There are many reasons why insurance outsourcing had taken off in a big way in the past decade or so, in fact from the mid-1990s to be precise. It was based on the need of the insurance sector to be competitive, cut costs to stay afloat and to offer schemes and policies that had attractive pricing. With the global recession of not so long ago hitting hard even major economies of the world, the insurance companies had no other option but to opt for insurance outsourcing services. This enabled them to focus on core business, devise optimum product pricing and parcel out routine and tedious activities that did not need any form of discretionary powers.
Before going into an explanation of the insurance process outsourcing, it is relevant to understand the basic structure of the insurance industry. Insurance is all about offering protective covers on various aspects such as life, vehicles, health, marine transports and natural disasters such as fire and earthquakes to name just a few. Devising new schemes and policies is a core activity but behind it is a huge set-up of back office functions. Once a policy is sold, there will be claims against it at a later date, the agent will get a commission for it and umpteen forms have to be filled up and huge volumes of data processed. It is for these activities that insurance outsourcing services have become indispensable for the insurance sector.
A look at some of these functions will make clear the importance of insurance outsourcing services.
Outsourcing Policy Management – Policy Management is the administrative plan that is chalked out to predict an outcome or eventuality and how to deal with it. When back office functions are outsourced it makes sense to also spin off the decision-making process on those subjects so that insurance companies are left free to concentrate on sales and marketing of insurance covers. Some of the areas where policy management is outsourced relate to data processing and security, accounting and human resource management.
Outsourcing Claims Management – This is a very intricate field for two reasons and is why insurance companies outsource this function. The first is that for life covers especially, claims are often made after a decade or two of the inception of the policy. Secondly, the authenticity of the claimants has to be established before reimbursement is made to prevent litigation. For both these functions, reams of old data and files have to be gone through before a decision can be arrived at which is really a challenge for insurance outsourcing services.
Outsourcing Commission Management – It is a task of the insurance sector that is compulsorily outsourced because of its complexity. Calculating and paying commission to thousands of agents every month each with a different amount requires a great deal of professional expertise and skill at computing accurate amounts. But outsourcing agencies have the systems and manpower to tackle this aspect well thereby leaving the insurance companies to focus on core activities.
These are the main sectors of the insurance outsourcing process through data processing and its security and form processing are equally important. The growth of the insurance sector has been in step with the exponential expansion of insurance outsourcing services.
Also Read: – How to Ensure a Smooth Insurance Outsourcing Process