What is a Rules Engine and Why Do You Need It?

What is Rules Engine and Why Do You Need It?

Imagine a system that will helpy you maintain consistency, compliance, and adjust to changing conditions. A system that will partially automate complex tasks and mundane work, freeing up mental capacity of your well-trained and well-paid employees.

How much more money would you company make if such system existed?

But you know it does exist. We'd say - a lot of them exist. Automation becomes a must-have at the top of the game. We'd like to present one of them - business rules engine. Companies like Aviva, Allianz, Bosch, Husqvarna, or Notus are already using one, gaining competitive edge on a daily basis.

It is why Business Rules Engine market grows steadily - it is projected to grow with a CAGR of 6,60% over the next 5 years [1]. BRE market was valued at $1.0 billion in 2020 and it's projected to reach $1.8 billion value by 2025 [4].

What is a Rules Engine?

A rules engine is a software system that automates decision-making by applying predefined business rules to data. It evaluates "if-then" conditions and executes specific actions when those conditions are met. This system separates business logic from application code, making it easier to manage and adapt to changes.

Rules engines streamline processes by automating decisions, ensuring consistency, and reducing manual intervention. They are widely used in industries like finance, healthcare, and e-commerce to handle tasks such as fraud detection, compliance checks, and personalized recommendations.

How does a rules engine work?

A rules engine works by processing a set of predefined rules to evaluate conditions and trigger actions. For example, if a customer’s purchase exceeds a certain amount, the engine might apply a discount automatically. This process involves three key components:

1. Rule definition: You define the business rules using "if-then" logic. For instance, "If a customer spends over $100, then apply a 10% discount."
2. Rule execution: The engine evaluates the conditions in real-time and executes the corresponding actions.
3. Rule management: You can update or modify rules without changing the underlying application code, ensuring flexibility.

By automating these steps, a rules engine ensures faster and more accurate decision-making.

The rule engine needs a trigger in order to go off - a particular event, specific conditions and so on. The definition of business rules is an intricate process.

These straightforward but powerful conditional statements determine how an organization operates by evaluating whether or not a given input meets certain criteria.

Rules determine what an organization can and can't do. So, when a business rules management system applies rules to a data set, it provides a true or false result depending on whether the input data matches specific conditions in the ruleset.

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Your system can use any number of rules to optimize your processes - the rules engine will handle them with ease.

Use Cases of Rules Engines

Laws, regulations, business goals, best practices, and performance requirements can all be expressed by rules.

Common real-life business rules examples include:

• An insurer determines whether a candidate meets eligibility requirements.
• A bank reviews a loan application to ensure that all the requirements relating to credit and cash flow history, collateral, and character requirements are met.
• A retailer decides which customers get free shipping and a 5% discount.

A rule engine automates repetitive and complicated tasks, increases collaboration, and cuts down on expensive mistakes.

Immediate Benefits Of Rules Engines

A rule engine can have a transformative effect on a company.

Stakeholders and business users empowerment

One of the major advantages of a rule engine like Higson is that it enables users to modify business logic without touching the application's code.

Non-technical users can manage a company's intellectual property and critical processes without having to plow through hundreds of thousands of lines of code.

Rule engines dramatically shorten the time it takes users to make changes —from months to a matter of minutes.  

Business rules engines empower business users to create rules, which means that new products have a significantly shorter time to market!

Let's see how all the important features of rules engines translate into benefits for different types of organizations.

Compliance

A pressing issue facing companies across various industries is more regulatory scrutiny. Non-compliance can result in harsh fines and business disruption.

Compliance costs consist of everything necessary to keep a business compliant with relevant regulations. To do so, organizations must keep track of internal policies and local and international industry regulations.

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Rules can improve compliance by making processes transparent and creating audit trails. Compliance officers use rules to make necessary changes to business decisions so their organizations can effectively respond to changing regulatory policies.

No More Repetitive and Manual Tasks

Recent studies show that repetitive and manual tasks cost companies $5 trillion a year globally [2]. Office employees spend on average 69 days per year on mundane work. These time-consuming tasks can easily be streamlined with a reliable business rule engine.

A rule engine allows employees to focus on creative work that actually merits human attention. Most rule engines can be integrated with customer relationship management software (CRMs) to reduce manual data entry.

High-Quality Work with Rules

Humans are fallible but machines aren't. Study shows that machines make X less mistakes than humans. What's more - the machine doesn't get tired after 8 hours of work. It won't sleep with its face on a keyboard to send 222 million € somewhere, like it was in the case of German banker in 2013.

Also, managing large number of rules is hard for a human, to say the leasts.

