CAPACITY PLANNING MANAGEMENT ASSIGNMENT

On

IMPLEMENTATION OF BPR IN INSURANCE INDUSTRY

By

Kriti Sharma (A-21)

Kreepa Shankar Chourasiya (A-36)

Shivam Aggarwal (A-44)

Virish Chauhan (B-37)

Karan Mittal (C-27)

INDUSTRY: Insurance

Under the Supervision of

Dr. Abhay Kumar Srivastav

Department of Operations

At

AMITY BUSINESS SCHOOL

AMITY UNIVERSITY UTTAR PRADESH
SECTOR 125, NOIDA - 201303, UTTAR PRADESH, INDIA
 TOPIC: Implementation of BPR in the insurance sector

CAPACITY PLANNING PROCESSES

Capacity planning is essential to be determining optimum utilization of resources and plays an

important role in decision-making process, for example, extension of existing operations,
modification to product lines, starting new products, etc.Strategic capacity planning is essential
as it helps the organization in meeting the future requirements of the organization. Planning
ensures that operating costs are maintained at a minimum possible level without affecting the
quality. It ensures the organization remain competitive and can achieve the long-term growth
plan.

Need of Capacity Planning

Capacity Planning Processes are essential in any organization as it helps in following ways:

● Determine service level requirements

o During the first step in the capacity planning process, these workloads must be
defined and a definition of satisfactory service must be created.
o What type of work is being done (order entry, financial reporting).
o How the work is being done (online inquiries, batch database backups).

● Determine the unit of work

o What "transaction" really means.
o Can vary from an OLTP application to a batch system.
o "Business Transaction" vs "Technical Transaction."

● Establish service levels

o A service level agreement is an agreement between the service provider and
service consumer that defines acceptable service.
 o The service level agreement is often defined from the user’s perspective, typically
in terms of response time or throughput.

● Analyze current capacity. Note that these steps are generally done for an existing system
during load testing phase. but similar steps can be done using APM data for a live system
or using performance modeling for a system which is still in early phases of development
life cycle.

● Plan for the future

o Determine future processing requirements
o Systems may be satisfying service levels now, but will they be able to do that
while at the same time meeting future organizational needs?

Problems in the Capacity Planning Process

Although, it is an essential part of any organisational operational process, capacity planning
process itself has certain challenges that needs to be tackled. Following are some of the processes
that pose a challenge to the organisation:

● No standard technology.
● No standard workload.
● Forecasting future applications/technologies is difficult.
● Each vendor has their own benchmarks.
● Distributed environments make modeling even more complex.

Capacity Planning Classification

Capacity planning based on the timeline is classified into three main categories long range,
medium range and short range.
Long Term Capacity: Long range capacity of an organization is dependent on various other
capacities like design capacity, production capacity, sustainable capacity and effective capacity.
Design capacity is the maximum output possible as indicated by equipment manufacturer under
ideal working conditions Production capacity is the maximum output possible from equipment
under normal working conditions or day. Sustainable capacity is the maximum production level
achievable in realistic work conditions and considering normal machine breakdown,
maintenance, etc. Effective capacity is the optimum production level under pre-defined job and
work-schedules, normal machine breakdown, maintenance, etc.

Medium Term Capacity: The strategic capacity planning undertaken by organization for 2 to 3
years of a time frame is referred to as medium term capacity planning.

Short Term Capacity: The strategic planning undertaken by organization for a daily weekly or
quarterly time frame is referred to as short term capacity planning.

Goal of Capacity Planning

The ultimate goal of capacity planning is to meet the current and future level of the requirement
at a minimal wastage. The three types of capacity planning based on goal are lead capacity
planning, lag strategy planning and match strategy planning.

One such process of Capacity Planning Management is BPR i.e., Business Process
Reengineering.

BPR - BUSINESS PROCESS RE-ENGINEERING

Business process re-engineering (BPR) is a business management strategy, originally pioneered

in the early 1990s, focusing on the analysis and design of workflows and business
processes within an organization. BPR aimed to help organizations fundamentally rethink how
they do their work in order to improve customer service, cut operational costs, and become
world-class competitors.

Business process reengineering is also known as business process redesign, business

transformation, or business process change management.
Business process reengineering (BPR) is the practice of rethinking and redesigning the way work
is done to better support an organization's mission and reduce costs. Organizations reengineer
two key areas of their businesses. First, they use modern technology to enhance data
dissemination and decision-making processes. Then, they alter functional organizations to form
functional teams. Reengineering starts with a high-level assessment of the organization's
mission, strategic goals, and customer needs. Basic questions are asked, such as "Does our
mission needs to be redefined? Are our strategic goals aligned with our mission? Who are our
customers?" An organization may find that it is operating on questionable assumptions,
particularly in terms of the wants and needs of its customers. Only after the organization rethinks
what it should be doing, it does go on to decide how best to do it.

