Health Insurance Is About Risk Management: Health Plans Need to Manage Process Risk Too

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It’s ironic. Health insurance is the contractual transfer of risk from the insured to the insurer. This risk is transformed and managed by the insurer through a variety of technical, administrative. and financial means. But if you take a course in insurance underwriting, one area that’s not often addressed is process risk: Probability of loss inherent in business processes. Process risk is sometimes called operational risk, “resulting from breakdowns in internal procedures, people and systems.”

I think this is highly ironic! Insurance is in the business of concentrating and managing risk. But it does not always use the kind of information technology that can dramatically reduce the risk of internal procedures, people, and systems breaking down. What kind of tech am I speaking of? Modern Business Process Management.

A colleague of mine, Mike Ingrisano, wrote a great blog post titled An Application Platform Approach for Compliance and Risk Management in which he said:

“Organizations must align strategies in order to meet regulatory guidelines to reduce operational risk. Businesses of all different types cannot afford process error and data breaches, which has led to large investments to secure data and assets.

Now, combine the fast-paced world of digital business and access to new sources of data, and organizations find themselves investing even more in compliance management.

Forward looking companies are using the best of enterprise IT software to adopt applications that use defined workflows, fixed business rules and process automation to establish solutions that enable the most accurate and safe compliance monitoring to mitigate risk.”

I couldn’t put it any better. But, in the rest of this series of reasons for health plans to “double-down” on Business Process Management, I will try!

P.S. By the way, back when I was a pre-med Accountancy major (more on that in a later post in this series) we did cover insurance accounting and actuarial approaches to insurance underwriting. Plus, during my masters in Industrial engineering, we covered optimization of stochastic systems, some of which are used today to estimate future healthcare and derive necessary premiums! A great book, if you’re interested in this sort of geeky health insurance topic, is Health Insurance: Basic Actuarial Models

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10 Reasons Health Plans Should Double-Down on Modern Business Process Management

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