As insurance carriers face competitive pressures to reduce operating costs and streamline business operations, many insurers are turning to business process outsourcing (BPO) and information technology outsourcing to achieve those goals, according to a survey by Gartner, Inc.
During late 2001, Gartner surveyed 114 U.S. insurance carrier organizations that had written net premiums of $100 million or more. The survey reported that 48 percent of property and casualty insurers outsourced at least one business process in 2001. An additional 9 percent of property and casualty insurers have plans to outsource some business processes in 2002.
Kimberly Harris, research director for Gartner, commented that with added pressures to trim operating costs and launch new products, many insurers are finding those objectives difficult to meet. Gartner said they have inadequate internal resources, such as people and skilled workers, or they are so overwhelmed with other priorities that they simply cannot handle all the requirements in the necessary time frame.
“The insurers’ top reasons for BPO included a lack of time, inappropriate skill sets, and faster turnaround with the use of outsourcers,” Harris commented. “Many insurers are looking to gain competitive advantages and are using BPO and technology outsourcing services as a means to accomplish that.”
To acquire optimum return on investment (ROI) from outsourcing, Gartner reports insurers must have a corporate strategy that includes the reasons to outsource.
“Insurers looking for long-term ROI from BPO and information technology outsourcing will find greater success from having a corporate outsourcing strategy in place rather than haphazardly responding to institutional constraints,” Harris said. “Lack of a corporate vision for outsourcing will inhibit an organization’s ability to find corporate value from using external service providers.”
Gartner recommends that insurers develop a business and technological agenda that includes strategies for outsourcing. Requirements should be set for any process or project that is done externally and procedures should be made for handling outsourcing agreements and projects.
“The focus should be on market distinction with an emphasis on core competency rather than tactical requirements,” Harris added. “That change will promote greater opportunities for positive corporate wide ROI from outsourcing and will allow an alignment of resources with the core competency.”
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