Farmers Insurance Group,  United States

Executive Summary / Abstract

To leverage the power of their many recent acquisitions, Farmers Insurance Group assembled a road map of activities encompassing more than 300 separate initiatives to be accomplished through cooperative efforts between business teams and IT. Farmers’ challenge was integrating the technology of legacy customer services systems from their acquired companies and, in doing so, ensure a unified consistent standard of quality of customer service for all Farmers customers.

The initiative had three goals:

Business Flexibility

•  Create a solution architecture founded on a “decoupled” claims tool that could handle a client’s “notices of loss” across all Farmers lines of business. This would create a common intuitive front end that could be deployed across all subsidiaries to promote cross training and balance the workload. It would also aid in the rapid integration of future business acquisitions.

User Productivity Lift

•  A tool was needed that would intelligently drive customer service representatives (CSRs) through the maze of State and process specific rules and regulations required to service and adjudicate a claim. Thus creating a significant productivity lift in the effectiveness and efficiency of the customer service team.

Enhanced Quality / Customer Experience

•  Finally, Farmers needed a tool that could provide measurement and metrics that would allow a program of continuous improvement leading to sustainable gains in Service Quality and in the total customer experience.

Farmers selected Pegasystems’ SmartBPM, a technology that intelligently combines business process, business policy, business rules and reporting into a single integrated package to address these defined needs. Business and IT then worked together to create a single unified solution that transformed the business operation.

The road map provided the guiding vision so that existing technology investments could be further leveraged and that the most critical business needs could be met first. This provided immediate value to the business because of the relatively short time between concept and delivery. The result: drastic improvements in both productivity and customer satisfaction. Farmers also saw significant reduction in the time required for both training of new CSR’s and adoption of the new methods. Finally the company experienced new higher levels of improved quality, accuracy, consistency and speed in the processing of claims.

Overview

Farmers Insurance Group Inc., (Farmers Exchanges) headquartered in Los Angeles, Calif., are a wholly owned subsidiary of Zurich Financial Services. The Farmers Insurance Group of companies is a personal lines property and casualty insurance group providing homeowners, auto and life insurance as well as financial services in the United States. The recent acquisition of AIG’s US Personal Auto Group, including 21st Century Insurance, strengthened Farmers’ position as the third-largest insurance group in the U.S., operating in 49 states and Washington, D.C. The acquisition positions Farmers as the largest auto insurer in several states, including California. Prior to the acquisition, Farmers already provided insurance and financial services to 10.5 million U.S. households.

Farmers Exchanges, serving Farmers Insurance Group, with an industry-leading commitment to customer service, is constantly seeking ways to improve service delivery, particularly claims processing, to customers for all insurance product lines, from auto to personal property.

Driving growth through acquisition of other insurance providers, Farmers faced challenges integrating the customer service systems of acquired companies to ensure quality service for established customers and for customers from acquired companies.

Farmers was processing more than five million inbound and outbound calls annually. They had developed contact centers to centralize operations and created economies of scale to process claims efficiently. They had also developed a primary claims process based on Siebel CRM software in the past, as they acquired more companies; they continued to add other systems to the mix. They soon realized that if they were to continue segregating customer service representatives by the legacy claims system they were accustomed to using, it would diminish the return on employee investment and reduce their claims-handling capabilities.

Farmers assembled a road map of activities encompassing more than 300 separate initiatives to be accomplished through cooperative efforts between business teams and IT. The overall goals of the initiatives were to introduce standardized business practices, develop standardized business rules, enable faster service capabilities ramp-up, capitalize on functions shared across all business and product lines, and reduce training costs associated with customer service support systems.

Farmers turned to a joint business and IT development process to define the operating requirements of the project. First, the application needed to be easily configurable to maximize use of business and IT resources. Next, it needed to support the current claims application (Siebel). It needed to demonstrate performance and scalability to support large volumes of calls and staff, particularly when Farmers responds to natural disasters or other large-scale catastrophes. Finally, it needed to be an “agnostic” front end that could easily integrate with disparate back office and external applications across all of Farmers Insurance Group as well as potential “to be” acquired companies.

After reviewing offerings from four companies, Farmers selected Pegasystems’ SmartBPM as the framework to support FNOL for its auto claims. The powerful SmartBPM engine contains both rules and process to enable intent led interactions bringing the right data and the correct choices to the CSR’s screen at the moment they are needed.

