Factors Driving the Growth of the Insurance Support BPO Industry

Insurance support BPO remains a viable alternative for many companies. In today’s volatile market, third-party insurance support services continue to play a crucial role in enabling companies to perform routine, back-office activities in a cost-effective manner.

While insurance support may not be a core activity for some firms, it is essential for driving business transformation, just like higher-value services. The insurance support BPO vertical is a crucial part of the larger banking, financial services, and insurance (BFSI) industry, which was among the first sectors to outsource non-core, transactional activities to external providers.

That said, insurance outsourcing is one of the most mature and significant buyer segments in the overall BPO industry. By leveraging the expertise and resources of BPO providers, insurance companies can streamline their operations, reduce costs, and free up resources to focus on more strategic activities that drive growth. Therefore, insurance support BPO remains a valuable option for companies seeking to enhance their business operations in a rapidly changing market.

Evolution of Insurance Support BPO

1990s and 2000s

During the late 1980s and early 1990s, insurance support BPO was primarily driven by the need for cost reduction. Many companies partnered with low labor-cost locations, both domestically and offshore, to leverage economies of scale. A successful outsourcing partnership allowed companies to reduce overall costs associated with running back-office operations. The next wave of outsourcing activity incorporated technological advancements. Newer, faster, and more sophisticated tools increased productivity and rate of return, and IT outsourcing vendors offered these tools to companies across various industries, including the technology-hungry BFSI segment.

In the early 2000s, shared services or captive centers gained popularity as an alternative to outsourced insurance support services. At the time, the main advantage of the captive center delivery model was that it allowed insurers to assume greater control over processes. Insurance support providers lacked the expanded capabilities and deep domain knowledge they possess today, making it more practical for insurers to centralize operations. However, as the workforce grew, and operations were conducted on a larger scale, the management of captive centers became increasingly complex.

As insurance support providers matured and acquired sophisticated technology, talent, and resources, outsourced insurance support once again proved a viable alternative for companies looking to establish robust back-office operations. With increased capabilities and deeper domain knowledge, insurance support providers can offer more comprehensive solutions that meet the evolving needs of the BFSI segment.

Sourcefit Philippines Outsourcing Blog: Evolution of the Insurance Support Outsourcing Industry

2010 and Today

The third wave of business process outsourcing in the insurance industry is marked by a focus on quality and value derived from third-party partnerships, as well as a high level of maturity. While cost control and process efficiency remain top drivers of the growth of insurance support outsourcing, insurers are increasingly seeking a partner who can share risk and provide consulting and strategic services. As the insurance outsourcing market continues to mature, global insurers are placing increasing demands on providers to strengthen their capabilities.

In addition, service providers are now offering more judgment-based services, such as analytics, underwriting, and claims adjudication, in addition to transactional services like insurance support. Insurance vendors are now seen as true partners to business success, rather than merely an external party that provides a service. They are more accountable and share operational risks with their clients. With deeper domain expertise and greater experience with different types of insurers, vendors can deliver value beyond cost reduction and efficiency improvements.

Many outsourcing engagements today combine unbundled insurance support BPO services, such as document management, with higher-value processes like underwriting, analytics, and product development. Analysts predict that with the surge in demand for full-service offerings in pension and closed block administration, paper-based work will be eliminated, and automation through straight-through processing (STP) will become the norm. As insurers seek innovation, rapid product development, and customer-driven solutions, insurance support partners are aggressively investing in integrated IT-BPO offerings, with a focus on long-term value and flexible delivery models.

Most insurers adopt a hybrid approach to outsourcing. They may keep some core activities in-house while outsourcing consulting, strategy, and support to different vendors. Another flexible solution is outsourcing support services in lower-cost areas domestically and offshore and hiring part-time support workers such as data entry professionals and mailroom workers. Insurers may also opt to bring in additional temporary support staff during peak times.

Growth of Insurance Support BPO

In recent years, global economies have achieved a newfound sense of stability, and a number of countries are experiencing significant growth. The middle class is experiencing a rise in spending power, while high-net-worth individuals are enjoying greater financial resources. Despite these encouraging developments for insurance firms and brokers, challenges remain across all regions.

In the United States, insurers are grappling with regulatory changes, slim profit margins, intensifying competition from new players and products, and sluggish growth in premiums. Meanwhile, other regions are facing challenges stemming from technological issues, mounting cost pressures, market volatility, and evolving consumer behavior. These issues are driving the growth of insurance support BPO.

