the tortoise and the hare: a tale of document management...

The Tortoise and the Hare: A Tale of Document Management in

Insurance and Banking

March 2012

Nathaniel Rowe

This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc.

March, 2012

The Tortoise and the Hare: A Tale of Document Management in

Insurance and Banking As discussed in Aberdeen's report, Handling Paper in a Digital Age: The Impact of Document Management (February 2012), the capture, processing, management and securing of both paper documents and the resulting unstructured data files is very important to a number of industries. Based on a January 2012 survey of 30 insurance and 29 banking organizations, this Sector Insights takes a closer look at the particular concerns and document management strategies adopted by these industries. Aberdeen's research shows that, as in the well-known Aesop Fable, there is more than one way to run a race. While insurance companies are taking a slow and steady approach, focusing on high levels of data accuracy and trust, banking companies are racing forward, quickly adopting technologies to increase the speed of document capture and processing.

Business Context: Document Management Pain Points Despite the highly digitized world we live in, the processes for handling insurance claims, loans or mortgage applications still rely in large part on physical, paper-based forms. While tools have been developed to quickly turn these hard copies into digital text or image files, and to facilitate fast, easy, collaborative access to this information, the reasons for investing in these tools differ across industries.

Figure 1: Document Management Pain Points Differ by Industry

Source: Aberdeen Group, January 2012

Sector Insight

Aberdeen’s Sector Insights provide strategic perspective and analysis of primary research results by industry, market segment, or geography

Sector Definition: Insurance

The insurance organizations surveyed for this report reported organization size by the following annual revenue categories (USD):

√ Small (<$50 M) 47%

√ Medium ($50 M - $1B) 33%

√ Large (>$1 B) 20%

Among the job roles surveyed were the following:

√ Executive or C-level (CEO, CIO, CFO) 20%

√ VP / GM 24%

√ Director 24%

√ Manager 21%

√ Other 11%

http://www.aberdeen.com/Aberdeen-Library/7480/RA-document-processing-management.aspx


The Tortoise and the Hare: A Tale of Document Management in Insurance and Banking Page 2

© 2012 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897

As Figure 1 shows, almost half (48%) of banking companies cited a desire for increased speed as one of their top business drivers fueling investments in document management systems. For insurance organizations, this is a concern for less than one out of five companies (17%). Likewise, banking organizations tend to be more concerned with the security aspects of document management, such as protecting sensitive internal business data and customer data from authorized access, keeping a granular and accurate audit trail, and maintaining compliance with both industry and governmental regulations. One third of banking companies (33%) were feeling increased pressure for better security, a considerable difference from the 20% of insurance organizations that reported the same.

On the other hand, both industries were almost equally concerned with the growing volume of documents and data, with 30% to 37% of companies citing this as a top concern. Where insurance industries stood out, however, was in their desire to improve the decision-making process based on business data. This inherently involves both changing the corporate mindset to place greater value on intelligence and analytics based on business data, as well increasing the accuracy and trustworthiness of this data. Insurance organizations were almost twice as likely as banking companies to cite the need for better decisions as a top pressure. To provide some context for the differences in these main business drivers, Aberdeen will take a deeper dive into each of the respective industries in the following section.

Industry Profiles: Banking Aberdeen's research reveals that the average banking organization from the January 2012 study reported storing and managing an impressive 1.4 petabytes of business data. Of this amount, two-fifths (41%) was unstructured data (such as text or image files) that doesn't fit neatly in the rows and columns of a traditional database. Finally, this data is growing at an incredible 33% year-over-year. At this rate, the average banking organization could be dealing with well over three petabytes of business data by 2015.

The average banking company likewise reported that each processor within their organization processes 30 mortgages, loans or claims per month. Those employees dedicated to closing out these accounts averaged almost twice this amount, or 55 cases per month. The organization as a whole handles over 1.5 million such cases per year, and this number is growing at more than 5% year-over-year.

