Saturday, March 20, 2010

A business case for collaborative action

#SOA #insurance #govit @mcgoverntheory asked if anyone was interested in learning how insurance carriers partnered with state GOV to stand up SOA for online coverage verification?

Where is the business case for this initiative? There is certainly a demand, going back to this 2001 article on the Growing DMV Reporting Headache, and James points to a March 2004 document on the IICMVA website called Online Insurance Verification Using Web services to verify auto insurance coverage (pdf).

The IICMVA document outlines the problem - costs incurred by uninsured motorists, complicated and varied procedures for verifying insurance between different states - and so it makes clear that a web service solution might be a good idea. But a business case has to go further than this.

Firstly it must show that the benefits outweigh the costs (and risks). In a collaborative scheme, it isn't always obvious who is going to pay for the scheme, so there may be alternative options for funding the development followed by some kind of charge-back during operations. Each party that is investing in the scheme will presumably need a business case to justify its own investment. But if there aren't sufficient benefits to cover everyone's costs, then the scheme just isn't viable at all.

Searching the internet, I found a presentation by Loren McGlade and Jon Neiditz from the ACORD/LOMA Insurance Systems Forum (May 2009) mcglade_neiditz.pdf;; mcglade_neiditz.mp3. This presentation contains a lot more than the March 2004 document in terms of quantifying the potential benefits and cost-savings of the scheme.

And secondly, in a collaborative scheme like this, the viability depends on the number of people who join. In this case, how many insurance companies and how many states have to participate, in order for the scheme to deliver the benefits. Given that the benefits are largely dealing with the complication caused by the differences in regulation between states, this only makes sense if multiple states are involved. But how many?

I've done a number of business cases of this kind, where the viability of a multi-agent scheme depends critically on the rate of adoption, so I'd be very interested to see how this aspect of the business case for the IICMVA scheme is worked out.

More generally, there is a widespread belief in the potential benefits and cost savings of shared service provision, especially in the public sector. However, there is often a lack of realism in how these shared services are to be implemented. If the shared services are too inflexible, then people won't use them without some degree of coercion; thus the costs and risks are higher than expected, and the benefits lower. I'm looking at a number of situations in the UK where public sector agencies are being encouraged to use nationally provided services, and it's an extremely complex task to work out how these services can be fitted asymmetrically into a joined-up solution that delivers the best outcomes. (Please contact me if you are facing this kind of task.)

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