The Case for Change

© 2007 Accenture. All rights reserved.
Achieving High Performance
in Insurance Billing
SAP Americas Insurance Forum, November 2007

Billing and Revenue Management has a dramatic effect on insurers,
reinsurers, and agents
High Performers balance the three forces that are
impacted by billing and revenue management
Potential to drive fee income
balanced with an impact on
investable funds
Financial
Performance
Operational
Efficiency
Customer
Satisfaction
Key driver of customer and channel satisfaction and
dissatisfaction – most common touchpoint with
“customers”
Inefficiencies cost money, hinder
growth, and create compliance
problems
© 2007 Accenture. All rights reserved. 2

The Case for Change: Billing currently only gets the appropriate
attention when things go wrong
High Bad debt writeoffs
AR > 90 days
High DPO
High Collection Costs
Financial
Performance
Operational
Efficiency
Customer
Satisfaction
High-Levels of billing-related customer calls
Customer service can’t solve problems
Agents driven to “easier” carriers
Low customer retention
Exception-based/fragmented processes
Tribal-knowledge-driven operations
Systems/processes hindering change
Focus on non-value-add activities
© 2007 Accenture. All rights reserved. 3

The Case for Change: Financial Performance
Typical Problems
It takes the larger P&C carriers an
average of 85 days to turn premium into
cash
The average carrier loses .40% of
premium to bad debt
Potential Opportunities
A 15% improvement would add over
$15mm to the bottom line if invested at a
marginal 3%
A 15% improvement would net the larger
carrier an average of $3mm per year
Financial Financial
Performance
Performance
Operational
Operational
Efficiency Efficiency
Customer
Satisfaction
© 2007 Accenture. All rights reserved. 4

The Case for Change: Operational Efficiency
Typical Problems
Billing operations are typically
poorly funded (~0.15 to .25% of
premium)
Limited operational and
performance data available to
make informed decisions
Billing systems are old,
undocumented, difficult to
maintain, and don’t support the
changes in the business
Carrier is “beholden” to scarce
resources and/or specialized
vendors
Potential Opportunities
Make the best use of the budget by industrializing low
value-add activities and focusing on high value-adds
Transition transactional and non-core processes to
lower cost, focused providers (e.g., BPO, ASP,
lockbox, cash application, collections)
Create a reliable repository of data that provides timely
and accurate information for management decision
making
Create systems and processes that the business can
own and configure. IT and business should partner to
have the technology and business processes
constantly enable change in each other.
Improved systems allow for expanded business options
and improved time to market: products, targeted
payment plans, bill formats, bill messaging, invoice
delivery options
Choose a solution that allows resource and vendor
flexibility. Implement it as “vanilla” as possible and rely
on the software’s ability to support best practices
Financial
Performance
Operational
Efficiency
Customer
Satisfaction
Systems and processes either Drive out inefficiencies with systematic controls through
require inefficient work-arounds or proactive workflows and/or reactive auditing
don’t even support major aspects
of controls and compliance
© 2007 Accenture. All rights reserved. 5

The Case for Change: Customer Satisfaction
Typical Problems
Customers are confused – especially
on the 1 st bill, renewals, or
endorsements. The bills reflect
upstream problems that are difficult to
explain to the customer
An average of 80% of the customer
calls are related to billing – however,
most are really just upstream
problems poorly reflected in the bill
Agents are disincented to work with
difficult billers
Insureds aren’t comparing carriers
against each other. They are
comparing carriers against all of the
other bills that come in the mail
One size does not fit all, but current
systems don’t allow targeting and
flexibility
Potential Opportunities
The bills can contain customized explanations and
online self-help capabilities exist. The call is likely to
go to the agent who must have the tools available to
understand what is happening. Be careful with
“flexibility” if it begets confusion.
Track the root causes of “billing” issues and fix
them. If a customer call is required, track how many
contacts it takes to resolve it.
Reduce paperwork and make it easier for agents to
solve problems through responsive service centers
or self-help utilities
Pick up best practices from other industries – they
are not that different. Bill designers and testers can
help
Targeted customer strategies on both the front end:
payment plans, payment options, bill formats and
the back end: collection strategies, late fees, etc.
lead to more satisfied agents/insureds
Financial
Performance
Operational
Efficiency
Customer
Satisfaction
© 2007 Accenture. All rights reserved. 6

Making the Change: Billing Should Be a Value-driver, Not Cost-
Center
Typical Carrier’s Current Billing
High Days Premium Outstanding
Customer/Agent Dissatisfaction
High Reconciliation Costs
Resource/Vendor Risks
Lack of Controls and Transparency
No Support for EFT, Credit Cards, etc.
Disparate Billing Systems and Processes
Poor Cash Management
No Automated Workflow
Cannot Support Shared Services
High Performance Billing
DPO Improvements Typically Provide
12-18 Month Payback
Customer and Agent Self-Service Tools;
Better Customer Care Tools
Automate Reconciliation and Optimize
Business Processes
Industry Standard Tools; Business Manages
the Tools
Bullet-Proof Compliance and Auditability
Current Tools Continuously Updated
With Best-Practices-Based Processes
One Platform with Flexibility to Process
Multiple Lines
Tightly Integrate all Cash-Related Systems
Workflow to Track and Speed Issue Resolution
Standard Infrastructure and Processes
Enable Shared Services
© 2007 Accenture. All rights reserved. 7

