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An increasing number of insurance firms are choosing to outsource their operations as they seek to streamline core insurance functions. The benefits are potentially immense. Outsourcing provides greater scale and flexibility so firms can focus on returns, liabilities and improving customer service. Operating infrastructure is simplified, cash flow is improved and processing speed is enhanced. Reducing costs is no longer the exclusive reason insurers consider outsourcing.
Factors Behind Outsourcing Growth
To stay focused on growth and customer service, insurers are now outsourcing back- and middle-office functions, including insurance accounting and data management. Outsourcing providers work with multiple clients and generally have greater scale and the ability to invest in innovative technology. This lets them offer the latest solutions—something small to medium-sized insurance companies cannot easily do.
The Rise of Big Data
Big data keeps getting bigger not just in size but also in complexity. Insurance firms need a clearly defined strategy to manage and understand data along with the expertise and technology to execute their vision. Outsourcing providers can help design a data strategy to ensure firms can capitalize on the value of their own data.
A recent Northern Trust/Economist Intelligence Unit survey of asset managers and insurance companies revealed that only 13 percent of respondents agreed they could capture the full value of their data. Nearly 30 percent reported that the sheer volume of data made it difficult to use it in a meaningful manner.
What to Look for in an Outsourcing Provider
Choosing the right outsourcing provider is key to a productive venture. Insurers need to find a provider who will understand their strategy and help them accomplish their business goals. Insurers thinking about outsourcing should carefully consider their long-term goals before signing on with a provider.
Key questions to ask a prospective outsourcing provider include:
- Does the provider demonstrate expertise in core competencies?
- How will the provider work to understand the business?
- What kind of technology platforms will the provider use?
- Are these platforms modern and flexible for when demands evolve?
- What level of support is available when critical issues arise?
Key questions to ask if outsourcing specialized services, such as insurance accounting, include:
- What is the service provider’s reporting model?
- How detailed and granular is the model?
- Are there any customized data reporting options available?
Choose a service provider with the same careful consideration as someone applying for a job at the insurance firm. By partnering with a reliable service provider who can handle data management, insurance accounting and other essential functions, insurance firms can focus on their clients and move forward with confidence. The right service provider will help insurance firms gain a competitive edge and enhance their focus on customer service.