This can be done by a rule engine with clear instructions that define each step, which gets rid of mistakes. By eliminating errors, teams can work more confidently and innovate quicker.

It also speeds up decision process, especially if the decision doesn't require a board meeting and a few weeks long debates.

Customer Segmentation Using a Rule Engine

Consumers are looking for more thoughtful and engaging businesses. Perhaps one of the most important differentiating factors for companies is their ability to segment customers.

Consumers want to do business with brands that understand their needs and deliver exceptional tailor-made results. By creating relevant offers that provide high-value experiences, businesses can secure customer loyalty.  

This allows them to cater to the needs of a wide range of customers. For example, marketing teams can segment their audience based on their level of interaction with the business. This would allow them to tailor their ad campaigns accordingly.

Customer segmentation also helps companies identify new prospects with similar traits

Rules Engine: Insurance Industry

Insurance is a highly personalized industry that constantly creates new products and offers. However, not all insurance providers offer the same products or target the same audience.

Each type of insurance policy considers different factors when deciding whether to issue a plan or not. For example, auto insurance companies look at the applicant's driving history, experience, and skills.

They also need to examine the value of the vehicle and its safety record to approve an application. Life insurers consider an applicant's personal health, age, lifestyle, and family medical history.

An increasing number of insurers use rules to streamline the application process with automated insurance underwriting.   ‍

Build Insurance Segments with A Business Rules Engine

Insurers need to provide personalized services to meet customer expectations.

An insurer might segment their audience into “budget-conscious” and “agent loyal” groups. Customers who are in the former group are characterized, mainly, by their desire for minimal coverage and determination to find the “best deal.”

Conversely, customers who are in the “agent loyal” segment feel strong loyalty to their agents and value highly personalized services. Therefore, the insurer would have to come up with different products and services to effectively engage both segments.

Organize Tasks with A Rule Engine

Some of the critical tasks that major insurers perform using rule engines include:

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Insurance agents use Higson to calculate plans and offer customized solutions in real-time.  They can quickly search, view, and edit individual rules.

Fraud prevention

Frauds steal from American customers more than $300B each year, with every 1/10 claim in property-casualty insurance being a fraud attempt [3]. Business Rules Engines (BREs) play a crucial role in fraud prevention within the insurance industry. By automating decision-making processes, BREs help insurers quickly identify and respond to potential fraudulent activities.

They process vast amounts of data, applying business rules to flag inconsistencies or suspicious patterns indicative of fraud. This capability significantly reduces the manual effort required to detect fraud, allowing insurers to act swiftly and minimize losses.

The integration of BREs in fraud detection strategies enhances the accuracy and efficiency of the process, ensuring compliance and protecting both the insurer and policyholders from fraudulent claims.

Rules Engine: Banking & Finance

Financial institutions face tighter budgets and higher pricing pressure. This inevitably eats into their profit margins. Meanwhile, the competition to attract, engage, and increase profitable customer relationships is stronger than ever before.

In this environment, financial institutions rely on rule engines to operate efficiently and remain competitive. Banks use rules to develop new financial products while maintaining pricing accuracy and compliance.

Tasks Performed by Rule Engines

Rules engines can empower financial institutions to streamline important processes such as:

• Product Eligibility
• Credit Scoring
• Data Validation
• Cross-sell and Upsell Opportunities

Also, rule engines remain a powerful tool that effectively prevents fraud by allowing organizations to quickly react to new data.

Rule Engine as a Fraud Prevention Solution in banking

If fraudulent behavior is traced back to a particular location, then a company can immediately block all orders from that place.

However, financial institutions can also use this tool to remain proactive and prevent new schemes.

For instance, a bank could be aware of a developing trend in fraudulent behavior. A fraud analyst can simply create a rule in a rules engine that would detect this particular scheme.

Our team at Higson has implemented safeguards that let users see how each rule affects the organization without making any actual changes. You tinker with rules on a daily basis, so it's important you can do so safely.

Smooth Commision System in Banking Powered by Higson

A bank struggles with managing complex commission structures due to:

• Dynamic fee structures that depend on transaction volumes, requiring constant recalculations.
• Slow implementation of commission changes (taking weeks and requiring IT support).
• Lack of transparency in commission rules, making auditing difficult.
• Scalability issues as financial operations increase, leading to system errors.

The solution: Higson as a commission engine

Higson serves as a central decision engine for commission calculations, enabling:

• Dynamic fee adjustments based on customer transaction volumes (like debit card fees).
• Real-time commission rule modifications without IT involvement.
• Easy implementation and testing of promotional mechanisms.
• Centralized management of commission rules for better transparency and compliance.

