“Do what you do best, outsource the rest”. This line fits the insurance company that engaged in insurance back office support processes. Before choosing which tasks you can farm out for outsourcing, take a hard look at your business and determine your strengths and values. In the insurance industry, it is the level of services offered to their customers which help retain policyholders. Therefore, the primary focus of the company should be on the development activities i.e. core area instead of non-core areas.
Let’s take an example. In the insurance industry, product development is the core activity of the insurance business. This deals with designing and development of new products or product variant within a product line. Such activities are carried out by the product development department of the company. Activity like product planning requires vast domain expertise and experience; therefore the companies wish to retain it in-house.
Activities like, data processing or technical support function, are purely operational activities handled by the operations team in an insurance company. The companies outsource insurance services to gain cost advantage so that they can focus more on core activities such as product development, underwriting, etc.
Core and non-core processes
In view of the above, the processes can be divided into core and non-core areas of the companies. Generally, those processes that are the source of competitive advantage and, therefore, owned and operated by the company are known as core processes. Such activities help the company in achieving the edge in both financial and operational performance and are significant for strategic decision making. Non-core processes are those processes that do not necessarily provide a competitive advantage and may act as a support to the core business.
However, there may be processes within a department, which are even though the core is outsourced. For instance, in claim administration, accessing claims documents, review and evaluation of claims for legitimacy, claim set-up and disbursement and full claim settlement are also outsourced. It is due to the fact that the service providers have better technology, skills and manpower resources that they carry the potential to serve even in the core areas. Therefore, nowadays those processes which were unimaginable for off-shoring are also being outsourced.
List of some of the Insurance back-office outsourcing processes:
Policy management: Generating proposals and verifying insurance policies. Endorsing, renewing, canceling, reinstating and rewriting an insurance policy.
Commission management: Commission accounting and commission payable.
Claim administration: Review and evaluation of claims, settlement of claims, etc.
Customer service: Customers queries and complaints.
Technical support: Technical support and problem resolution for the back- office systems and applications. These include installation, product support, and troubleshooting.
Miscellaneous: Underwriting, Data processing, Documentation & Billing, Financial reporting and HR/payroll processing, etc.
The basis of differentiating core and non-core processes is the practice adopted by insurance companies, however, now even the core processes are outsourced by these companies to offshore vendors as mentioned hereinabove.