P&C insurance outsourcing is an operational model that allows insurers to delegate certain tasks or workflows to a third party. These teams are often comprised of experts who specialize in certain insurance operations or processes, like claims processing or underwriting. Outsourced teams typically handle tasks more efficiently or effectively than what you could accomplish internally.
Outsourcing is a common practice in the business world, and insurers have compelling reasons to adopt this business model. Between better efficiency, cost savings, and access to highly desired skills and technology, insurers continue to enjoy impressive benefits when outsourcing processes to expert providers.
Which P&C Insurance Functions Are Commonly Outsourced?
Nearly every key insurance function can be outsourced to a third-party provider. The most common ones include:
- First notice of loss (FNOL) and claims
- Customer support
- Product sales
- Premium services
- Underwriting support
- Print distribution
Depending on your current capacity and your staff expertise, you likely require additional support in certain areas while your team continues to handle their core specialties.
For example, if you have a team of experienced product sales advisors, but no one skilled at underwriting, rather than expanding your in-house team to bring on skilled underwriters, you can outsource this workflow to dedicated experts instead.
How Does Outsourcing Impact P&C Insurance Costs?
P&C insurance outsourcing can provide you with the right talent to handle key workflows, but how does it impact the bottom line? In many cases, as mentioned above, it’s more financially viable to outsource insurance tasks than to expand your headcount by hiring the equivalent talent internally.
Of course, outsourcing is not free. You will generally pay a monthly fee to a provider for a certain level of engagement from their team. However, you can take advantage of economies of scale, as the outsourced provider divides their costs among each of their clients. This means you can access an entire team of specialists and advanced technology much more affordably than it would be to support the same resources in-house.
The Benefits Of Outsourcing P&C Insurance
Here are some of the main benefits of P&C insurance outsourcing, and why a growing number of insurers are turning to outsourcing as a reliable source of expert talent:
Cost Reduction And Improved Efficiency
It’s often cheaper to hire an outsourced team to handle specific workflows than it is to build a dedicated team in-house. The outsourced team will also likely allow you to expand operations and improve service delivery, creating profitable growth.
Access To Specialized Expertise And Technology
Smaller insurers, or those who operate in more remote geographic regions, may struggle to attract and hire talent with the right set of skills to support efficient operations. Plus, certain technology systems and tools that might be too expensive for insurers to purchase outright will be much more accessible through an outsourced provider.
Enhanced Focus On Core Business Functions
Another crucial benefit of P&C insurance outsourcing is that it allows an insurer’s team to focus on their core competencies and do what they do best. Your team members should not be expected to fill multiple roles, even if you’re short-staffed. Placing too many responsibilities on your staff can only detract from their key areas of expertise.
For instance, if you have staff for all core insurance functions except a dedicated customer support team, you may find that your claims processing falls behind because these team members spend too much time addressing customer service matters.
Scalability And Flexibility In Operations
Outsourcing also helps insurers be more flexible to changes in demand. It’s much quicker and easier for an outsourced provider to dedicate more of their associates to a certain insurer than it would be for the insurer to recruit, hire, and train their own personnel. Outsourcing lets you quickly scale up during periods of high demand, and scale back during normal conditions.
P&C Insurance Outsourcing Tips for 2024
There are some P&C insurance outsourcing challenges to be aware of. However, the following best practices will help you get the most out of your outsourced engagement.
Prioritize Data Security And Compliance
Any time you engage with a third party that will handle and store policyholder data, you must ensure they have proper data security protocols in place and are compliant with relevant industry regulations.
Insurers (and therefore their outsourcing partners) handle sensitive client data, such as addresses, financial information, Social Security numbers, and other details, which are prime targets for fraudsters. Make sure you thoroughly evaluate the outsourced provider’s security framework before engaging in a partnership to best protect policyholder data.
Seek Expertise In Emerging Technologies
The adoption of emerging technologies like artificial intelligence (AI) and machine learning (ML) will continue to reshape the industry. Even the most tech-savvy staff members may have difficulty adapting to this changing landscape, so it’s a good idea to consult with an outsourced team that can provide guidance on how to navigate new technology and its effects.
Not every new insurance system labeled as “AI-powered” or “automated” will drive tangible benefits for your operations. So consider speaking with a qualified expert to help you make an informed decision before adopting one of these costly solutions.
Focus On Quality
It’s important to find an outsourcing partner that doesn’t break the bank. However, you also need to find the right balance between affordability and quality service, ensuring you get the right value for your money.
Just because a provider is cheap doesn’t mean it’s the right match for your needs. Perform a thorough evaluation of a provider before committing to an engagement, with cost being just one of the key factors for consideration.
Establish Clear Communication And Collaboration Channels
It’s best practice to maintain open and transparent communication in any line of business, and the same goes for outsourced engagements. You want to make sure the outsourced provider understands your requirements and expectations. Otherwise, your service quality and policyholder experience could suffer.
In most cases, it’s appropriate to set up regular check-ins between your team and the outsourced provider to address any concerns and gather feedback that could help improve operations. Consider designating a point of contact for both teams at the beginning of the engagement to discuss any pertinent issues outside of your regular meetings.
Getting Started with Expert Insurance Outsourcing
Insurance outsourcing can help you grow, and understanding the key benefits and best practices of this working model will help you find the right solution for your needs. Not every outsourced provider can drive efficiency improvements and strengthen your competitive edge. So always do proper research and due diligence to find a trusted provider with a successful track record partnering with insurance companies, like Covenir.
We help you streamline insurance operations, giving you the expertise you need to provide more efficient, proactive, and personalized services for policyholders. From empathetic frontline service teams to reliable back-office support, we seamlessly fit into your operations wherever we’re needed, so you can give your team the freedom and flexibility to focus on what they do best.
Contact us to learn more about our P&C insurance outsourcing services.