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Checking the mail.


Another standard bearer for the insurance industry is fading away: the paper bill. Insurers are following the lead of other financial services companies by exploring all the possibilities in electronic bill presentment.

In the family of core systems, billing often is viewed as the runt of the litter. The replacement of policy administration systems has overshadowed billing as insurance carriers focus on growth strategy first and customer service strategies second, according to Martina Conlon , a principal in Novarica's insurance practice.

"We know that billing is a customer service application," she says. "It's a financial application, but is critical in customer service. As we see customer service being prioritized as a strategic goal, billing systems are becoming more of a priority"

Karen Furtado, partner with Strategy Meets Action (SMA), finds that what drives carriers to think of changes in their billing systems is when they don't have the capability of doing things for themselves that they see with their competitors.

"This can start to sway the scale as far as competitive differentiation" says Furtado. "Billing is there to service. As long as it is highly serviceable, people don't think of changing a component. If it is holding a company back they will change it, but they are trying not to reach that point."

What we do know, though is billing is not a drag on the company, explains Furtado.

"People see [billing] as a way of staying very sharp and have refined their billing processes," she says

Insurers face two choices when they look to replace their billing system--an enterprise suite or components. When examining components, policy and billing are closely linked because they share much of the same information, explains Furtado.

"Fundamentally, policy admin is the key so when you look at databases you will often see they are tightly linked because they are keyed the same way," says Furtado. "Claims systems are keyed by the claim number."


If you just wanted a solution that was focused on one particular area you could get a highly robust solution, points out Furtado.

"Something that is single-focused tends to have a lot of bells and whistles," she says. "If the insurer is extremely sophisticated in how they handle billing, often a billing component is the way to go because you get that robustness."

When discussing sophisticated billing, Furtado is talking about systems that can handle direct bill, agency billing, account billing or risk billing.

"Some [enterprise] systems deal with [functionality] well, but not as well as a solution that's focused solely on billing" she says.

In going that route, Furtado explains carriers need to have the technical expertise to deal with integration issues.

"You are going to have to deal with the information that comes from the policy system and send information to the policy system, so the integration side is important," she says.


Integration is no longer an issue if you purchase an enterprise solution, points out Furtado.

"Integration is taken care of for you," she says. "The systems come prepackaged to send transactions from policy to billing. The other advantage is you tend to be working with a single data model. Being able to mine the information out of the systems offers much easier access to data"

The perception in the industry is if you buy a standalone solution it will be more robust, but Furtado believes the big change in modern architecture is that enterprise solutions are bringing a highly-sophisticated level of robustness to the table that did not exist before.

"There were trade-offs in functionality because those software providers only had X number of resources so they had to spread them among the suite," says Furtado. "Whereas, if you had a single solution you were going to focus your development efforts on that one particular solution. Now, with some of the more modern solutions, [solution providers] are delivering highly-sophisticated, highly-functional components to the market. That's been the game-changer. That's why there's been an upswing in enterprise solution in the last few years because the enterprise solutions now have the robustness they were lacking before."

One of the focuses for many carriers when looking to replace legacy systems is to turn to an enterprise system that includes two or more of the three major touch points among the core solutions: policy, billing, and claims.

"It makes sense to do billing at the same time because you don't want to integrate [a legacy billing system] with a policy solution and then replace the billing system sometime in the future and have to reintegrate," says Conlon.

Many legacy policy systems include billing functionality that carriers can't separate, adds Conlon, so carriers are forced to replace both of them at the same time.

"I think there are some carriers that have a transformation program in place," she says. "They do policy first and then billing and claims. Based on the priorities in your organization it makes sense to do them together if you have the budget, the focus, and the manpower, but doing it one component at a time makes sense too, especially if you have a large number of systems to replace and you are consolidating."


Those using legacy billing systems are unable to take advantage of what modern systems are able to offer carriers.

"Modern systems typically have direct bill to the policyholder, agency bill, account bill--multiple policy billing--and split bill--one policy being billed to multiple individuals," says Conlon.

Modern systems also offer configurable payment plans, support for credit cards and other payment types, and automated rules to be applied to processing overpayments or under-payments.

"A lot of the modern systems are rules-based, which further automates your billing process and requires less manual intervention," says Conlon. "They operate in real-time. Legacy systems are batch oriented and you can't update an account and schedule payments unless a batch cycle runs. Now you can change your billing plan, recalculate your account, and talk to a CSR immediately to learn what kind of changes they will see in their payments. There is more robust support for commissions and collections. Those are the main features that are becoming standard in the new billing systems."

For Pacific Compensation Insurance Company, billing has been a problem for several years. "We still have a very old billing system" says Joe Cardenas, Pacific Compensation's vice president and CIO.

The carrier has been using a balance forward type of system, according to Cardenas, which means the carrier loses all track of the transactions as they go forward.

