The process of outsourcing is a common business activity today. Firms globally are leveraging the benefits such as cost structure, latest innovations, and spin off non-core activities. This is especially true in the case of insurance companies. They are outsourcing process of issuing policies and settling claims, which requires a huge backend structure. Therefore, outsourcing insurance services is definitely a much-preferred option for this industry. Ultimately, it helps to eliminate flab that is not an integral component of the primary process of insurance.
Why the Insurance Industry Outsourcing Increasingly
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Flexibility to introduce new products –
Introducing new products is the very lifeline of any insurance company. This is because there’s a constant demand for better schemes that offer greater value for money. Companies that are unable to cope get left behind in the race for a bigger market share. The main focus is always on structuring and ensuring distribution of the products. Insurers should focus more on marketing their new launches and selling to the right audience, rather than processing non-core tasks. This can be left to the care of insurance outsourcing companies. Thus maximizing building and distribution of new launches and outsourcing the administrative sections will help.
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Updating to the latest in IT systems –
Particularly, the life insurance sector has always been at the forefront in introducing automation and replacing manual processing. The earliest investments were made in mainframe computing technologies which were not only dependable and reliable but served their purpose well in the scale of business prevailing then. But complacency soon set in as insurance companies were happy with the processing speed of the mainframes and did not find merit in migrating to newer systems. But when they did feel the need for modern technological updates in their IT network such as open systems, data management tools, and multi-tier architecture, it made more sense to approach an insurance outsourcing company that already had the required infrastructure in place than to go for massive investments in the latest technology.
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Outsourcing of closed blocks –
This concept is relevant for life insurance where a policy issued today comes up for claim processing after a lifetime. There are many products and more are launched periodically to ensure a greater market share while the past ones are discontinued. However, insurers have to keep on servicing the policies no longer in vogue. These are known as closed blocks. Allotting time, effort and network space to the closed blocks is not only a burden from the cost angle; it also acts as a stumbling block for future growth and expansion. Hence insurance outsourcing of closed blocks does not drain away precious man hours that would have been spent on servicing the blocks.
Insurance outsourcing services are here to stay and at present form the backbone of the insurance sector that is now more interested in parceling out non-core activities and focusing on the true business of insurance.
