Outsourcing is a common business practice used across all industries. However, this business model is becoming more widely used, especially in the insurance space, helping insurers deliver quicker and better quality service while improving efficiency and productivity.
Specifically, many insurers are turning to business process outsourcing (BPO) companies which offer specific skills and expertise in insurance processes like claims management, policy administration, customer support, and more. For a better understanding of what insurance BPO is, how it can benefit your operations, and other key details about this business model, continue reading below as we provide you with a comprehensive view of this growing market.
What is a BPO in insurance? The Basics
Insurance business process outsourcing (BPO) is a type of business arrangement where an outsourced provider delivers non-core activities and workflows on the insurer’s behalf. Insurance BPO providers typically have expertise in certain processes, allowing their partner insurers to focus on core operations while they handle the more tedious, time-consuming, or specialized tasks.
Working with an insurance BPO company is a strategic move for insurers, ensuring their policyholders receive top-tier service from industry experts while enjoying internal efficiency improvements, which we’ll discuss in more detail below.
How Does Insurance BPO Work? The Benefits
The insurance BPO market is quickly growing in popularity, largely due to the wide range of benefits insurers can take advantage of through this partnership. In fact, a recent report from Verified Market Research shows that the insurance BPO market is projected to reach $10.2 billion by 2028, representing a CAGR of 4.2% from 2021 to 2028.
From cost savings to an improved policyholder experience, here are some of the important benefits you can achieve from working with a BPO provider.
Cost reduction
One of the primary reasons insurers engage in a partnership with a BPO provider is to save on labor costs. Even when working with an onshore BPO provider, the associated costs to use their services are often more favorable than what you’ll incur to expand your in-house team.
When hiring internal staff, you pay a fixed cost for their wages, in addition to other labor-related expenses like recruiting, hiring, training, benefits, and overhead. Instead, using insurance business process outsourcing gives you access to highly skilled professionals, without having to go through the costly process of recruiting and training them, or paying for the specialized technology and software needed to get the job done.
Access to global talent
Another key advantage of outsourcing to a third-party provider is that it helps you access a global talent pool rather than being limited by your geography. In today’s insurance market, where it’s become increasingly difficult to attract and hire qualified professionals, turning your sights globally could be the answer to finding the right talent for your needs.
Current estimates show that the insurance industry in the United States could lose 400,000 workers by 2026, explaining the ongoing labor shortage felt throughout the domestic market. Thus, an insurance BPO company based offshore can provide you with the specialized labor you need without having to rely on the talent that’s available in your area.
Focus on core activities
Further, partnering with a BPO provider gives your team the breathing room to focus on what they do best. Rather than being stretched thin and responsible for all tasks, outsourcing certain processes to a BPO provider ensures your team has more time to focus on their core competencies.
In other words, if your team has the most skills and experience with sales, and needs more support with underwriting, you can outsource the underwriting process to a BPO provider that specializes in this process. As a result, your team has more resources to dedicate to the sales process, while underwriting is handled by qualified professionals.
Scalability and flexibility
Working with an insurance business process outsourcing company equips your team with the scalability and agility needed in the modern marketplace. This flexibility means you can scale your engagement up or down as needed to meet your demands. In contrast, when you depend on your internal staff for all processes, it’s not sustainable to continually hire and fire personnel when your demand fluctuates.
For example, if there has been a catastrophic event or natural disaster in your area, you can expect a temporary surge in claims filings. A BPO provider can quickly deploy the proper number of team members to efficiently process claims, then scale down once demand has normalized.
Enhanced customer service
You’ll also be happy to learn that a partnership with a BPO provider can help you deliver a better policyholder experience and customer service. In turn, you gain more policyholder satisfaction, loyalty, and retention for your business.
If your team doesn’t have the time or skills to provide quality customer support, outsourcing this workflow to a team that does will ensure your policyholders receive the empathy and care they desire from their insurer.
Improved process efficiency
Overall, an insurance BPO company can assist you with operational efficiencies that you likely wouldn’t be able to achieve on your own. In general, as you grow and expand operations, you may reach a point where it’s no longer feasible for your internal team to handle all insurance processes. The work can quickly pile up, and they can’t deliver all services with the same standards and quality as before.
Working with an insurance business process outsourcing partner allows your team to offload the resource-intensive tasks they no longer have the time for. These teams can provide the extra people power you need to maintain your productivity levels without sacrificing quality.
6 Main Insurance BPO Models
There are a number of business models that fall under the umbrella of insurance BPO. Depending on your needs and budgetary restrictions, you may lean toward one model over the other. However, it’s important to understand the key differences between each of these models so that you select the insurance BPO partner that’s right for your business.
Onshore Outsourcing Model
The first type we’ll discuss is the onshore outsourcing model, like Covenir BPO. Sometimes, this model is referred to as domestic outsourcing. Either way, it means that the team is based in the same country you are, though they may be located in a different city, state, or region. This model allows you to access skills and specialties that may be challenging to find in your area.