The results were significant, including drastic improvements in both productivity and customer satisfaction. Farmers not only reduced training time and costs; it drastically sped up the processing of claims. In a business where hundreds of thousands of claims are in various stages during the course of any given year, streamlining these processes makes a world of difference.

Business Context

Founded in 1928, Farmers has approximately $18 billion in sales. Today, Farmers Insurance Group of Companies is the third-largest insurer in the U.S. of both private Personal Lines passenger automobile and homeowners insurance, and also provides a wide range of other insurance and financial services products. Farmers operates primarily in 41 states across the country through the efforts of approximately 24,000 employees. Farmers exclusive and independent agents, along with Farmers employees, are responsible for servicing more than 15 million customers.

Farmers’ recent acquisition of 21st Century Insurance from AIG placed the company in the top three largest insurance group in the U.S. The acquisition presented Farmers with the challenge of integrating the customer service systems of acquired companies to ensure quality service for established customers and for customers from acquired companies.

Farmers Exchange undertook this project to bring a new degree of order and consistency to their contact center operations. There was an inability to readily integrate the customers of the newly acquired companies with the same level of high quality of service that Farmers was known for offering.

Over time, the multiple acquired systems were not integrating information or performing well together. The training of each system for customer service associates (CSRs) was becoming lengthy and costly for the organization. The segregation of the CSRs to each system was reducing productivity as well.

HERO vision

Most importantly, it was taking away from Farmers’ customer service as well as the CSR job of managing their interactions with multiple systems was becoming more difficult. Turnover was much higher than normal, and higher than what was acceptable. To maintain these old methods were too costly and inefficient to continue.

A solution that could bring together the many disparate systems into a single cohesive platform was needed.

The Key Innovations

Business

Farmers, departed from the typical development model whereby the business side submits requirements and IT reviews those requirements and re-engages the business once having built the solution. They took a different tack, where the business people represented each of the sections for auto and spent eight months with IT at a development center participating in daily sessions analyzing requirements and processes for the project. Throughout the whole phase, iterative development methods allowed team members to witness systematic development of the tools they would be using. This helped to minimize the surprise at the end. It also enabled them to see whether the options for the CSRs within the GUI (graphical user interface) were either overboard or where it might need more functionality.

From this project, Farmers replaced the complex legacy systems with a proprietary application that provided CSRs with an easy-to-use front end dubbed “HERO.” HERO presents information and logically sequenced questions to guide customers through the FNOL process. The HERO contact center piece puts all claims first notices and status calls on a common platform so that CSRs only have to train on one system, regardless of the back-end claims or policy system.

Elaboration Phase

Process

Process (Before) – The processes were all manual and reflected the knowledge of the individual claims handler and their experience with their respective systems. Multiple call center organizations, across the United States, handled calls in radically different manners. Call loads could not be balanced or shifted as demand changed. Ramp up for emergency situations (e.g., hurricanes, earthquakes, large scale natural disasters) was long and costly.

The CSR’s dealt with multiple backend systems in order to service the needs of the caller. Creating inconsistent customer experiences across the board. Much of the call quality depended on the CSR’s experience level and knowledge of where to look for information.

Performance reporting was haphazard and lacked standardization. The training cycle was long. Burn-out and turnover were common and help to drive costs upward.

The CSR training cycle was long and costly. Once trained, CSR’s still had to spend months and weeks getting proficient in using multiple systems. The skills acquired in training were not fungible across the greater organization.

In summary, the process would not scale and would not support or work for company that was rapidly growing through acquisition.

Process (After) – The claims processes for notice of loss are all automated and reflect best practice of the greater Farmers organization. The collective knowledge of the individual claims handler and their experience has been incorporated into the BPM tool. All calls, through multiple call center organizations, across the United States, are handled in a standard, measurable and repeatable manner. Call loads can be balanced and shifted as demand changes. Ramp up for emergency situations (e.g., hurricanes, earthquakes, large scale natural disasters) can be achieved in a manner of hours. Additional staff can quickly and easily be trained.

The CSR’s deal with a single intuitive interface to service the needs of the caller. Creating consistent and informed customer experiences across the board. The call quality emanates from the CSR’s ability to listen to the caller’s need and the BPM tools ability to lead the process intelligently through context aware computing. As a result, average handling time has been reduced by 20%. This added capacity allows Farmers to take on an increased call load with incurring addition costs.