The sheer volume of business data these organizations are handling necessitates a greater focus on speed and efficiency, a topic that is discussed at greater length in Big Data, Big Moves (August 2011). Manual processes that work well with small data sets can be rendered untenable with these much larger amounts. Aberdeen's research shows that 37% of banking companies had document management systems that were at mostly based on manual efforts, and an additional 33% were evenly split between manual and automated elements. Considering such a significant percentage of the overall

Sector Definition: Banking

The banking organizations surveyed for this report reported organization size by the following annual revenue categories (USD):

√ Small (<$50 M) 42%

√ Medium ($50 M - $1B) 35%

√ Large (>$1 B) 23%

Among the job roles surveyed were the following:

√ Executive or C-level (CEO, CIO, CFO) 26%

√ VP / GM 27%

√ Director 4%

√ Manager 37%

√ Other 6%

http://www.aberdeen.com/Aberdeen-Library/7125/RA-volume-data-management.aspx



amount of banking data is unstructured and the processing of business documents is intrinsically related to text and image data formats, it only stands to reason that investment in this area is becoming more of a priority. Fortunately, this attention is beginning to pay off: the average banking organization was also able to report a year-over-year improvement of 8% in their close rate, and 6% improvement in the average time to close an account.

Industry Profile: Insurance As shown in the Sector Definition sidebars above, the two industries had almost identical representation from small, mid-sized and large organizations. Based on this evenly distributed sample size, we see that in contrast to the banking organizations profiled above, the insurance industry is dealing with a much smaller data environment. Aberdeen's research shows that the average insurance organization is storing 260 terabytes of business data, which is growing at a downright pedestrian 17% year-over-year. Almost half of this amount (47%) is unstructured data.

However, despite not having to deal with data on the scale of their banking compatriots, insurance companies are dealing with some struggles of their own. As first reported in Aberdeen's study on Data Management in Insurance: The Impact of Improved Data Quality (February 2012), key areas of the insurance business are showing incremental increases in their associated costs. Some examples include: legal fees (+2% increase in costs year-over-year), impartial medical exams (+3%), expert witnesses (+4%), field investigations (+3%), and appraisals (+3%). While none of these increases are enough to break the bank, the overall trend could put significant pressure on an organization's budget.

Furthermore, with a complex data environment that relies heavily on unstructured data, the average insurance organization is also seeing an impact in overall efficiency and performance. When it comes to the data and processes surrounding cost management, insurance companies reported a similar incremental decrease in performance. The accuracy of loss reserving (i.e. the calculation for how much money should be held to cover future claims) decreased 3% year-over-year, and medical cost management was indicated as 2% less efficient as well.

Given this trend in operational performance and cost management, it comes as little surprise that these organizations are looking to improve upon their decision making and invest in collaborative access to accurate, trustworthy business data.

Supporting Document Management: Collaboration and Security In addition to the different industry pressures they face, insurance and banking organizations are also taking separate approaches to two key aspects of document management: collaboration and security. While there are a number of tools and solutions to address these issues, collaboration

"Different departments [in our organization] are using different software and hardware options. Streamlining to one software platform would be a huge benefit when implementing new areas."

~ Senior VP of Procurement Large (>5 B)

North American Financial Services Company

http://aberdeen.com/Aberdeen-Channel/IT-Infrastructure/ITIS.aspx

http://aberdeen.com/Aberdeen-Channel/IT-Infrastructure/ITIS.aspx



or security success starts with the policies an organization sets and how highly they value these abilities.

Collaboration As Figure 2 shows, insurance organizations are currently about 1.4 times as likely as banking companies to have defined policies for both internal collaboration within departments or divisions, and external collaboration with customers or business partners. However, as collaboration tools can play a significant role in decreasing overall time-to-information and ease of information discovery (see Document Management, February 2012), banking companies have expressed considerable interest in developing and implementing these policies in the near future. In fact, in the next two years, the surveyed banking organizations are expected to either overtake or surpass their insurance counterparts in these business capabilities.

Figure 2: Collaboration Capabilities


Another area of interest is the ability to develop a Return on Investment (ROI) for document management solutions. One of the main obstacles for any technological investment is getting support from senior management; building a good business case is a key component to ensuring that buy-in. However, like many data-centric, line-of-business problems, it can be difficult to draw a direct correlation between investment and improved revenue or decreased costs. Less than one in four banking companies (23%) and one in five insurance companies (17%) currently have the capability to measure their document management investments to this degree. However, in both cases, this is expected to nearly triple in the next two years.




