The process of outsourcing is a common business activity today. Companies reach out to specialist firms all over the world to take advantage of cost structure, latest innovations in the IT field and specifically to spin off non-core activities. This is especially true in the case of insurance companies where the very process of issuing policies and settling claims needs a huge backend structure that far outranks the main activity. Therefore, outsourcing insurance services is definitely a much-preferred option for this industry as it helps to eliminate flab that is not an integral component of the primary process of insurance.
What then are the factors that optimize insurance outsourcing?
Flexibility to introduce new products – Introducing new products is the very lifeline of any insurance company as there is 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. Attention should be given more to spreading awareness of new launches and taking it to the ultimate holder at the micro level than to the task of processing the new policies and integrating them into the existing system. 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 insurance companies get ahead of the competition quickly.
Updating to the latest in IT systems – The insurance sector, more specifically the life insurance sector has always been at the forefront in introducing automation and replacing manual processing of their core activities for better customer servicing. 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.
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 companies 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.