Most of these problems, and potential benefits, are common to
other industries so we can learn from them
Goals of Effective Billing and Revenue Management
Telecom, Utilities, etc. Insurers/Reinsurers/Agents
� Convert sales to cash as
quickly as possible
� Minimize service
interruptions to customers
� Convert sales premiums
written to cash as quickly
as possible
� Minimize service coverage
interruptions to customers
Billing has a Huge Impact on Any Company
� The bill is one of the few touchpoints all customers have
with the company
� Upstream problems manifest themselves on the bill
� Most customer service contact is due to “billing issues”
Benefits to Improving Billing and
Revenue Management
� Higher Revenue: More satisfied
“Customers”
� Cash Flow Improvements
� Cash can be invested, outstanding
AR can’t
� Fees can be a significant source
of income
� Reduce bad debt
� Operating Costs Improvement:
� Lower the overall cost of the
billing and revenue management
function
� Improve the ability to support the
business’ growth – rather than
hinder it
© 2007 Accenture. All rights reserved. 8

Some specific lessons from other industries translate well to
insurers
All levels in the organization must share the mindset that billing should be a value center rather than a cost center
Find the right metrics that incent the right behavior
Empower someone to be able to describe what is happening – even if the cause is upstream
Automate and industrialize as much as you. Outsource non-value-add activities
Keep it simple – balance clarity with flexibility
Direct as many customers to self-service as possible
Lessons Learned
One size doesn’t fit all – different strategies are needed for personal/commercial, agent/insured, standard/nonstandard,
etc.
Provide the tools required to do, and measure, the job right
Decrease check payments, increase electronic payments and credit cards/PIN-less debit
© 2007 Accenture. All rights reserved. 9

How do we start the transformation?
Transformational Step Important Considerations
Achieve organizational acceptance that billing
is a key driver of customer service and financial
performance
Integrate all billing-related activities into one,
cohesive solution. Industrialize and centralize.
Move towards one, integrated billing system
Catch up on new services, then differentiate
with your own
Consider alternative delivery models (ASP,
BPO, ITO, etc.)
• Solicit research and help quantifying the costs and
benefits
• Ownership should be shared by the business,
finance, customer care, and IT
• Share service across LOBs
• Present one face to the insured and agent
• Continuously improve processes to minimize costs
and maximize returns
• Integrate with other systems – don’t knot together
• Enable the business to continuously tweak systems
and processes for ongoing improvement and new
business models
• Insured, agent, internal business self-service
• New settlement methods (credit cards, EBPP, direct
bill)
• Consider the models at any point in your transition
• Rely on the experience of service providers
• Jealously guard control over insured and agent
interaction
© 2007 Accenture. All rights reserved. 10

Keep an eye on key metrics to keep the three forces in the balance
desired
This triangle doesn’t necessarily need to be equilateral. It is up to senior management to
decide where the company wants to focus. But, it is up to the billing and revenue
management team to ensure that all three forces are continuously considered
Quantify and Watch
Cash Flow
Working Capital
Fees Income and Expense
Sample Metrics
Days Premium Outstanding (DPO)
Bad Debt % of Earned Premium
AR Aging > 30 days as a % of all AR
Financial
Performance
Operational
Efficiency
Customer
Satisfaction
Quantify and Watch
Retention
Quantify and Watch
Overall Billing Costs
Sample Metrics
Total Billing Dept Cost as a % of Revenue
% of Invoices Mailed within 24 Hours
Collection agency recovery ratio
% of Payments Processed Electronically
Sample Metrics
% of Billing Related Customer Service Calls
% of First Call Billing Resolution
Billing Statement Readability/Understanding
© 2007 Accenture. All rights reserved. 11

When designing a best-practices-based solution, break the
functionality down into small parts and apply the three forces to
every requirement
Organization
Process
Technology
Accenture’s High Performance Insurance Billing Framework
Billing
Accounts
Receivable
Customer
Care
Mgmt &
Analysis
Policy
Systems
Integration
Cash Receipt
Issue
Resolution
Controls and
Compliance
Agency Bill
Direct Bill
Invoicing
Cash
Application
Dunning and
Collections
Reporting
and Analytics
Payment
Plan
Commission
and Refund
Payment
Self-Service
Reconciliation
Training, Deployment, and Knowledge Transfer
Finance and Performance Management
Electronic
Funds
Transfer
General Ledger
Integration
Correspondence
Master Data
Management
© 2007 Accenture. All rights reserved. 12
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