Why Outsourcing Works for Insurance Companies?

 

Posted on September 23, 2021 by Admin

Due to the changing market drivers and stringent regulatory norms, substantial changes are occurring in the insurance sector. The heavy competition in the insurance sector has given rise to various operational challenges such as improving turnover ratios and their activity along with establishing a pricing model that remains competitive. However, insurance companies could minimize operating expenditures and streamline back-office operations by utilizing the potential of business process outsourcing (BPO).

 

For insurance companies that are gearing for growth and profitability, outsourcing business processes is a strategic option. Outsourcing helps in reducing operational costs, overcoming economic uncertainties, and providing a strong foundation for expansion and growth. Insurance companies can maximize outsourcing capabilities in various areas of their operations. Common areas for outsourcing are data processing, claims handling, and underwriting. Good outsourcing models should include standardized, documented business processes, a rationalized delivery model, and an exceptional customer retention plan in place.

 

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 insurance industry has outsourced business services for decades, and the market is considered to be very mature. Initially, companies outsourced insurance activities primarily to reduce costs and improve efficiency, but firms have since shifted their focus to new business acquisitions. Regulatory pressures, shrinking premiums, market uncertainty, and changing expectations are pushing companies to seek out insurance business process outsourcing (BPO) vendors that can drive innovation and improve the customer experience while maximizing their resources. 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.

 

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.

 

Outsourcing also allows insurance companies to carry out their daily functions by forming a robust foundation of profitability and growth. Outsourcing helps insurance companies reduce costs, survive any economic uncertainty, and set a concrete stage for future expansion and growth.

 

1. 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 a fraction of the standard cost.
2. 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 be more competitive in the market and provide the best customer experience.
3. 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.

 

The following are some of the ways in which BPO can help insurance companies boost their performance as well as productivity:

 

• Customer Support Services – A reliable back-office service provider will offer best-in-class inbound and outbound solutions that enable insurance companies to meet regulatory requirements and enter new markets by providing superior services and also maintaining customer loyalty. Insurance companies can utilize call centers to manage customer queries and concerns via multiple channels, including email, voice, and chat, on a round-the-clock basis 365 days a year. In fact, customer queries and concerns vary from questions regarding pending claims and endorsements to requests for their policy statements. Call centers can also be used to follow up until the claim is over by reaching out to the customer when the claim is filed. A single customer service representative (CSR) can be assigned the follow-up task and see through the whole process until the end. During the sales process, CSRs can explain various coverages to the customer. This in turn helps the customer become familiar with what aspects the insurance policy covers. In addition, call centers can provide emotional support, as insurance claims at times can be quite upsetting and emotional for the customers. Call centers can also play a crucial role in boosting the trust of the customer with the insurance company.

 

• Data Processing Services – Data processing is one of the most critical functions that insurance companies have to carry out throughout their operations. As companies grow, their data processing requirements also grow. This in turn causes companies to buy more computers and other technology-related equipment and begin a cycle of ever-increasing technology and administrative costs. Partnering with a professional BPO company offering data processing services can help perform data entry work more efficiently and at a fraction of the cost.

 

• Data Mining Services – Data mining has helped insurance companies discover various useful patterns from customer databases. This technique can generate great results and also enhance the decision-making capabilities of the insurance company. Experienced data entry companies can provide data mining services and help insurance companies to effectively manage customer data. In fact, outsourcing data mining tasks allows insurance companies to identify risk factors and predict profits, losses, and claims apart from providing customer-level analysis, sales and marketing analysis, reinsurance, insights on developing new product lines, financial analysis, estimating outstanding claims provision, and predicting fraudulent claims. Moreover, outsourcing will support the administrative and management tasks of insurance companies and help them efficiently manage organizational and financial data.

 

• Underwriting Services – The underwriting process allows insurance companies to determine how much premium should be charged for a particular policy. Insurance underwriters evaluate insurance proposals to determine their feasibility and the amount of risk involved. This enables insurance companies to gain a competitive advantage over their competitors by bringing about process excellence, including catastrophe modeling, renewals, and underwriting support. Underwriters may also balance all the losses that insurance companies may incur from the probable risk of potential claims. The aspects considered by underwriting include claims experience and credit ratings where lower claims experience or credit rating corresponds to low premiums. Outsourcing helps the insurance sector to cover the full spectrum of underwriting services, which range from advanced analytics to business process management. Other underwriting services include submission and clearance where documentation on liability coverage, application processing, eligibility checks, account verification, and data scrubbing is done.

 

Outsourcing helps insurance companies to enjoy other benefits such as improved ease of increasing the operational capacity by documenting workflow and placing the burden of other non-core activities on the outsourcing service provider. This helps improve the efficiency of in-house staff. Business process outsourcing (BPO) can be used to streamline the back-end operations effectively and maximize revenues as well as sales.

 

The insurance industry has always lagged a bit when it comes to the adoption of new practices. So, while outsourcing may not be as common in the insurance industry compared with other sectors, it is certainly gaining popularity. With today’s technologies and the right strategy, outsourcing BPO is advancing the industry into the future, allowing insurers to substantially minimize operating expenses, streamline back-office operations, and transform business models to be successful on an operational and financial level – all while improving customer service to policyholders.

 

If your company is considering outsourcing, look no further than the expert team at Outsourcing Alliance. Our outsourcing specialists can schedule a meeting with you to discuss your company’s needs, goals, and current state.

Contact Outsourcing Alliance today!