Security As mentioned above, improving security was a top pressure in the banking industry, and so it comes as no surprise that these companies are devoting more attention to this area. However, the degree to which this issue is valued within these two groups becomes quickly apparent when we examine three aspects of a document management security initiative.

The first aspect deals with information access, roles and privileges. Commonly known as the rules to enforce an employee's ability to Create, Read, Update and Delete (CRUD), these policies enable appropriate interactions with business data, but also serve as a first line of defense against unauthorized data access either internal or external to an organization. Almost half (48%) of banking organizations had these policies in place, compared to less than two in five insurance organizations (39%), (Figure 3).

Figure 3: Security Capabilities


The two groups likewise reported similar rates of implementation for basic security policies. These include everything from encryption, remote (i.e. outside the firewall) access, data storage, and the ability or inability to copy files to removable media (e.g. burnable CDs or DVDs, flash drives, external hard drives). Finally, when it comes to Governance, Risk and Compliance (GRC) policies, both banking and insurance companies indicated almost identical levels of policy adoption, 40% and 38% respectively. This is an area that is seeing both increased attention and ever-tightening regulations, and so of the three categories it is showing the largest planned increase in adoption. It is also important to note that within the banking industry, 100% of all organizations indicated that they either had implemented these security policies or were planning to in the near future. In the world of finance, it is no longer possible to ignore this crucial element of the data management equation.

"Whatever policies and standards are implemented have to be applied to all units across the organization. This can only be done with support / buy-in from the very top management."

~ Director of Business Development

Medium ($50M - $500M) North American

Financial Services Company



Document Management Technology Adoption Coupled with the underlying organizational policies, technology solutions form the second piece of the document management puzzle. Aberdeen's research shows that across the board, banking organizations are reporting higher levels of current and projected adoption of document management solutions, likely as the result of their need for more automated tools to handle their higher data volume. However, when comparing these two industries with all other organizations, we can see a picture of overall document management maturity.

Safety at High Speeds: Tools for Speed and Security In terms of tools to address the speed and security of capturing, processing and managing documents, Figure 4 displays an illustrative list. Document capture tools are vital in turning hard copy forms into digital information, and can play a key role in improving both the speed and accuracy of document process. Data Loss Prevention (DLP) tools are able to identify when a security breach might occur by recognizing when protected data is about to the leave the organization through an unauthorized channel (e.g. through email, burned onto a disk, downloaded onto a thumb drive). Some tools are able to automatically prevent the breach from happening by blocking the rogue activity, flagging the behavior and/or raising alerts to the appropriate manager. For further information on this topic, see DLP, the Ideal Referee: Let the Game Go On! (November 2011).

Figure 4: Tools for Speed and Security


Data quality tools are able to enforce consistency and accuracy across large amounts of information, by applying normalization standards and adding data from secondary sources to supplement missing fields. Finally, business process automation can be used in identifying areas of business activity that are productivity bottlenecks and ultimately increase speed and efficiency. In all these categories, insurance companies lagged behind banking organizations in current adoption, but matched or outpaced the rest of the field, indicating how important this functionality is to these industries.

"When organizations have different individuals or departments capturing documents / data, there needs to be a specific, defined location for each type of document. This will allow for easy access and retrieval."

~ Operations Manager Small (<$50M)

North American Financial Services Company

http://aberdeen.com/Aberdeen-Library/7244/RA-data-loss-prevention.aspx




Finding the Needle in the Haystack: Tools for Discovery and Insight Aberdeen's research shows that when it comes to tools for the discovery and analysis of documents and unstructured data, the adoption rate across the board is much lower than in other categories. Even the tools with the largest installed base still only represent less than two out of every five companies. However, as discussed in Big Data, Big Moves (August 2011), the amount and importance of unstructured data is expected to grow rapidly, making these tools an object of interest for the future.

