Challenges in insurance outsourcing
Over the years, businesses in the US have realised the unprecedented advantages of process outsourcing, making it a $129.7 bn market. This is set to grow at a CAGR of 5.75% to reach $162.2 bn by 2027. By outsourcing, businesses have transformed their operations and service offerings, thus providing a higher level of customer satisfaction.
Insurance companies can benefit by outsourcing their non-core processes and thus focusing on enhancing efforts on value-driven activities such as underwriter reports. According to a survey, the global insurance business process outsourcing will grow at a CAGR of 8.8% and may cross $9.8 bn by 2028. However, outsourcing insurance processes comes with its challenges.
This article will explain the key challenges in insurance outsourcing and solutions to overcome them.
4 Challenges in insurance outsourcing
From having existing employees onboard to choosing the right partner to outsource, insurance companies face these four challenges –
Job insecurity among the existing employees
The decision to outsource can bring insecurity among your existing employees. They may fear losing their jobs, which could lower their performance and increase the churn rate.
Solution – It is important to get the consent of all the stakeholders and have employees onboard with the management’s decision to outsource. Encourage the team to upskill for servicing major clients, strategic decision-making, and providing excellent customer service.
Difficulty in integrating processes
Outsourcing should be a backend process with no impact on service continuity. The customers should not face any disruptions or delays due to the outsourcing. If you do not plan the outsourcing properly or choose the wrong partner, there can be difficulties in integrating processes which may cause service disruption.
Solution – An experienced insurance outsourcing service provider will partner with your operations teams and understand the pitfalls, thus ensuring a smooth transition. Outsourcing usually happens in incremental phases to ensure no service disruption and smooth integration of processes.
Challenges in maintaining the company culture and service quality
Setting up and nurturing the company culture is a long and painstaking process in the insurance sector. By shifting the processes to an external partner, you can risk jeopardising years of effort in establishing the service quality and work culture.
Solution – Research and know the partner to whom you intend to outsource the insurance process. Ensure that they have experience in the industry and can answer your specific questions about maintaining your company’s service quality and work culture. They should have well-defined operational guidelines and flexible and sustainable solutions that they can scale up if necessary.
Higher cost of outsourcing
Although reducing costs is one of the major factors behind outsourcing, sometimes it can end up costing more. Longer times in collecting claimant information and payments can leave customers dissatisfied. Policy changes, cancellations, erroneous claim vetting, and high service costs of the outsourcing partner can end up costing more for your business.
Solution – Search for an outsourcing partner that provides domain expertise in a transparent cost model that is at par with the market trend. You can take services on per project basis or on a weekly or monthly payment model.
You can save precious man-hours of your in-house team and divert them towards activities that generate direct revenue.
Which insurance processes should you consider outsourcing?
Identify processes that do not have a direct impact on the revenue but take up a lot of time of your in-house team and consider outsourcing them to the experts. Some of the examples are –
Finance and accounting
Outsource finance and accounting processes such as bookkeeping, accounts payable, bank reconciliations, tax filing, annual compliances, audit and financial statement preparation, and invoicing and payments.
This includes new customer onboarding steps such as filling out forms, review of KYC, administrative support, claims process support, and more.
Consider the digital transformation of your insurance processes that reduce manual work and human error. Technologies such as robotic process automation, artificial intelligence, and machine learning can detect fraud, predict claim trends, and even fill out forms for new clients.
You can use leverage the information to make or alter existing policies or create new products that put you ahead of the competitors.
This could be a long list of processes such as policy drafting, overseeing governance processes, migration, data mining and warehousing, and more.
For organisations on the digital transformation journey, agility is key in responding to a rapidly changing technology and business landscape. Now more than ever, it is crucial to deliver and exceed on organisational expectations with a robust digital mindset backed by innovation. Enabling businesses to sense, learn, respond, and evolve like a living organism, will be imperative for business excellence going forward. A comprehensive, yet modular suite of services is doing exactly that. Equipping organisations with intuitive decision-making automatically at scale, actionable insights based on real-time solutions, anytime/anywhere experience, and in-depth data visibility across functions leading to hyper-productivity, Live Enterprise is building connected organisations that are innovating collaboratively for the future.
How can Infosys BPM help?
Infosys BPM has helped over 45 insurers significantly reduce their OPEX by transforming their business processes. The lines of business (LOBs) range from property insurance to general liability insurance to life insurance and much more.
Read more about the insurance business process management at Infosys BPM.