The outsourcing industry is almost a parallel business sector to mainstream commercial entities and constantly growing exponentially. This is because of its many inherent advantages. But in spite of this taking a decision to outsourcing insurance process is definitely not easy and various factors have to be taken into account. The pros and cons have to be carefully evaluated. Will it benefit the company if an investment is made in such fixed expenses as hiring staff, maintaining hardware and software and having its own accounting system? Or will it be beneficial to outsource these activities to companies that already have the required infrastructure in place? Can those outsourcing companies cope with the economies of scale required for smooth transition and functioning?
Can those outsourcing companies cope with the economies of scale required for smooth transition and functioning? All these questions and much more have to be answered before a smooth and seamless outsourcing process can be ensured.
Every company or business sector has its own exclusive outsourcing needs but it is the insurance industry that is the biggest votaries of outsourcing. Activities related to insurance back office outsourcing is very common as insurance outsourcing companies have specialist manpower and systems in place to meet any challenges. But even for this industry, the ground rules for initiating the outsourcing process is similar to other commercial segments.
What then are the precautions that need to be taken to facilitate the process once the decision to outsource has been arrived at –
Have a steering committee in place – To consist of top management executives drawn from those departments to be affected by outsourcing. This committee will oversee the search for the ideal outsourcing companies and prepare a report after a due diligence exercise has been carried out on the selected company. This will prevent any surprises cropping up after a choice has been made.
Identify the top internal resource – In today’s digital age, identifying which hardware and software, licenses and key technical staff should go over to the outsourcer is critical if the change is to be smooth and meaningful. This should preferably be decided by someone in authority such as the head of IT in the company. It is all the more important for insurance outsourcing services as a major portion of back office functions in this sector is related to data processing.
Analyse the business plan – Typically, a contract for outsourcing insurance support services as well as other businesses is for a period of 7 to 10 years. Hence it is imperative that the outsourcing company know where it will be in this period, the possible policy changes, increase in scale, emerging markets, manufacturing and the possible global trends in the related industry. Once the projections are in place, these can be factored into the contract.
Know about the outsourcer – When the search for an outsourcer has been narrowed down to a few alternatives, the next crucial task is to know as much as possible about the company from documented records. These include the financials, life expectancy of existing hardware, their business plans, downtime data, number of employees and crucially current, new and lost clients. All these and many more will establish the credibility of the outsourcer and indicate whether a long term relationship will be possible.
Time well spent on these aspects will make for a smooth insurance outsourcing process which will be glitch-free in the long run.