Performance reporting is consistent and deep with industry accepted standardization. Reporting can be generated at the CSR, unit division or organization level either real time or through an extensive system of reports and charts.

The training cycle is short. It requires one day to become proficient on the system and to immediately take customer calls. Burn-out and turnover have been significantly reduced.

In summary, the current process can scale to meet the business needs, is agile and built for business change. Farmers has continued to pursue an aggressive M&A strategy that has solidified its market leadership and increased revenues.

Organization

The project impacted the employees by creating a better CSR experience, thus creating a better customer experience overall.

Farmers wanted to allow the CSR to focus on the customer’s needs and let the system do the heavy lifting and decisioning based on the responses of the customer. This was accomplished through an approach known as “intent-led” processing. Intent led processing is enabled when processes are sophisticated enough to be content aware. For example, as the CSR works through the call on an accident claim, an event like “car drivable” or “car not drivable” would initiate totally different streams of activities and tasks based on the customer’s response. If the car was not drivable the CSR would automatically be presented with lists of towing companies and car rental companies for the applicable area. If the car was drivable the CSR would see the applicable repair shops. The customer’s choice would always lead to more context sensitive processes that supported the CSR’s ability to service the client, until the call was completed.

The customer experienced a highly customized interaction driven by the situation, the need and the policy coverages. Once the loss data was captured, the claim is then routed to all involved parties (e.g., physician, hospital, car repair, glass replacement, towing, auto rental etc.) and tracked with specific service levels (based on the policy and coverages). At any point in time the claim status (and all parts and pieces) can be determined by the claims manager.

Before this project, the CSRs would have to enter all the data of the customer calling, check multiple systems for information and approval. However, the biggest challenge would be constantly keeping all the elements of the process in their memory. From a management perspective, accurately tracking claim status was a nightmare, particularly on complex claims. The claim event and all the components were very difficult to reconstruct and to visualize.

Hurdles Overcome

Management

The project had a dedicated VP-level champion who managed the cross-functional project team and served as a catalyst in bringing IT and business together for this corporate-wide success.

The challenge the management faced was navigating and understanding the impact that a collection of acquired systems had on contact center operations, then having the wherewithal to realize that changes must be made.

They overcame this challenge by implementing the project and incorpora ing all the needs of the employees, management and the customers.

Business

The launch began with a revamping of the first notice of loss (FNOL) system for automobile claims because it is a critical, high-volume point of contact for customers. With the success that the automobile claims line of business, Farmers can now implement it to other areas of the company’s vast line of businesses. This one project, the implementation of HERO can be across other lines of business to produce similar results.

Organization Adoption

Adoption has been a “grass roots” phenomenon. Organizational adoption has quickly occurred as this intuitive CSR-centric system has liberated staff at one contact center after another. The challenges that CSRs faced was the fact there were multiple CRM systems to use. The jobs of a CSR were difficult and cumbersome with the multiple systems.

Benefits

Since going live, HERO has driven up CSR quality assurance scores in terms of both efficiency and file quality, as measured by appropriateness of the claim paid. The application also has driven reductions in overall claims handling times and queue times, enabling more calls to be handled by a representative in a given day. Furthermore, the application facilitates rapid ramp-up in response to catastrophes.

In a catastrophe situation, Farmers can ramp up to service within a couple of hours rather than waiting days trying to figure out how to put more employees on the floor at call centers to answer calls. Because of the intent led processing, HERO also enables CSRs to be trained in a single day rather than over a two-week period, as was necessary with the multiple legacy system.

The application's ease of use drives both efficiency and CSR morale. It was cited in an e-mail from a supervisor that ends with the following statement: “I cannot say how grateful I am to every single developer, every dollar spent and all the people who travelled for so long to make this remarkable product for us to use...This is the Cadillac of claims reporting; it is our future, and it is our HERO!”

 

HERO was able to reduce costs by reducing training hours and costs associated with training. Instead of having multiple systems and training on each, this one easy-to-use system.

Actual training time was reduced from two weeks to one day. This 90% reduction, as incredible as it is, reflects only part of the cost savings. The “intent led” nature of the content aware processes give the new CSR the full benefit of all the best practices used by a seasoned and experienced employee. So the traditional learning curve to achieve effectiveness with customers is dramatically impacted in Farmer’s favor.

