Business Process Change, 3rd Ed.  Case Study  

This case study contains 6 reading sections and 9 questions. Please read each reading section and post your answers to the questions under the file exchange section of your individual boards. Questions 1, 2-A, and 2-B are due by Noon September 22nd. Question 3 is due by Noon October 4th, and Questions 4, 5, 5-A, 5-B, and 6 are due by Noon December 8th. 
The Boat Insurance Case Study

Reading 1.  BPT Insurance

BPT Insurance has been in business for a number of years.  The company has, in the past, sold life, home and auto insurance.  Their clients are middle class professionals in the state of Ohio.  The company recently decided to add a new line – insurance for motor and sail boats.  

Assume that the insurance company headquarters is in Cleveland, Ohio.  They define the product, market the insurance, have underwriters to approve policies, and IT applications to manage monthly billings and other financial tasks.  The company has an investment department that invests the income from policies to earn income that is then used to pay for damage or replacements when necessary. The company depends on local, “independent” agents to actually sell the insurance, and they subsequently meet with customers and document any claims that are made.  The agents operate out of their homes and link to the company headquarters via a company website. The agents all report to a sales and support manager who is located in Cleveland.

Figure 1 provides a high-level organization diagram of BPT Insurance of Ohio.  In essence Boat Insurance Policy Planning functions as new product development.  Underwriting is a core operational activity, but is kept separate as a control on the over-enthusiastic acceptance of new policies.


Figure 1.  BPT Insurance of Ohio:  Organization Chart

Question 1

Since the process is new, a team was assembled to assure that the new process was designed in an efficient and effective manner.  Their first job was to define the process they were going to focus on.  They began with a single process box to name the process and to define the key inputs and outputs of the process.  Sketch a basic process diagram for this new process.

Reading 2.  Understanding the Project - 1

The second thing the process design team focused on was the development of a stakeholder diagram that would define the major stakeholders in the Provide & Sell Boat Insurance process.  Imagine a series of interviews with managers and perspective customers.  At some point, the process design team would branch out and consider the interests of employees and field agents and groups like the Investment Department and IT support, and the Government Agencies that regulate Insurance in Ohio.   In each case, the team would make notes on how the various stakeholders will likely interact with the new insurance process.

Question 2-A 

Prepare a Stakeholder Diagram for Provide and Sell Boat Insurance.
Question 2-B.  Understanding the Project - 2

Now that the process team has a good idea of who cares about the Provide and Sell Boat Insurance, they are in a position to work up a tentative list of the measures that the process redesign team (and management) can use to determine if the process is working well or not.  In the real world, you would get this information from interviews with the various stakeholders.  In this case, we will just ask you to imagine yourself in each of the stakeholder roles, and then to write down what you would be concerned about.

Prepare a table with the following information:

The Stakeholder	What the Stakeholder 		How the Team Could
			Cares About:	 			Measure Success:

Reading 3

As a result of interviews with various stakeholders, the process redesign team discovered that there were a number of problems.  For example, although most policy holders (customers) were happy with their agents, policies, and the way claims were handled, a few thought claims payment was unnecessarily long.  The management team explained that, as the company relied on field sales agents to review and approve claims, and then had an in-house adjustor review the photos and paperwork the agent send in, that it was often a lengthy process.  Some argued that the company should separate the agents, who sold the policies, from the claims adjustors who checked on claims, but others argued that they would cost too much, requiring a staff of field adjustors.  Field Agents felt strongly that they should maintain the interface to the customer. Others argued that it could be simplified if they simply let clients send in digital photos, and only asked agents to check when there was significant doubt.

Some agents complained about the computer interface they used to interface with the sales manager and to input information about new policies and asked that it be improved.  Similarly, some clerks complained that it was often difficult to get information on older policies from the database and asked that their computer-database interface be improved. 

Senior management has complained that the managers of the Provide & Sell Boat Insurance line do not submit their plans and budgets on time and have asked the local manager to submit earlier.  Similarly, government insurance regulators have complained that the local management team sometimes submits financial data late and on the wrong forms.

Question 3.

Using this information, and other information you have about stakeholders, develop a Scope Diagram that shows the Provide & Sell Boat Insurance process and highlights the products or activities that might be improved.

Highlight events or artifacts that seem to be problematic.  Draw a bold line to indicate the final scope of the project.

Reading 4.  Phase 2; Analyze the Business Process

There are several problems facing the process team that wants to improve the Provide & Sell Boat Insurance process.   Let’s start and see if we can figure out how the sales process actually works.  Here are the notes the process analysts made as they talked to both the sales manager and several field sales agents in a group session.

The key thing to understand, according to the sales manager, is that sales agents are independent salespeople.  They have a license or contract with BPT Insurance to sell Boat Insurance.  They take a course put on by BPT Insurance on the features of the BPT Boat Insurance policies, and on how to submit policy information and claims.  The course is built around the BPT Boat Insurance Application that is available, online.  The application runs on a server at the BPT Insurance IT department and passes information back and forth between the BPT Boat Insurance group, including the sales manager, and the field sales agents.  The application supports sales planning and reporting, policy entry, the entry of changes, the filing of claims, and policy data access.

