Scope: Insurers design and sell insurance policies that spread the risks across a large universe of insureds and the insurers’ reserves for losses. Third parties, ranging from small entrepreneurs to global ITO and BPO service providers, deliver “insurance management services” to assist insurers in dealing with operations. Such operational support includes investigation of applications and origination of policies, issuance and collection of invoices for premiums, research and actuarial analysis of trends in loss payouts and recommendations on policy re-design, and claims settlement. In addition, litigation support providers assist carriers in claims adjudication, litigation and impact analysis for policy re-design.
Other insurance industry professionals regularly hire third-party service providers. Smaller insurance brokerages may hire specialist advisors to train and provide consulting services to the sales force and customer service representatives.
Business organizations also hire consultants and outourcers in insurance administration. Sometimes such services are bundled with other services, such as PEO services for employers.
Technical Requirements: The insurance industry is based on a large number of transactions. Hence, ITO and BPO services in this industry require specialized transaction processing capabilities. As a regulated industry, insurers need help in information security, data protection and global sourcing management. Service providers must also be skilled and knowledgeable in designing and managing workflows to comply with special consumer protection laws, patient protection laws and other specially protected groups.
Service providers generally offer skilled personnel with technical knowledge in insurance and call center personnel who can handle customer relationships in outbound sales or inbound claims processing. In launching new products, outsourced marketing support can use call centers and e-mail campaigns to measure acceptance of customers to new types of insurance and help identify the performance drivers for a successful launch. Test marketing can reduce losses later. Further, with data analytics, outsourcers might assist an insurer in identifying solutions for reducing the number of incoming customer calls by simplification, self-service and other strategies.
As insurers mature in their level of outsourcing, they may engage a service provider to handle middle-office services that represent the internal management of the office using ERP systems such as Oracle and SAP. Using ERP, the service provider can generate reports for better management decision-making.
In short, as insurance carriers re-examine what is “core” to their IT functions, they may also outsource IT infrastructure management, network management, integration services for new products, services and for post-merger integration of acquired companies, policy administration services (and software administration for specialized software), underwriting, workflow and content management on ERP systems.
Benefits: By starting with non-customer services, insurers can begin the path of process management and defining which processes are “core” and must be within the organization. After understanding how service providers can improve productivity and profitability in back-office and middle-office administration, the insurer’s management will have a clearer picture of how to leverage its sourcing portfolio to drive competitive advantage.