Benefits of implementing Higson

Implementing Higson as a rules engine for commission systems delivers several advantages:

• Time efficiency - New commission rules can be implemented in minutes instead of weeks
• Business autonomy - Operational teams can manage commission rules without IT dependency
• Error reduction - Automated calculations minimize errors and non-compliance risks
• Scalability - The system efficiently handles growing transaction volumes without performance degradation

This case study demonstrates how a rules engine transforms commission management from a rigid, IT-dependent process into a flexible, business-controlled operation that adapts quickly to market needs and regulatory changes.

The implementation empowers business users to create and modify commission structures independently, significantly reducing time-to-market for new pricing models and promotional campaigns while maintaining operational compliance.

Rules Engine: Retail

To compete retailers must enter new markets while improving their range of products. Therefore, they need to keep track of their supply chain and meet consumer demand at the same time.

A business rules engine can also be deployed as a recommendation engine for e-commerce businesses. This allows online retailers to make highly personalized product suggestions to visitors at crucial stages of the customer journey to drive more revenue.

Rules engines enable retailers to update their rules daily, which helps them to achieve their various business goals seamlessly. For example, the shipping price could change every day due to the changes in shipping fees. Retailers can't wait days or weeks to make these sorts of changes to the system.

All of these demands translate into a vast amount of information a retailer has to maintain:

• Provide consumers with customer-centric product information
• Add new items and update existing ones
• Streamline supplier approval process
• Set immediate responses to price changes

This is why major retail companies use rules to leverage the power of their data to implement a dynamic pricing strategy with specific pricing rules.

Interestingly, the retail industry has a notoriously poor track record of managing rules. It was quite common for business rules to be written on paper. Unsurprisingly, rules would often be misplaced or lost!

Luckily today retailers that use business rules management solutions can manage their business decisions and all their knowledge in one accessible place.

Other industries that could benefit from using Business Rules Engines

Business Rules Engines (BREs) can benefit various industries beyond banking and insurance. Here are a few examples:

1. Healthcare - For managing patient data, treatment protocols, and compliance with healthcare regulations. ‍
2. Manufacturing - To streamline production processes, quality control, and supply chain management. ‍
3. Telecommunications - For managing service provisioning, billing, and customer service operations. ‍
4. E-commerce - For personalization, recommendation engines, and dynamic pricing strategies. ‍
5. Government and Public Sector - To improve public services, regulatory compliance, and resource allocation. ‍
6. Transportation and Logistics - For route optimization, fleet management, and regulatory compliance. ‍
7. Education - For personalized learning plans, administration, and compliance with educational standards. ‍
8. Human Resources - BREs can be used for automating various HR processes like recruitment screening, employee onboarding, benefits administration, and compliance with labor laws. They help in standardizing HR policies across the organization and ensuring fair and consistent application of these policies.

Each of these industries can leverage BREs to automate decision-making processes, enhance operational efficiency, and comply with industry-specific regulations.

Most business rules engines today are designed to partially automate complex decision-making processes but also to empower different departments within an organization. They are no longer just tools for IT specialists; they serve as bridges between technology and business strategy.

A well-chosen BRE aligns with both your current operational needs and your strategic goals, enabling departments like HR, Finance, and Sales to efficiently execute mission-critical processes. The right BRE transforms the way your organization responds to challenges and leverages opportunities, making it an integral part of your business's growth and adaptability in a dynamic market

The ideal rule engine for your organization depends on the set of rules you need to implement and your specific goals.

Mission-critical processes take place in departments like HR, Finance, Procurement, Administration, and Sales and can be optimized with a rule engine.

What you should look for when choosing a BRE:

• Ease of Use - The BRE should have an intuitive interface that allows non-technical users to create and manage rules easily.
• Integration Capabilities - Ensure the BRE can integrate seamlessly with your existing IT infrastructure and data sources.
• Scalability - The BRE should be able to handle increasing volumes of data and complexity of rules as your business grows.
• Performance and Speed - Assess the engine's ability to process rules quickly and efficiently, especially for real-time decision-making needs.
• Customization and Flexibility - The BRE should be adaptable to your specific business needs and rules.
• Support and Maintenance - Consider the level of customer support and maintenance services provided.
• Compliance and Security - The BRE must adhere to industry standards and regulations, especially regarding data privacy and security.
• Cost - Evaluate the total cost of ownership, including licensing, implementation, and ongoing operational costs.
• Vendor Reputation and Reviews - Research the vendor's market reputation and read customer reviews to gauge reliability and customer satisfaction.