"You send out a bill and you have to go back to the month when it first went out to actually know what it was for," says Cardenas. "As you move to subsequent months it just shows you a balance. The customer is wondering what you are billing them for. It creates all kinds of problems by its very nature."

Cardenas believes most companies stopped using balance forward systems 15-20 years ago. "It's way over its prime," he says.

Pacific Compensation looked for a modern system and one that came in a SaaS model.

"We are a company that has no data center at all," says Cardenas. "In today's par lance you would call us 100 percent cloud. SaaS is one form of a cloud system where people can go to that address on the Web and pull out what they need. You are actually having that served to you rather than going out and buying servers."

The STG system from MajescoMastek, which Pacific Compensation is in the final stages of implementing, is a rules-based system in which they can specify a rule that either goes across all the transactions or part of the transactions, so those rules can be enforced across the entire application.

The differences between Pacific Compensation's old system and the new are "night and day," says Cardenas.

The old system could not adequately communicate in a modern fashion with the carrier's customers. The company sent out a paper invoice with few, if any, options.

"We didn't have a lot of things that brokers, who are intermediaries, wanted" says Cardenas. "Sometimes those relationships get complex. We were limited in how we would look to our brokers and the end customer. Clunky is the way I would describe it."

Cardenas expects to take things slowly to begin with, so paper billing will continue, but the possibility of electronic billing and other positives for the future.

"This system, unlike the old system, which was just a black box, is talking to all the various components of our systems," says Cardenas. "It has the capability of doing that real time talking to these other systems."


During the first half of 2010, OneBeacon Insurance Group sold off its personal and non-specialty commercial books of business and concentrated its efforts on specialty lines. One significant problem, though, according to Gary Plotkin, OneBeacon's senior vice president and CIO, the carrier had no consistency in how it billed its customers.

"We were left with a number of challenges around moving to a common and consistent process and flow for billing," he says. "Our challenges were enforcing PCI [compliance]; providing service to our customers--primarily our producers--in a manner they wanted, whether it was electronic bill or paper, self service on the Web, agency or direct billing; and to improve our own financial processes."

With multiple systems and manual processes to handle billing, Plotkin explains this move provides an opportunity to consolidate systems and introduce consistent automated processes across its specialty business. It also provides a platform that supports the activation of new business segments.

"It was pretty clear to us as we moved to become a specialty writer that [billing] was a key area where we needed new technology and improved business flows" says Plotkin.

After scanning the industry in a search for the right solution, OneBeacon chose the STG Billing solution from MajescoMastek.

"[MajescoMastek] met the bulk of our business needs and we also felt it was the most economical when we performed a cost benefits analysis," says Plotkin.

OneBeacon chose a SaaS solution.

"One key element of the STG billing solution that we liked was its robust integration framework," says Plotkin. "Since billing has to 'sit in the middle-of-all,' it needs scalable architecture for interfacing with upstream (policy admin) and downstream (general ledger, warehouse, stat reporting) systems. Due to this integration model in place, the changes made to the payment options/payment plans will seamlessly flow through to our PAS solutions and will not lead to additional or duplicate IT or business efforts."

The vendor also has done a decent job of developing a secure, robust model, explains Plotkin, particularly with security, which was OneBeacon's biggest concern.

Plotkin explains that OneBeacon spent eight weeks conducting a fit-gap analysis.

"We spent time with all our business segments to document a full set of requirements, identify the gaps that will require development, as well as our own interface, integration, and data conversion work," he says.

The benefits OneBeacon is seeking include a consistent set of processes and technology that will lower the carrier's costs and improve overall efficiency. Plotkin points out the solution will help improve data analytics and data analysis because there will be one consistent data flow.

"We'll be able to offer agents and brokers billing options and payment options--give it to them the way they want it," he says. "Ultimately, it means high flexibility in our payment plans and payment options."


Plotkin believes the billing area is a good fit for the cloud because the goal is to achieve consistent and common processes. Plus, he doesn't believe the solution will need significant additional customization or modification as the carrier moves forward.

OneBeacon gets new capabilities and new technology without investing heavily in its development staff, but Plotkin knows the carrier needs to keep a sharp eye on security.

"Cloud computing is still evolving," he says. "We read the same things about security breaches and remain diligent about what we store and where we store it. We're doing quite a bit with controls and evaluations before we move forward. There's no doubt security is my biggest concern. Security and the ilities--reliability, accessibility, availability."

"How much information carriers store and what kind of information is perceived as a challenge," says Furtado. "Many use third parties, so I think part of billing is about security and the confidential information insurers get."


In 2010, CNA embarked on a project to adopt a managed services model.

"We were looking to core partners to do our coding, system testing, and integration testing based on requirements and the high-level design we are providing them," says Bruce Clusky, vice president of IT application development for CNA. "In that model we recognized the need for a more disciplined way in which the requirements are articulated and in a way that minimizes the change as those requirements go into detail design, unit tests, and so forth."