Within the framework of this basic assessment of mission and goals, re-engineering focuses on
the organization's business processes—the steps and procedures that govern how resources are
used to create products and services that meet the needs of particular customers or markets. As a
structured ordering of work steps across time and place, a business process can be decomposed
into specific activities, measured, modeled, and improved. It can also be completely redesigned
or eliminated altogether. Re-engineering identifies, analyzes, and re-designs an organization's
core business processes with the aim of achieving improvements in critical performance
measures, such as cost, quality, service, and speed.

Re-engineering recognizes that an organization's business processes are usually fragmented into
sub-processes and tasks that are carried out by several specialized functional areas within the
organization. Often, no one is responsible for the overall performance of the entire process.
Reengineering maintains that optimizing the performance of sub-processes can result in some
benefits but cannot yield improvements if the process itself is fundamentally inefficient and
outmoded. For that reason, re-engineering focuses on re-designing the process as a whole in
order to achieve the greatest possible benefits to the organization and their customers. This drive
for realizing improvements by fundamentally re-thinking how the organization's work should be
done distinguishes the re-engineering from process improvement efforts that focus on functional
or incremental improvement.

How BPR Works

Business Process Reengineering is a dramatic change initiative that contains five major steps that
managers should take:

● Refocus company values on customer needs

● Redesign core processes, often using information technology to enable improvements
● Reorganize a business into cross-functional teams with end-to-end responsibility for a
process
● Rethink basic organizational and people issues
● Improve business processes across the organization

Why BPR?
Organizations that take part in Business Process Reengineering are the first to examine the
organization and its environment. Objectives play a leading role in shaping new processes or
changing existing processes. Business Process Reengineering, invented by IT expert Michael
Hammer, is mainly applied in information technology, but is a standardized model that can be
used to optimize many processes or organizations. Benefits of using BPR are:
● Shorten lead times
● Increase productivity
● Improve quality and customer focus
● Improve competitive position
● Implement new technology

BPR was a very important management concept from the mid-1980s to the mid-1990s. The
concept is generally credited to MIT professor Michael Hammer and Babson College professor
Thomas Davenport. Hammer and Davenport started out as colleagues, working on a research
program called PRISM (Partnership for Research in Information Systems Management). Their
research efforts, which were sponsored by some of the biggest corporations at the time, involved
developing an architectural model that would help large companies take advantage of recent
advances in technology, including personal computers (PCs) and the internet.

Challenges of BPR
As quickly as BPR rose in popularity, however, so did the backlash against it. Radical change
proved to be expensive and risky, but the most frequent critique of BPR was that it placed too
much emphasis on technology and cost reduction and didn’t consider how dramatic change
affects people and company culture. By the end of the 1990s, the word reengineering was being
used as a synonym for two practices that were radically impacting corporate life – downsizing
and outsourcing.

Today, there is a renewed interest in business process reengineering as a framework for digital
transformation. With hindsight, it has become apparent that the concept’s focus on radical
change can complement process improvement approaches that emphasize incremental change,
such as continuous improvement (Kaizen) or the Total Quality Movement (TQM).

A downside to adjusting business processes as quickly as possible in order to be able to work

more efficiently, is that some employees need more time to adjust than others. If an employee on
Monday morning hears that their entire job description has been changed, this can seem
overwhelming. Which is why it’s very important that the changes that are implemented are well
communicated to the employee, and that guidance is provided if necessary.

The principles of business process reengineering

In 1993, Hammer and organizational theorist James Champy published a book to expand upon
the ideas Hammer proposed in his research paper. The book, which was entitled “Reengineering
the Corporation: A Manifesto for Business Revolution,” quickly became a national bestseller.
The authors suggested seven principles for reengineering a work process and achieving a
significant level of improvement in quality, time management, speed and profitability.

1. Organize around outcomes, not tasks.

2. Identify all the processes in an organization and prioritize them in order of redesign urgency.

3. Integrate information processing work into the real work that produces the information.

4. Treat geographically dispersed resources as though they were centralized.

5. Link parallel activities in the workflow instead of just integrating their results.
6. Put the decision point where the work is performed and build control into the process.

7. Capture information once and at the source.

INSURANCE SECTOR

Insurance is a means of protection from financial loss. It is a form of risk management, primarily
used to hedge against the risk of a contingent or uncertain loss.