There are also some pitfalls to avoid:

• Overlooking the BRE's compatibility with your current systems.
• Neglecting the importance of user-friendliness for non-technical staff.
• Underestimating the total cost of ownership.
• Ignoring scalability which could lead to performance issues as your business grows.
• Failing to consider the long-term support and maintenance requirements.

Proprietary Rules Engines vs Open-Source

When considering the implementation of rules engine you might think between open-source and proprietary ones. Both have advantages as well as disadvantages. The table showcases pros and cons of the two solutions.

Learn more: Open Source vs. Proprietary Rules Engines: Weighing the Pros and Cons

How to Ensure Success When Implementing a Business Rules Engine

Adopting a Business Rules Engine is a transformative step for any organization, but its success relies heavily on careful planning and execution. Here are key strategies to ensure your BRE implementation achieves the desired outcomes:‍

Start with Clear Goals
Identify the specific business challenges your BRE is intended to address, such as reducing manual workloads, enhancing compliance, or accelerating time-to-market. Defining measurable KPIs will help you assess the engine's impact.

Involve Stakeholders Early
Engage all relevant departments—IT, operations, compliance, and business users—from the start. Their insights will be crucial for defining the rules, ensuring seamless integration, and gaining buy-in for the changes.

Map Out Existing Processes
Document your current business processes and rules. A clear picture of your existing workflows will simplify translating them into the BRE and identifying areas for optimization.

Ensure Data Quality and Accessibility
BREs rely on accurate and accessible data. Cleanse your data sources and establish integrations that allow the BRE to pull real-time, accurate data. This ensures consistent decision-making.

Prioritize User Training
A user-friendly BRE is only as effective as the people managing it. Provide comprehensive training to ensure non-technical staff can confidently modify rules and optimize workflows without IT dependency.

Start Small, Then Scale
Implement the BRE in a pilot area to test its functionality, identify potential gaps, and fine-tune the configuration. Once successful, scale it across other departments or processes.

Monitor and Optimize
Continuously monitor the performance of your BRE. Regularly review rules to ensure they align with changing business requirements and market dynamics.

By incorporating these best practices, your organization can maximize the efficiency, accuracy, and flexibility of its Business Rules Engine, paving the way for sustained growth and innovation.

Higson as Your Go-to Business Rules Engine

Higson emerged as an internal tool that we simply needed for ourselves. The IT dependency was a pain and we wanted to simplify the process, empower non-technical users, and speed it up.

Then we thought - if we need this and we can use it to a great benefit, why not deliver the solution to others that need it as well? It is why we are proud to deliver a high-quality, unique rules engine day in and day out for insurance, banking, finance, and more.

We'd be more than happy if you chose us as your go-to rules engine, but we won't just ask you to be kind enough to do it. We'll show you hard data on why it is the most efficient choice for you.

Higson vs Competition

In simple terms - Higson is faster, easier to use and cheaper than the competition.

Higson pay-as-you-go pricing model is unique and fair - the more work Higson does for you, the higher the fee. Similarly, if you need less work done, you will pay less.

Notus Chose Higson

Notus, a finance company from Poland, narrowed down the choice to three options - Drools, Camunda, and Higson.

After the tests the results were as follows.

We delivered a solution that:

• is manageable by the business users,
• offers an enormous range of configuration,
• create new mortgage products,
• cross-sell conditions,
• insurance pricing,
• marketing descriptions,
• required documents,
• provides API for banks,
• integrates with the client’s CRM,
• empowers users to compare different offers,
• speeds up form fulfilling (one form for all banks),
• validates applications automatically,
• creates a payment schedule for a customer,
• allows sending required documents online in GPDR compliant way.

Why Higson?

The reasons you should choose Higson are:

• High Performance: It is optimized for executing complex rules quickly. For example, it processes 100,000 insurance calculation rules in just 8 seconds, significantly outperforming competitors like Drools and Camunda.
• Ease of Use: A low-code interface allows non-technical users to create and manage rules without requiring extensive coding knowledge. It also supports Excel integration for rule management.
• Flexibility: Rules can be updated at runtime without system downtime, enabling rapid responses to market or regulatory changes.
• Cost Efficiency: By automating rule execution and reducing reliance on IT teams, Higson lowers development costs and accelerates time-to-market for products.
• Robust Integration: It offers APIs and Java libraries for seamless integration with existing systems and workflows.
• Version Control: Built-in versioning ensures easy tracking of changes and compliance with governance requirements.
• Industry-Specific Features: Tailored solutions for sectors like insurance and finance help streamline workflows such as underwriting and claims processing.