Traditional Outsourcing Model
The traditional outsourcing model is when you contract a third-party team that’s located offshore, or in a different country than where you operate. The primary reason you might consider working with an offshore provider is for better cost savings, as the different wage standards in developing countries offer a cheaper alternative to hiring the equivalent talent domestically.
Joint Venture Model
In a joint venture model of insurance BPO services, you form a partnership with the provider. Together, you collaborate to serve policyholders, often sharing resources, risks, profits, and other factors jointly.
Build-Operate-Transfer (BOT) Model
Another model of insurance BPO outsourcing is the build-operate-transfer (BOT) model. This occurs when you contract a third party to establish, operate, and optimize a specific business process, usually for a specific amount of time. After this period is over, ownership of the process is transferred to your team, as you might be able to guess from the name.
Managed Services Model
As you’re browsing the available options, you may come across the managed services model of insurance BPO. While highly similar to standard BPO models, with managed services, you outsource the entire responsibility of a certain business process to the third-party provider.
These providers are “always on”, and will maintain certain processes in addition to anticipating future needs rather than offering on-demand support as the insurer needs. In other words, this model is better suited to long-term partnerships rather than flexible outsourcing.
Cloud-Based BPO Model
Lastly, a cloud-based BPO model allows the provider to deliver insurance processes via cloud-based software rather than being on-premises. This solution supports remote BPO service delivery, which is growing in popularity in today’s digital age.
6 Common Types of Insurance BPO Services
As you can gather by now, there are many reasons to leverage an insurance BPO partnership for better efficiency and productivity. In general, each BPO provider will specialize in a few key areas to support your operations, including the following:
Claims Processing and Management
One of the main insurance processes that you might outsource to a BPO provider is claims processing and management. Teams that specialize in claims processing deliver empathetic and caring customer support to policyholders during their time of need.
You may contract a BPO provider to manage your complete claims processing. Or, you may use their services to offer support outside of normal business hours. Depending on the individual provider, they may offer end-to-end support on claims processing from initial notice of loss, through investigations and resolution. Or, they may simply deliver one element from this process to ease your team’s workload.
Policy Management and Administration
Insurance BPO providers can also handle policy management and administration on your behalf. From initial application processing to renewals, endorsements, notices, cancellations, and reinstatements, a BPO provider can handle one or each of these tasks, depending on your needs.
Outsourcing policy administration to a BPO provider helps you deliver prompt policy issuance, quick responses to policyholder inquiries, and thorough records–like loss run insurance reports–to support compliance requirements and internal policy standards.
Customer Support and Service
Certain insurance BPO providers will also offer customer support services. These teams can uphold your brand reputation and mission, ensuring policyholders receive the level of service they have come to know and expect from you.
One of the benefits of using BPO providers to offer customer service is that they may have the capabilities to deliver multi-language support and are often available around the clock. Look for a provider that suits your preferred mode of communication with policyholders, whether that be via email, phone, chat, or any combination of the three.
Underwriting and Risk Assessment
Underwriting support and insurance risk management services are commonly offered by insurance BPO providers. The BPO provider will work with you to understand your unique risk requirements, ensuring all underwriting is completed to these standards. They perform extensive quality control and new business acceptance reviews to ensure each new policy meets your objectives.
Plus, if you want to grow an insurance agency and expand into a new product line, BPO providers’ underwriting teams often have the hands-on experience and skills needed to support your initiatives.
Billing and Payment Processing
You can also find an insurance BPO provider to assist you with billing and payment processing. This might include generating invoices, processing policyholder payments, managing billing inquiries, reconciling accounts, and making payouts for approved claims. Outsourcing these non-core processes supports your cash flows with accurate and on-time billing, helps you avoid insurance overpayment, and frees up your internal resources.
Regulatory Compliance and Reporting
The insurance industry is highly regulated, placing a burden on your internal team to keep up with changing regulations, meet existing compliance standards, and adapt operations to meet the evolving requirements. Certain BPO providers will offer regulatory compliance and reporting services, helping you stay compliant by making mandatory regulatory filings, conducting compliance audits, and preparing regulatory reports on your behalf. As a result, the BPO provider will help you mitigate compliance risk and stay up-to-date on the latest regulatory changes.
What are the Risks Associated with Insurance BPO?
Though there are impressive benefits you can tap into when working with an insurance BPO provider, you should also be aware of the potential risks and challenges of this arrangement. These may include:
- Becoming reliant on a third party to deliver essential insurance processes, like claims processing, customer support, underwriting, etc.
- Facing operational delays, should the BPO provider face unforeseen events that impact their ability to deliver the contracted services
- Possible language barriers and cultural differences when dealing with offshore BPO partners
- The risk of data breaches or hacks if the BPO provider’s systems become compromised
- Difficulties migrating or integrating your existing processes and data into the BPO provider’s tech infrastructure
- Upholding consistent quality control when you are hands-off of certain processes, which can impact your company’s reputation if there is subpar service delivery to your policyholders
What Trends are Currently Shaping the Insurance BPO Industry?