The factors driving the growth of the insurance support BPO industry are as follows:

Sourcefit Philippines Outsourcing Blog: Insurance Support Offshore Outsourcing Sector

1. Cost pressures and tight profit margins.

The growth outlook for life, annuity, and property-casualty insurance companies in the United States appears promising. However, soft pricing conditions are putting pressure on profit margins. Meanwhile, in Europe, insurance providers are grappling with intensified competition and decreased business investment, while customers are increasingly seeking personalized products and multichannel interaction. This has prompted companies to prioritize cost control and efficiency improvements, with many opting for selective offshoring of insurance activities.

To achieve enhanced risk management and process optimization, insurers are turning to their outsourcing partners. In addition to seeking integrated IT and end-to-end insurance solutions, there is a growing demand for cost-effective insurance support BPO services. Many carriers have successfully utilized claims processing services and centers of excellence offered by insurance support vendors to streamline the claims lifecycle and boost profits.

By leveraging such services, insurers can drive efficiencies and optimize costs, thereby improving their competitiveness in a challenging marketplace.

2. Increasing competition.

The insurance industry has experienced significant disruption in recent years, with multiple new entrants causing a shift in the value chain. Aggregators, for example, have made it easier for customers to compare prices and switch insurance carriers, further reducing customer loyalty. In this price-driven environment, insurers must find innovative ways to remain competitive and differentiate themselves from their peers.

However, achieving differentiation can be challenging for insurers, particularly with existing resources. Many companies are turning to third-party partners to optimize their supply chain, reduce costs, and streamline underwriting processes. By leveraging the expertise of these partners, insurers can improve operational efficiency and better meet the needs of their customers.

To succeed in a rapidly evolving marketplace, insurers must be nimble and responsive to changing customer needs and preferences. By partnering with third-party providers and embracing new technologies, insurers can drive innovation, enhance the customer experience, and differentiate themselves in a crowded and competitive landscape.

3. Changing regulations.

To stay competitive in a rapidly evolving market, insurers must adapt to meet changing regulatory demands and customer expectations. For instance, the implementation of regulatory requirements, such as the Insurance Distribution Directive in 2018 required European insurers to make strategic and operational changes. In the United States, the National Association of Insurance Commissioners (NAIC) implemented updates to the Model Audit Rule and changes to the Long-Term Care Insurance Model Act. This required changes to companies’ distribution and marketing activities to ensure compliance

By working with insurance support outsourcing providers, companies can implement the necessary changes to remain compliant and streamline operations, freeing up resources to focus on delivering top-quality products and services to customers. Third party providers can also assist in modernizing insurance products and distribution, as well as transforming back-office operations to improve efficiency and reduce costs.

4. Technology issues.

Insurers use a wide range of technologies to support their operations and enhance customer experiences. One such technology is customer relationship management (CRM) software, which helps insurers manage interactions with customers from prospecting to policy servicing and renewals. CRM allows insurers to track customer preferences and buying patterns, provide targeted marketing and communication, and quickly resolve any issues or complaints.

Policy administration systems are another essential technology used by insurers. These systems manage policy creation, billing, and claims processing, automating many of the time-consuming manual tasks involved in policy administration. This improves efficiency and accuracy while reducing costs. Advanced analytics and machine learning are also increasingly used by insurers to analyze customer data and identify patterns and insights. This technology helps insurers make better underwriting and pricing decisions, improve fraud detection, and enhance risk management.

In today’s data-driven world, sophisticated data collection and analytics tools have become a crucial element for better decision-making in the insurance industry. By leveraging enhanced data analysis and modeling techniques, insurers can improve customer acquisition and retention, gain detailed insights into risk profiles, and develop customized cross-selling opportunities for each client.

However, technological upgrades and improvements can be costly, both for small and large enterprises alike. That’s why many insurers are turning to service providers with the right technological capabilities and IT offerings integrated with insurance support services. By partnering with these providers, insurers can leverage cutting-edge technology without incurring the high costs of developing and maintaining their own in-house solutions. This not only helps reduce operational costs but also allows insurers to focus on their core competencies while leaving technology management to the experts.

To learn more about outsourcing, you can read our Top 8 Qualities of an Outsourcing Company in the Philippines article. We invite you to follow us on social media and to visit our website to learn more about our services.

banner-finalAbout Us: Sourcefit is a widely recognized US-managed business process outsourcing company based in Manila, Philippines. We proudly serve over 100 clients with a workforce of more than 1,300 employees. Our global centers can serve multiple markets, and our staff is highly proficient in English, Spanish, French, and Portuguese. Whether you need a few or many employees, we can help you achieve your business goals and build high-quality offshore teams.

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