In the past, when CNA primarily used an internally-sourced set of activities in a staff augmentation mode, there was more flexibility in how the carrier addressed change. The solution provider iRise helped in the articulation of those requirements in a visual way that left less room for any interpretation of what the words or numbers meant because users could visualize things.

"This was for our business partners and our delivery partners" says Clusky. "We felt this would draw a much tighter alignment between the expectations that were meant to be delivered."

One of the key projects CNA used the iRise solution is the agency bill-pay project, according to Clusky.

CNA uses an independent agency distribution force. Part of that arrangement from a billing perspective is the carrier bills customers through the agents and the agents then bill the insureds.

The mechanism CNA previously used involved interacting with the agent through the bill that was presented to them. The agencies would tell CNA what they thought they owed the carrier and the two sides reconciled what the carrier felt was owed them, according to Clusky.

"It was a manually intensive process," he says


In July, the carrier plans to deploy a solution that will represent the details of the bill to their agents and allow them to interact directly with the carrier as to whether they agree with what is included in the bill in real time through the carrier's portal.

"What was a very paper-intensive and call-intensive process is now moving to a self-serve mechanism," says Clusky. "We needed to have a way to bring that to life for our agents to envision what we are doing. We are first on the market so there is no precedent for the agents to draw from."

iRise helped CNA mock up the process and make it look real to the agents, so they could react to changes that were proposed.

"They could see it in real-time and collaboratively develop what the end solution would be," says Clusky. "That became the historical document of the requirements and the benchmark. We could take the solution back to iRise and determine what we expected or if we needed something slightly different."


CNA's agents were very engaged and appreciative of the ability to be part of the upfront requirements gathering piece, explains Clusky.

"So far as we've brought a few trusted agents in to preview the actual system and the reaction has been positive," he says.

The new portal connects to CNA's legacy systems where all the data is drawn, points out Clusky. The carrier has adopted a service-oriented architecture approach to development, which also helped make the project run smoothly.

"We've made investments over the years to create an enterprise service bus, even before it was called that," says Clusky. "It's really been a key component of our overall strategy. We've been able to bring up new capabilities without ripping out the core system that sits beneath it."

Clusky believes there is a lot of efficiency to be gained from this project for both the agent and the carrier.

"For us it's also an expense play in that we spent a lot of time manually reconciling the bills," he says. "This system will reduce that manual intervention significantly. It will reduce the time for the agent, too, because we spent a lot of time on the phone with them discussing these issues."

The new system also will give agents the ability to select whether they want to receive electronic bills.

"With this in place they may not need to have the bill sent to them in paper form," says Clusky. "We haven't factored that in as a huge cost savings. But many agents still feel comfortable with paper in addition to having the electronic piece. So as they get more comfortable with this, as they discover it is exactly representative of the paper--and if they want to print it they can--we believe they will start to elect the electronic format even more."


In terms of the financial aspects of billing, the legacy systems still do a tremendous job of accurately billing, so the back-office work remains in good shape, explains Conlon. She feels the challenge for carriers is delivering the bill the way the policyholder or whomever is receiving the bill wants to get it and providing the customer-service staff with a flexible interface that enables the CSR to provide the best service the customer.

"[Insurers] have been doing billing well for a long time, now the focus is on the customer," she says. "[Mid-tier carriers] have to keep up with the large insurance companies that provide flexible billing options. It's table stakes in order to support flexible billing options and creative delivery of bills."

More carriers are providing electronic bill presentment and allow online payments, and there are many carriers working on electronic bill presentment.

"Carriers understand customer service has to be a top priority with today's systems," says Conlon. "Bills are the most common touch points with your best customers, so it's an opportunity to shine in the eyes of your customer"
Type of Billing Systems in Place
for P/C Insurers

Multiple vendor/package and homegrown systems 16%
Multiple older or customized vendor/
 package systems 7%
Multiple homegrown systems 9%
A single, modern vendor/package system 12%
A single, consolidated, older or customized
 vendor/package solution 38%
A single, consolidated homegrown system 18%

Source: Novarica

Note: Table made from pie chart.

Plans for Billing Systems in 2011

Not on the list 15%
Evaluating a replacement as part of a
 larger core systems replacement project 13%
Evaluating a stand-alone replacement 2%
Minor enhancements to the existing
 system likely 30%
Significant enhancements to the existing
 system likely 20%
Replacement as part of a larger core systems
 replacement project in progress or will
 start this year 10%
Stand-alone replacement in progress or will
 start this year 10%

Source: Novarica

Note: Table made from pie chart.
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Author:Hyle, Robert Regis
Publication:Tech Decisions
Date:Jun 1, 2011
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