Figure 5: Tools for Insight and Discovery


Both Enterprise Content Management (ECM) and enterprise search tools are designed to address the issue of management and discovery for large volumes of unstructured data. Banking again is leading the way in terms of current adoption, as their need in this area is the greatest. Insurance organizations, on the other hand, have not yet placed a high priority on these tools, lagging behind even non-banking organizations in their implementation. Similarly, the ability of text analytics or text mining tools to scan and process text files for keywords, trends and general sentiment, have been largely ignored in the insurance sector, with only 7% reporting adoption. However, as these tools continue to develop and mature, organizations are beginning to take notice: insurance companies are planning to nearly quadruple their adoption rate in the next two years, with 26% indicating intentions to invest, while for the banking industry an additional 36% plan to adopt.

Running the Race: Business Performance and Potential Pitfalls As seen above, the banking and insurance industries have taken dramatically different approaches to addressing their document management initiatives. While each strategy aims to address industry-specific pressures and needs, there is much in common in the basic processing of insurance claims and

"In the current world there is a dire need to have information readily available and accessible."

~ Director of Operations Mid-sized ($50M - 100M)

APAC Insurance Company




mortgage or loan applications. As Aberdeen's research shows, neither the aggressively investing, speed-focused method of banking organizations nor the slow-and-steady focus on collaboration and accuracy of insurance organizations is perfect. To truly succeed in the document management race, organizations of either group should take care to avoid a few dangerous pitfalls.

Table 1: The Speed and Cost of Document Capture / Processing

Performance Metrics Banking (n=29)

Insurance (n=30)

All Others (n=174)

Time to scan / capture one document 1.7 minutes 2.6 minutes 2.5 minutes

Cost to scan / capture one document 13 cents 24 cents 26 cents

Need for actionable information Within 1.1 days Within 2.2 days Within 3.5

days Ability to deliver information within demand window

85% of the time 73% of the time 75% of the time


As Table 1 shows, the many investments the banking industry has made to improve the speed of their document capture and processing has paid off. While the insurance industry is largely on par with all other organizations, banking organizations take 53% less time for initial document capture, and spend 85% less. Furthermore, even though they have more stringent demands for the fast delivery of business intelligence to their decision makers, they are more likely to meet this demand. While the average banking organization needs to have actionable information within 1.1 days of a significant business event, 60% of all banking companies need it within an hour of the event. Even so, they were able to meet this demand 12% more often than insurance organizations. However, as the hare races ahead, there are a few important things to watch out for, as Table 2 shows.

Table 2: Warnings for the Hare: Accuracy, Errors and Trust


Insurance (n=30)

All Others (n=174)

Percent of business data that is accurate 82% 87% 80%

Percent of business data that is complete 76% 86% 76%

Errors per 1000 business documents 25 16 18

Percent of organization with high* customer satisfaction related to business data

31% 61% 42%

Organizations with high* levels of trust in business data 58% 73% 58%

*"High" rating defined as a 7 or higher on a scale of 1 (low) to 10 (high) Source: Aberdeen Group, January 2012

"[In terms of new systems for document and data management] there will be some initial reluctance on the part of the users, but if implemented properly, it will result in those users stating 'I didn't think we really needed this, but now that we have it, don't you dare take it away!'."

~ IT Staff Large (>5 B)

North American Insurance Company



Aberdeen's research shows that despite - or perhaps as a result of - the dramatic increases in the speed of document capturing and processing, banking organizations are seeing issues with data quality, number of errors, and overall trust and satisfaction with their data. Insurance organizations, with their consistent, steady approach, reported the highest levels of performance in all of these areas. Their data was rated as more accurate and complete than all others, and they had 69% fewer errors per 1,000 documents processed than their speedy banking peers. This higher quality was noticed by both their employees and customers. When it came to aspects of their services that relied on business data, insurance organizations reported high customer satisfaction levels at almost twice the rate of banking companies. And while less than three out of five (58%) banking organizations could report they had high levels of trust in their data, almost three-quarters (73%) of insurance companies could do the same.

Unlike Aesop's Fables, however, this race is not yet finished, and even the tortoise has cause for concern.

