Outsourcing has become an integral feature of the insurance industry as companies seek to remain relevant in a competitive global market. The primary drivers of the shift to outsourcing in recent decades have been cost savings and access to strategic domain expertise especially in the area of business acquisition.
Due to intense competition, insurance products tend to be similarly priced. The customer has to look at other factors before making a purchase decision. As more consumers go online to compare prices and look at reviews of life and non-life products, insurance companies find that they have to provide superior customer service to stay on top of the game. Outsourcing not only reduces costs but also helps insurance companies become more efficient and profitable.
The goal of insurance outsourcing is not to replace in-house employees, but to maximize the productivity of existing staff. When companies export or outsource non-core or routine tasks, their employees can perform the expertise-driven tasks that they were hired for.
Services Outsourced in the Insurance Industry
Insurance companies outsource both open and closed-book business processes to third parties. These include policy management, claims administration, insurance data services, annuity services, insurance software and productivity tools, IT, call center support, consulting, and operations management.
Life and annuity policy management. Outsourced service providers offer a comprehensive range of life policy services from sales to back-office to IT. Insurance outsourcing companies also offer flexibility, customization and scalability. Businesses can reduce costs by 40 percent or more by outsourcing life and annuity policy services.
Property and casualty policies. Property and casualty policy services include consulting (business process consulting, legacy modernization, cost reduction analysis, policy and claims systems consolidation), IT (modernizing legacy environments), and administrative support (underwriting and policy processing, automation).
Property and casualty claims. Outsourced insurance software companies provide software and a comprehensive suite of claims applications that automate high-frequency claims, speed up settlement of high-severity claims, and improve standardization. Using outsourced apps can also reduce overpayments and the cost of claims management.
Collections and disbursements. Companies that outsource collections and disbursements can benefit from the latest custom or standard software/application that insurance providers offer. These apps can drive down transaction and audit costs, improve customer satisfaction and reduce the need for facilities and technology upgrades.
Pensions. Outsourced pension services include contributions, asset and benefits management, general reporting and ledger, call center support, and consulting. Third party services can improve quality of service, lower admin costs, improve efficiency with access to updated information, and improve regulatory compliance.
Benefits of Insurance Outsourcing for Businesses
Whether it’s a small business or a large company, insurance outsourcing can help companies control costs while streamlining and standardizing back-office processes and managing client-facing operations.
Cost reduction. The number one reason most businesses in the insurance sector outsource is cost reduction. Insurance outsourcing can drive down costs through process optimization and allow companies to provide the best customer experience.
Updated services and processes. Insurance outsourcing service providers invest in the latest technology and processes to keep their clients on top of the game. These processes also cost less than what clients would spend if they decide to upgrade or re-engineer existing technology and processes.
Domain expertise. Few people can perform specialized tasks in the insurance industry. Instead of recruiting, training and overseeing full-time employees, an insurance third party service company can provide the domain expertise at the fraction of the standard cost.
Clearer metrics. Outsourced service providers have clear metrics in place to evaluate the health of the outsourcing campaign, and they invest continuously in improving the relationship. Experienced staff also means that the work is reviewed stringently to reduce errors and delays.