An entity which provides insurance is known as an insurer, insurance company, insurance carrier
or underwriter. A person or entity who buys insurance is known as an insured or as a
policyholder. The insurance transaction involves the insured assuming a guaranteed and known
relatively small loss in the form of payment to the insurer in exchange for the insurer's promise
to compensate the insured in the event of a covered loss. The loss may or may not be financial,
but it must be reducible to financial terms, and usually involves something in which the insured
has an insurable interest established by ownership, possession, or pre-existing relationship.

The insurance sector is made up of companies that offer risk management in the form of
insurance contracts. The basic concept of insurance is that one party, the insurer, will guarantee
payment for an uncertain future event. Meanwhile, another party, the insured or the policyholder,
pays a smaller premium to the insurer in exchange for that protection on that uncertain future
occurrence.

Insurance Industry in India

The insurance industry of India consists of 57 insurance companies of which 24 are in life
insurance business and 33 are non-life insurers. Among the life insurers, Life Insurance
Corporation (LIC) is the sole public sector company. Apart from that, among the non-life
insurers there are six public sector insurers. In addition to these, there is the sole national
reinsurer, namely, General Insurance Corporation of India (GIC Re). Other stakeholders in
Indian Insurance market include agents (individual and corporate), brokers, surveyors and third
party administrators servicing health insurance claims.

However, in India, the start-up generation has carved out a new niche segment of insurance. A
slew of startup insurance companies, mostly selling online to keep costs low, are trying to sell
micro insurance products, promising low premiums and rapid settlement. Often working with
larger insurers, they try to sell to a small demographic segment of affluent, digitally savvy
customers in India where insurance penetration is among the lowest in the world.
Acko General Insurance offers 85 unique products to cover cell phone screens, missed flights
and so on. Others also target this new area of low-value, incident specific risk protection.

Most products are sold by the retailer concerned. An optician might sell a micro insurance
product along with a spectacle. A shopping website might sell insurance along with a cellphone.
But these are powered by new-age insurance startups.

BPR In Insurance Industry

The insurance industry is recently trying many innovations and improvements in order to survive
in the competition. In other words, many insurance companies are increasing work efficiencies
and productivities, and furthermore, strengthening business competitive power by fundamentally
changing the company organization and process. The Business Process Re-engineering (BPR)
converged among innovations attempted in insurance industry is considered in customer point of
view instead of function point of view, remove and improve unneeded work and process which is
management innovation to strengthen business competitive power1,2. In order to push and settle
BPR, business vision, organizational structure, change of thought, education training, new
approach and management technique and method are important.

The standardization and efficiency were maximized and business competitive power was
strengthened through this and continuous BPR institution in insurance industry is prospected to
establish.

The continuous BRP institution in insurance industry is increasing investment scale of many
global insurance industries and domestic insurance industries, and companies are recently
showing interest in work and customer data management for trends of Big Data and Social
Network. Therefore, decision makers of companies have big interests in efficient system
establishment. Many securities of budget and investment for BPR system support are created but
service quality and customer response ability for existing system are very poor compared to the
current global insurance industry. Therefore, finding the method to increase competitiveness of
information integrated company on the basis of simplification and standardization is important.

BPR is increasingly becoming a dominant part of insurance industry due to myriad changes.
Some of the changes are:

● Customer focused work process can be secured that providing consistent customer
respond service with combined customer information management system, and can
secure quality of customer information through unified management system. The support
of sales opportunities and sales activities can be strengthened based on combined
customer information. In addition, customer analysis infrastructure can be prepared using
accurate customer information.

● Customer satisfaction and loyalty increase can be brought with customer needs
comprehension, tendency analysis work strengthening, product provision according to the
customer request, and customer response to different channel character based on
customer information combination in customer point of view. In addition, customer
dissatisfaction can be reduced by decreasing unneeded overlapped guide or contact.

● Sales opportunity information can be provided to all channels through field focused sales
support system establishment, and can create new contract from provision of standard
sales activity model. The sales activity time can be expanded through sale activity results
management. The sales efficiency can be expanded through process focused sales
management and coaching, and new contract can be created by using sales opportunity
information.
 ● Fourth, sales using time can be expanded through provision of hierarchical key indicator
from sales management system strengthening based on scientific coaching, and
organization management work can be efficiently done through sales organization
information management systematization and sales efficiency expansion from process
based sales management and coaching.

The operational implication is important to induce immediate feedback from insurance company
to customer. It is very important that organization members can have close efficient work
improvement and customer approach through the next generation system.