What Is Insurance Outsourcing
Insurance outsourcing refers to the strategy used by insurance companies of hiring a third party to perform open and closed-book business processes to reduce costs, increase efficiency, or access specialized expertise.
Most Common Insurance Outsourcing Services
There’s no limit to the business processes that insurance companies can outsource, however, to help you envision which functions are more readily available in insurance outsourcing companies, below are the top insurance business functions most commonly outsourced.
Claims Processing
In insurance claims outsourcing, the service provider handle the entire claims process, from initial intake and verification to assessment and settlement. They also communicate with policyholders about claim statuses and manage disputes or appeals.
Policy Administration
When outsourcing policy writing and adminstration, service providers manage issuing new policies, processing renewals, handling endorsements, and cancellations. They maintain policyholder records and ensure compliance with regulatory requirements.
Underwriting
With insurance underwriting, outsourcing partners assess risks, decide on insurance applications, set premium rates, prepare documentation, and monitor existing policies for changes in risk profiles.
Fraud Detection
Specialized firms use analytics to detect fraud, investigate suspicious claims, report findings, implement fraud prevention systems, and provide staff training on fraud detection techniques.
Actuarial Service
External providers have actuarial analysts who develop risk models, calculate premiums, forecast financial performance, ensure regulatory compliance, and offer strategic advice on product development.
Legal and Compliance
Legal and compliance officers in outsourcing agencies handle legal issues, ensure regulatory compliance, and provide legal advice to minimize risks and meet industry standards.
IT Support
Third-party IT or tech support specialists manage infrastructure, develop and maintain software, ensure cybersecurity, and provide technical support to enhance operational efficiency.
Customer Service
Outsourced customer service agents handle inquiries, provide policy information, address complaints, and maintain high-quality support through various communication channels.
Benefits of Insurance Outsourcing
The business process outsourcing industry has been steadily expanding through the years, impacting most, if not all, industries in the market. Even more traditional industries like insurance are outsourcing some of their business functions, driven by reasons listed below.
Cost Savings
Like many other industries, companies in the insurance industry face financial pressure and need to improve cost efficiency in order to increase competitiveness and profitability. And an easy way to reduce costs is by outsourcing insurance services.
By outsourcing, insurance companies can leverage the outsourcing partner’s resources, paying only a flat rate whilst the service provider covers everything – operations, benefits and paid leaves, management fees, etc. Without having to invest in these, and not having to maintain staff who will manage these, companies can increase their cost efficiency.
Depending on where one chooses to outsource also impacts the amount saved. When insurance companies choose to outsource to an onshore or nearshore agency, they can typically save 10-20% on operational costs. And when they choose to outsource offshore, especially to countries like the Philippines, renowned for their lower cost of labor and high quality service, companies can save up to 70% on operational costs.
Business Focus
Most insurance companies don’t have expertise in functions such as customer service, IT, and marketing. By outsourcing these business processes to insurance outsourcing companies, one can increase efficiency, freeing up time and resources and gaining more business focus.
Access To More Talent
“The insurance industry continues to find itself in a talent crisis” according to ResroucePro. This problem is mainly due to people leaving the industry. As time passes, the job market is becoming younger, and over 50% of those in the insurance industry are expected to retire in the next 15 years.
One of the ways insurance companies are filling gaps in their manpower is through insurance process outsourcing. Many of the tasks performed in the insurance sector such as customer service, IT support, and marketing do not require as much industry expertise, and only more general industry knowledge. These tasks are easily outsourced for staff augmentation.
Meanwhile, the more specialized tasks like claims processing, underwriting, fraud detection, and so on, are more difficult to source, and requires partnering with an insurance outsourcing company who already have such talent readily available.
When working with insurance outsourcing companies, they have a large pool of talent so you can skip the recruitment process and only look at the profiles they present to you based on your requirements. Then, the service provider will train, onboard, and manage these outsourced staff for you, ensuring productivity and alignment on business objectives.
Scalability and Flexibility
While traditional outsourcing only supported basic roles and weren’t designed to support long-term success, outsourcing has evolved through the years, offering multiple engagement models and providing more flexibility to serve as business partners, rather than mere service providers, that help insurance companies scale and grow their operations.
This is crucial for insurance companies who wish to adapt the “escalating frequency and severity of global risks – from climate change to cybercrime… to react as society’s ‘financial safety nets’” (Deloitte).
Tech Infrastructure
The insurance industry has long been a more traditional industry, relying on manual processes and data analysis. However, in Deloitte’s 2024 global insurance outlook, they found that most insurance providers are recognizing the need for transformation.
This is driving the shift to a more customer-centric business model, which requires digital transformation that most insurers will find challenging.
As most outsourcing service providers have adopted more robust technological infrastructure and are utilizing advanced technologies to provide competitive services, insurance companies will find it easier to adopt new technologies and change their company culture with help from an experienced outsider who already has the resources and expertise to lead their transformation.
Outsource Insurance Services To The Philippines
With the growing talent shortage in the insurance industry, many insurance companies are pressed to find permanent solutions that will go beyond mere staff augmentation and support their long-term goals.
KDCI Outsourcing is more than just a service provider. We’re an insurance business process outsourcing partner that works hand-in-hand with our clients to achieve their business goals. By finding hard-to-source talent that not only have the expertise and experience, but also the cultural fit and attitude, we build excellent offshore insurance teams in the Philippines that seamlessly integrate with their operations, and collaborate well with their in-house teams to ensure efficiency and success.
Learn more about insurance back office outsourcing services in the Philippines. Contact us today!