In addition, staff turnover has been reduced as has employee burn-out.

Finally, the re-use of technical components used to build the Hero BPM solution was evaluated to be at approximately 45%. This re-use factor will speed further development initiatives and continue to lower the total cost of ownership of the technical applications. (A PowerPoint deck is available outlining the technical savings in greater detail)

Time Reductions

The application has also driven reductions in overall claims handling times and queue times, enabling more calls to be handled by a representative in a given day.

Average Handling Time (AHT) has been reduced by 20%. The equates to adding an additional 20% to the staff at no additional cost. Meaning the current staff can handle higher call volumes without the need to add additional staff.

Increased Revenues

The application has allowed Farmers to actively engage in M&A activity, bringing new books of business quickly into the standard Farmers HelpPoint© business model. Farmers is no longer constrained in its growth through acquisition strategy.

Productivity Improvements

Farmers Group delivered a number of business milestones in the first year of this project including an increase in the quality measured in processing claims.

Overall quality scores have improved by 6% indicating improved customer experiences and enhanced service.

The table below indicates other business productivity improvements brought on by the Hero project:

HERO

Business Area Productivity Benefits
State Requirements All mandatory state specific scripting is included
Additional Suggestion/Recommendation scripting is available
Coverage System will clear more coverage issues behind the scenes (without CSR intervention)
Reduced calls to the CCST to validate coverage
Early coverage validation results in fewer claims stuck in pending status
Automated File Notes All required file note information is gathered by the system
Total Loss Screening More accurate gathering of damage description
More accurate point totals
System will identify when a vehicle qualifies for total loss
Vendors No more “missed” vendors
System takes CSR through the options in correct order
System will not offer a vendor if it does not apply (policy and coverage)
All search results will display automatically without CSR intervention or delay

Best Practices, Learning Points and Pitfalls

Best Practices, Learning Points and Pitfalls

Best Practices and Learning Points

  • Focus on the customer as a central point by building the process that gets to where the customer wants to go
  • Have IT and business work together to rapidly develop business solutions; Rapidly prototype and iterate the targeted solution
  • Eliminate the non-value added process steps
  • Listen and learn from the current process; focus on key dysfunctional areas
  • Ensure that all processes achieve a high level of consistency permitting customers to receive the same excellent quality of service

Pitfalls

  • Cultural aversion to process; communicate every step of the way with audiences across the organization to make them comfortable with the idea of process
  • Leading with technology; successful BPM projects are driven by business imperatives
  • Failing to construct an intuitive process; make sure the process makes practical business sense and delivers real results

Competitive Advantages

With a new, single-screen interface, structured, fully scripted and question-and-answer based processes, CSRs process more claims, in less time, resulting in improved customer satisfaction and increased productivity.

Because HERO is scalable, and has received a positive response from auto claims CSRs, it’s being implemented to support Farmers recent acquisition of 21st Century Insurance (auto) and other lines of business including commercial property, property, specialty, and worker’s compensation.

With HERO, Farmers can implement this strategy to other lines of business. Auto was the first business line to benefit from it, and several more lines of business could use an approach that HERO provides. Farmers, for the short and long term, is looking replace the entire core claims application and improve the level and quality of client service, while simultaneously raising productivity and generating cost savings across multiple business lines.

Additional advantages:

  • Increased Straight Thru Processing – Claims are handled efficiently and completely. Fewer are set aside for additional review and manual handling. STP reduces operating expense ratios and gives a competitive edge.
  • Reduced Training and Call Time – Farmers can ramp up for disaster situations rapidly. The faster claims are resolved, the lower the overall cost of claims.
  • Enhanced Coverage Verification – Knowing early in the process whether a claim should even be considered is critical to keeping costs lower than the competition.
  • Improved Accuracy of Potential Total Loss – Knowing when to declare a total loss or to attempt salvage is a key differentiation factor. Automating the scoring improves consistency and reduces leakage.

These collective factors will allow Farmers to keep its overall costs to adjudicate a claim low and keep its overall pricing highly competitive in the marketplace.

