a massive jump on others in the market who will chase after any good business opportunity to eat into or take over share.
  1. Establish the fundamentals to cultivate growth.
  • Governance: If your plan is to create big sources of growth, the CEO has to own the goal, including implementation, and hold the rest of the C-suite accountable. If not, accept your destiny as an incremental player, at best.
  • Accountability: Big new sources of growth will come from separate accountability outside the established P&L structures. No fault to the P&L leaders; their work is important and drives the company today. But the goals, timeframes, talent and implementation path to run a scale business is based on predictability, control and risk reduction. Contrast these attributes with what’s needed to spawn a big, new business: experimentation, failure, ambiguity and risk-taking. The established P&L priorities will always overwhelm the nascent ideas trying to grow into big future profit producers.
  • Talent: The people who are absolutely brilliant at running the machine are unlikely to be the same folks who will create the next big thing, and vice versa. That’s not personal, it’s the reality that we are all really good at some things and mediocre at others and should just avoid yet others. Be truthful about that, both regarding yourself and when evaluating others.
  • Metrics: Find the metrics that connect customer needs and wants to the customer actions driving the P&L. It’s a cop-out to say this can’t be done, and it’s easy to fall back on familiar but irrelevant metrics. Focus on customer behavior measurements to drive decisions. High-level reporting of income statement and balance sheet line items are interesting, and certainly matter to your investors. But they will blind you to the below-the-surface measures that matter – the real drivers that are moving every day as your customers make decisions affecting your performance whether or not you acknowledge them. Operate your business at that level, and you will drive your destiny.
  • Process: Industrial-strength processes that enforce predictability, control and risk reduction will steamroll over anything that doesn’t look exactly like what came before. Remember the definition of insanity often attributed to Albert Einstein: “doing the same thing over and over again and expecting different results.”
  1. Embrace and behave according to the mindset of a founder, or move on. In The Startup Playbook, author David Kidder cites the five qualities of the successful entrepreneur. These attributes apply equally well to leaders in any enterprise, not just what we have traditionally defined as start-ups.
    1. Know thyself. Your team’s success will be a direct reflection of your self-awareness and deployment of your own gifts to whatever opportunity you go after.
    2. Ruthlessly focus on your biggest ideas. Focus means laser-like drive against the beacon you see out in front of you that represents realization of your solution to the customer problem. But not to the exclusion of listening – being able to filter and apply that which is valid, without getting diluted by the well-meaning, but utterly useless opinions you will be offered. It’s a tightrope.
    3. Build painkillers, not vitamins. Back to Point 1. Solve a real problem. Don’t create a nice-to-have.
    4. Be 10x better. That’s Kidder’s estimate of how far ahead you have to be to outrun and outlast the inevitable competition.
    5. Be a monopolist. At least in mindset, think gigantically. Think about how you can own the market, not just create something that will satisfy a near-term demand.

Creating big sources of growth with real results can be predictable. You just have to follow the formula.

This post also appearing in Huffington Post.

Are ‘Best Practices’ Really Best?

Best practices can help companies gain a competitive advantage. However, the opposite is often true. There are various reasons for this, but, in our experience, we have observed three major problems with implementing what a company perceives to be best practices.

  • First, the benefits are elusive. They are often difficult to measure, with no baseline or true comparison, and the costs to implement them are often excessive and misunderstood. This often means there are significant implementation costs and effort with few tangible results.
  • Second, best practices exist in the rearview mirror. By the time you have adopted them, business conditions and the right ways for implementing them will have changed.
  • Third, once adopted, these practices can be very difficult to change. The organization has invested emotion, credibility, time and money, and it’s very difficult to abandon a practice even if it doesn’t work or needs to be adapted.

What’s often missing is clarity on the best practices that are most relevant to the business.

Companies naturally want to be competitive, and many seek inspiration outside their own industry in their search for the best-of-the-best. Companies tend to reach broadly, embracing a great number of potential best practices. Conversely, some companies narrowly benchmark themselves against only their peers. Following either extreme often results in missed opportunity for real improvement. In addition, if implementation occurs in silos, then best practices tend to compete with one another and increase complexity and overhead.

Although the benefits from deftly applied best practices can be real and demonstrable, they often are more elusive than anticipated and can result in frictional costs, impasses, noise in the system and ultimately few concrete benefits to the bottom line. Moreover, implementation costs can be high but may not be visible until the cost of adoption or compliance becomes evident throughout the organization. Finally, benefits may elude adoption, specification, measurement and capture.

Our observations

Best practices tend to be selected and defined in isolation. Once they have a mandate, individual business and functional areas, centers of excellence and shared services often tend to implement new practices without giving sufficient consideration to downstream implications, such as costs. New best practices come with costs, and when they are supposed to result in higher service levels, they may come with higher-than-average costs.

Accordingly, the application of new practices requires balance and compromise. They may reduce expenses in part of the organization but may increase frictional costs and place an extra burden on people, process and technology elsewhere.

A common problem is that many companies attempt to implement too many new practices in too many places. Most organizations’ ability to adapt to change is limited, and change tends to be undermanaged, especially when new best practices are required by new control mandates.

Many companies also tend to overestimate the opportunities that standardization offers. We have seen some companies try to standardize everything and inevitably encounter challenges they had not anticipated. New best practices need to be capable of changing and evolving over time, as well as being able to adaptable to local differences and requirements.

Lastly, many companies fail to conduct a cost/benefit analysis when instituting new best practice mandates. If a best practice is central to the business strategy’s success, then frictional costs are an acceptable risk. However, excessive application of best practice improvements can waste resources (e.g., a need for excess staff to perform the work, complex policies and procedures, standardization for its own sake and demands for “unnatural acts of cooperation” that hinder the business’ ability to respond to changes in the marketplace).

What should companies do differently?

Many companies have the habit of relying on practices that are not appropriate for them and therefore fail to effectively execute desired strategy. To help prevent these problems, we suggest using a success framework that prioritizes and enhances company focus on improvement efforts. This framework should have the following six characteristics:

Success Framework A Mechanism…
1.  Prioritization To identify what’s most important and to align implementation effort with strategy.
2.  Proportion To confirm that the implementation effort is proportionate to the practice’s perceived value.
3.  Readiness To assess organizational appetite and readiness.
4.  Implementation To assign authority, accountability, responsibility, and appropriate resources.
5.  Impact To track impact, including both intended and potentially unintended consequences.
6.  Change To drive continuous improvement and to authorize a full stop if warranted.

 

It is critical to first identify which best practices are worth the effort, through prioritization.

Implementing leading practices can cost money, but there may or may not be tangible benefits or related savings. The question to ask is: How good is good enough? Moreover, when the implementations of best practices compete with each other for time and focus, there are frictional costs that further minimize expected benefits. Being cognizant of frictional costs and avoiding them is critical to optimizing investment and benefit realization.

What we’ve concluded

Best practices are about performing better and therefore adding strategic and operational value.

Accordingly, because of the highly subjective nature of “best,” we suggest the term “value added practice” (VAP) instead. By putting value at the center of practice improvement efforts, a company can better plan and implement new practices. Frameworks for investment and continuous improvement are key, especially at larger organizations where budgets, controls and approvals tend to be complex.

Before embarking on a new best practices initiative, a company should perform a quick self-diagnosis. Are you trying to implement a best practice for its own sake, or are you clearly focusing on the value you hope to realize?

If you plan to invest in new capabilities without tying them to specific business objectives, then you should step back and determine just how implementing new best practices will benefit the company.