Table 3: Warning for the Tortoise: Don't Fall Too Far Behind


Insurance (n=30)

All Others (n=174)

Percent of business data that is discoverable /searchable (year-over-year change)

+20% improvement

+9% improvement

+17% improvement

Time-to-information (y-o-y change)

+21% improvement

+9% improvement

+14% improvement

Time-to-decision (y-o-y change)

+13% improvement

+7% improvement

+10% improvement

Level of visibility into business data (y-o-y change)

+15% improvement

+5% improvement

+11% improvement


In addition to the high levels of performance the banking industry exhibited in terms of speed and cost, Aberdeen's research shows that they are also showing the most dramatic improvements year over year. They are able to search and discover more of their data, and the top-down visibility into business data and operations is likewise increasing. The time to find the information they need, and the window between a business event and an informed decision is also shrinking quickly. What is perhaps more telling, however, is that the insurance industry is lagging far behind not only the high-powered banking companies, but also all other non-banking, non-insurance organizations.

It is true that the demands for each industry are different, and while a customer of a bank might demand instant access to their account and financial records from anywhere at any time, the expectations are not the same for insurance. However this disparity might not last forever; the time may soon come when insurance companies hear their customers demand



even faster turn-around for their claims, greater visibility into the process and improved access to their account details. Insurance organizations should take care that they do not fall too far behind the technological curve, or the road to meet these demands will be a steep one indeed. Those few organizations that can quickly rise to the challenge will certainly be well placed to differentiate themselves from their competitors.

Summary and Key Takeaways Within the banking and insurance industries, proper document management cannot be ignored. The growing volume and complexity of documents and unstructured data, and industry specific pressures are all presenting a number of challenges that companies in both categories are working to address. When an organization is planning to tackle these issues, they should consider the following:

General Recommendations • Identify your major problem areas. Internal and external

pressures differ not only between industries, but between individual organizations. Determine what aspects of your document processing workflow need the most help, and prioritize investments accordingly.

• Invest in document capture and document management solutions. According to Aberdeen's research, these baseline technologies are rapidly becoming table stakes - required to even play the game. While there is a wide range of available solutions that can meet most budgets and needs, the automation and performance benefits they can provide are crucial to remaining competitive. For more information, see the Aberdeen study on Document Management, February 2012.

Banking Recommendations: • Get up to speed. Most of the banking industry is making significant

investments in increasing the speed and efficiency of their entire document management process. As first reported in Document Management (February 2012), organizations with document management solutions captured documents 64% faster than those without. If your organization is not keeping pace, making up this lost ground should be a high priority.

• Keep it secure. More-so than most industries, the banking industry should always be mindful of the security implications of any investment or policy changes. While increasing data security won't directly impact revenue or decrease costs, it can certainly help avoid unpleasant non-compliance fees or your organization's name in the headlines in the worst possible way.







• Improve data quality. Less than half of banking companies reported having currently implemented data quality tools. Given the sheer volume and rapid increase of business data in this industry, attention should be given to maintaining consistency and accuracy of this crucial information.

Insurance Recommendations: • Step on it. While speed is not as much of an immediate pressure

in the insurance industry as it is in banking, the same tools and performance benefits are there for the taking. Start with developing a business case and ROI for these tools, and try to get the green light for some tactical investment.

• Maintain vigilance. The high data quality and trust exhibited by an average insurance company is very good thing and care must be taken to keep this a priority in the future. Having accurate, complete, consistent business data is a key part of improving business decisions, as is addressing many of the cost and performance concerns facing insurance companies today.

For more information on this or other research topics, please visit www.aberdeen.com.

Related Research Handling Paper in a Digital Age: The Impact of Document Management; February 2012 DLP, the Ideal Referee: Let the Game Go On!; November 2011 Business Optimization through Unified Communications: In the SoMoClo™ (Social Mobile Cloud) Era; December 2011

Data Quality and the Supply Chain: The Benefits of MDM and Portals; October 2011 Big Data, Big Moves; August 2011 Invoicing and Workflow: Integrating Process Automation to Enhance Operational Performance; May 2011 Turning Pain into Productivity with Master Data Management; March 2011

Author: Nathaniel Rowe, Research Analyst, Enterprise Data Management, ([email protected])

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This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc. (2012a)

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