Technology

After reviewing offerings from four companies, Farmers selected Pegasystems’ SmartBPM as the framework to support FNOL for its auto claims. The powerful SmartBPM rules engine contains administration rules and enables intelligent interactions according to rules of specific claims transactions. Farmers also chose Pegasystems Process Commander (PRPC) as the framework to their project.

Farmers selected PRPC because of its agility, functionality and because it less costly than purpose-built solutions. It was the only solution that met all of Farmers’ requirements. The idea behind Farmer’s road map was to decouple certain processes and functions to get the most out of a solution, change its view of technology and the current working environment, as well as move toward a service oriented architecture environment. This technology enabled that to happen.

Based on the SmartBPM tool, HERO triggers the right questions, gathers the right answers and integrates into the claim system itself so that all information becomes part of the case file. Key to the application’s functionality is the ability to support scripting through logic for specific loss types reported and to enable intuitive process workflows.

The Pegasystems capabilities within HERO are integrated with back-end applications, including claims and some policy administration systems, through an Oracle BEA Aqualogic Service Bus. Most of the information is passed through the main Oracle Siebel claims system so that the adjusters in the field get everything they need as the Siebel systems knows exactly what has been handed to it. Basic information is also retained within HERO, so if there is a subsequent status call on a given claim, the CSR can present the current status of the claim. It is a true front layer of the main claims application.

The Pega solution delivers a variety of unique features that have impacted the Farmers project and delivered industry-first results. Among these are:

Directly Executable Business Objectives – Business users can input their business objectives, process steps and business rules directly in the system. Additionally, they can change, based on their security profile, rules and tables that run their organizations without the need for programmer intervention or coding.

Unified Policies and Procedures – Business users understand that they can change a rule in one place and they are guaranteed that the rule self-deploys across the business, appropriately

Situational Layer Cake – Business processes can actually share their true commonalities so that rule maintenance is significantly decreased. This allowed Farmers to specialize standard claims reporting processes by state, thus eliminating redundant rules across a standardized process.

Flex Scale Deployment – HERO has been integrated with multiple external and internal legacy systems, eliminating issues with data entry and data integrity. HERO can scale to accommodate additional business users and locations without performance degradation.

Intent-Driven User Experience – The process begins with the end result in mind. The system now asks only those questions that need to be asked in order to get the result intended and the task accomplished, leading to significant time savings and customer satisfaction.

The Technology and Service Providers

Pegasystems, the leader in business process management and a leading provider of CRM solutions, helps organizations enhance customer loyalty, generate new business, and improve productivity. Pegasystems’ patented Build for Change® technology speeds the delivery of critical business solutions by directly capturing business objectives and eliminating manual programming. Pegasystems enables clients to quickly adapt to changing business conditions in order to outperform the competition. http://www.pega.com

© Copyright: This case study was originally published in the Excellence in Practice series in the book entitled “Delivering BPM Excellence” Get the complete book in both Digital (download PDF) and Print Editions at http://futstrat.com/books/Delivering_BPM.php published by Future Strategies Inc.

Nathaniel Palmer
Author: Nathaniel PalmerWebsite: http://bpm.com
VP and CTO
Rated as the #1 Most Influential Thought Leader in Business Process Management (BPM) by independent research, Nathaniel Palmer is recognized as one of the early originators of BPM, and has led the design for some of the industry’s largest-scale and most complex projects involving investments of $200 Million or more. Today he is the Editor-in-Chief of BPM.com, as well as the Executive Director of the Workflow Management Coalition, as well as VP and CTO of BPM, Inc. Previously he had been the BPM Practice Director of SRA International, and prior to that Director, Business Consulting for Perot Systems Corp, as well as spent over a decade with Delphi Group serving as VP and CTO. He frequently tops the lists of the most recognized names in his field, and was the first individual named as Laureate in Workflow. Nathaniel has authored or co-authored a dozen books on process innovation and business transformation, including “Intelligent BPM” (2013), “How Knowledge Workers Get Things Done” (2012), “Social BPM” (2011), “Mastering the Unpredictable” (2008) which reached #2 on the Amazon.com Best Seller’s List, “Excellence in Practice” (2007), “Encyclopedia of Database Systems” (2007) and “The X-Economy” (2001). He has been featured in numerous media ranging from Fortune to The New York Times to National Public Radio. Nathaniel holds a DISCO Secret Clearance as well as a Position of Trust with in the U.S. federal government.

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