Just like the rest of the insurance space, the BPO market is constantly evolving, spurred on by changing consumer preferences, ongoing digitization efforts, and technological advancements that are shifting the way insurers do business.
One of the most impactful trends to the insurance BPO market in 2024 is the greater adoption of advanced technologies like artificial intelligence (AI) and machine learning (ML). These technologies will not replace the need for the human touch in insurance. However, they can help BPO providers work more efficiently and automate repetitive tasks that drain the team’s resources.
Additionally, insurers continue to face ongoing labor shortages, making it more difficult for them to attract and retain qualified talent. This is where insurance BPO companies can shine, giving insurers access to a network of experienced insurance professionals who are ready to step in and deliver high-quality insurance services.
Lastly, there is an ongoing shift in the market towards delivering more policyholder-centric services, which BPO providers can help insurers accomplish. As competition in the space rises, insurers are beginning to realize they need to stand out with policyholders by offering insurance products that are more tailored to their needs. By partnering with a BPO provider, it becomes easier to offer personalized interactions, quicker claims processing, and omnichannel support, which can boost policyholder satisfaction, loyalty, and retention.
How can Insurance BPO Providers Ensure Compliance with Regulations?
BPO providers may take a multi-faceted approach to help insurers stay compliant with regulations. Depending on the provider, they may offer a range of services including compliance audits, ongoing compliance monitoring as regulations change, accurate and on-time regulatory reporting, and more.
Overall, partnering with an insurance BPO provider that has a dedicated team of compliance experts is the best way to go to ensure they understand the regulatory landscape and can interpret and apply regulations accordingly.
What Technologies are Commonly Used in Insurance BPO?
BPO providers may utilize various technologies to help them deliver insurance processes effectively and efficiently. The use of such technologies does not replace the role of humans in key insurance processes, though they can support quicker and more efficient workflows, including:
- AI/ML: Advanced tools used to analyze large volumes of data to identify patterns, recognize anomalies, and make predictions and forecasts
- Advanced Analytics: Helps you derive valuable insights from data, which can support more data-driven decisions, process optimizations, and fraud detection
- Cloud Computing: Allows you to store data and access applications over the internet rather than on servers located on-premise, supporting better system agility and flexibility
- Robotic Process Automation (RPA): A tool used to automate repetitive and rule-based tasks for better speed and accuracy
How Does Insurance BPO Affect the Speed of Policy Issuance?
Working with a BPO provider can positively impact your speed of policy issuance, allowing you to process applications, complete underwriting, and issue new policies quicker than you would likely be able to with your internal resources alone.
Outsourcing certain processes to a BPO provider will streamline and optimize the various steps of policy issuance, since they can leverage their expertise and specialized software programs to make quicker and more accurate decisions. The result is an expedited process that helps you issue policies more efficiently and meet policyholder needs in a timely manner.
How Does Insurance BPO Handle Peak Load Times?
As we discussed above, one of the key benefits of working with an insurance BPO provider is that they can scale support services up or down as needed to meet your current levels of demand. So, when you are going through a period of peak demand, these providers can quickly deploy the level of support you need to maintain productivity levels and promptly meet policyholder needs. Then, once the surge has passed, they can scale back down to suit your regular demand levels.
How Can Insurance BPO Improve Policyholder Satisfaction?
Insurance BPO providers can help you enhance policyholder satisfaction by delivering high-quality, prompt, and proactive service. For starters, many BPO providers will help you offer 24/7 customer support, ensuring policyholders can always contact a knowledgeable rep to resolve issues, answer questions, or initiate a claim. This supports quicker response times and better communication, which can improve the policyholder experience.
In addition, if you’re outsourcing claims processing, underwriting, or other back-office support services, BPO providers can help you be more efficient and quick with service delivery, ultimately improving policyholder satisfaction. Plus, since BPO providers have specialized expertise in these insurance processes, they can improve accuracy and minimize errors, which can provide further value to policyholders.
The Bottom Line
Business process outsourcing in the insurance space can offer a variety of strategic benefits to insurers. From supporting a better policyholder experience to driving down operational costs and helping insurers address the ongoing labor shortage in the industry, the insurance BPO market will continue to grow and help insurers find their competitive edge.
At Covenir, we have a successful track record of delivering seamless, on-brand solutions that your policyholders can count on. Our team is composed of experienced industry experts who are eager to work as an extension of your team and provide you with the people power you need to stay competitive in the modern marketplace. We offer onshore outsourced support for FNOL/claims, customer support, underwriting, sales, and more, with turnkey solutions to help you achieve better efficiency and productivity in no time.
To see if our onshore outsourcing services are right for you, click here to learn more.