A field sales agent explained that the easiest way to understand the arrangement was simply to follow a typical sale.  The field agent has a target for each month.  Fees and bonuses are based on achieving targets and going over target.  An agent meets with a prospect and sells the policy.  Most agents work with boat stores and marinas in their area to get prospect leads.  In some cases, boat store owners are, themselves, agents.  Once a prospect agrees to buy and writes an initial check, the agent goes online and submits all the information, via their computer.  The registration clerk at the Boat Insurance group at BPT Insurance checks each policy submittal, requests any missing information, deposits the check, and proceeds to set up a billing program for the customer.  The company bills either once a year or quarterly, as the policy holder prefers.  If any customer information changes, the customer can either write the information on the payment form, which is processed at the insurance company, or notify the agent, who then submits a change request via computer.  If anything happens to a boat that is insured, the policy holder notifies the agent, who comes out, verifies the damage, takes photos, and then sends a report and scanned photos to BPT Insurance.  A claims agent at the Boat Insurance group reviews all claims and determines the payment due.  If there are disagreements, they can be adjudicated by the policy holder, the agent and the senior claims adjustor, according to the rules established by the policy.  Once a claim settlement is agreed upon, a check is cut and mailed by the insurance company.  Eventually, when the boat is sold, or the policy holder decides to change the policy, the agent files a policy cancelation notice via computer and the Boat Insurance group registration clerk sets the policy to inactive.

Try working up a rough draft of a BPMN diagram that describes the process flow from a customer agreeing to buy Boat insurance to cancelation.  To keep things consistent, let’s agree that there are two customers, the policy holder, and the insurance agent, and both interface with the BPT Insurance Boat Insurance process.  Treat the IT application as a swimlane within the Boat Insurance process that lies between the agent and the company employees.

Question 4

Prepare a first draft BPMN diagram that shows the Boat Sales Insurance Process.  Be clear about how the customer interacts with the Insurance Company. 

Reading 5

In working up the BPMN flow diagram, you will notice that there are several occasions where the Registration Clerk has to update policies.  As this occurs often, it’s important to get it right, so the BPM team decides to define this specific process in more detail.  To do this, they interview the supervisor of registration clerks and several actual clerks.  They also watch the registration clerks perform updates.   Here are the notes they came up with.

Customers often provide information about updates – usually hand written on statements that are returned with payments, but occasionally included in separate letters.  Or the customer talks with an agent who sends an email to the registration department.   Each request must be evaluated.  In essence, most requests are routine – a name has been misspelled or the customer has moved from one address or another.  On the other hand, some requests involve basic changes in the policy.  If a customer sells a boat and buys another, then one policy must be canceled and another initiated.  Similarly, the insurance is only valid for an Ohio residence, as it is always interpreted under Ohio law.  A client can use or even dock his or her boat anywhere, as long as his or her residence is in Ohio, but a client that moves from Ohio to Indiana will necessarily need to cancel his or her existing policy and get new insurance in Indiana.  If the registration agent determines that a proposed change is a “policy changing change,” the agent refers the request to the claims adjuster who notifies the agent that the policy has changed or must be rewritten or canceled.  Assuming the clerk determines that the change is legal and can be made, the clerk accesses the Boat Insurance Application and calls up the customer record – by entering the customer account number.  The clerk then moves to the appropriate computer screen, finds the item to be changed and makes the change.  When the clerk is satisfied that the change is correct, he or she selects UPDATE and the change is made.  The system automatically documents when changes are made and who makes them, and saves old data in case a change needs to be reversed.  The clerk then files the request document that generated the change and moves on to his or her next task.

Question 5

Prepare a BPMN diagram to document the Policy Information Updated process.  Draft business rules to document decisions that must be made.   To do this, create a new swimlane for the IT Dept/Boat Insurance Application.

Question 5-A.  The interaction between the clerk and the insurance application clearly involves computer screens.  Describe how a use case might be developed to specify how the screens could be improved.

Question 5-B  Assume that the clerks were not doing a good job entering updates when they arrived.  Describe how you might analyze the human performance situation to identify problems the clerks might be having.  Create a fishbone diagram to illustrate the things you might consider.

Reading 6:  Redesigning the Boat Insurance Process

Given what they had learned during the analysis phase, the process redesign team decided to make some specific changes in the boat insurance process.  They changed the date for when government reports were prepared, to allow more time, and made it a managerial responsibility to assure that reports were submitted on time.  They did the same thing for reports for senior management, and warned Boat Insurance managers that a portion of their bonuses would depend on getting reports in on time.  The company also decided to make the use of field Agents optional in the claims process.  A customer could use an Agent, if they wanted, but they could also file a report directly, on line, by going to the company website, selecting Boat Claim, filling in the information and attaching photos taken by a digital camera.  This information would be routed directly to a Claims Adjustor who would prioritize the analysis of the claim and respond with a payment proposal within 3 days.  In exceptional cases, the Claims Adjustor would ask a field Agent to check out the claim, but in most cases, they would propose a payment as soon as they received the online documentation.

The team also recommended that the training for the Field Agents be modified and that their incentive program be modified to assure that the agents paid more attention to sales reports and dealing with claims when appropriate.

The team also considered launching a separate project to define the business rules involved in analyzing change requests and to eventually incorporate those rules into the Website so that customers would know immediately when they applied for changes that would violate company policies.

Question 6.  Implement the Redesigned Business Process

Start with this process diagram that pictures the original process.  Modify this diagram to show how the process team decided to change the process to simplify claims.