Insurance is no different to most other industries when it comes to cycles of change. In my years of industry experience, I've seen trends swing from one to another.
Outsourcing has played a predominant role in insurers' strategic planning for some time and this trend has played its part in Town & Country's growth, with the outsourcing of claims handing and repair management. After all, “do what you do best – outsource the rest” holds a lot of sense for the financial sector.
The hardening of rates across many classes of business is no secret. Even brokers admit in moments of quiet reflection that insurers need to make a profit.
But brokers and their customers expect a decent standard of service. Delivery of innovative products with high levels of customer service at a competitive price while trying to contain the increasing cost of claims is a challenge. How can it be achieved?
For some time, insurers have flirted with the outsourcing of claims handling. Motor is one class that fits the category of being high in the hassle factor and high volume, relative to premium. Others include household and travel claims – again, large numbers of transactions usually at relatively low value. It solves the staff and skills burden while benefiting from the economies of scale offered by specialist intermediaries. This may be old news to some, but insurers are beginning to take this old concept and apply it in new ways.
This year has seen the emergence of a new outsourcing trend: first-line response. We have been approached by a number of insurers and brokers that are looking to achieve cost objectives. They see a first-line response unit as a method of achieving this. It is particularly attractive for organisations with a desire to streamline while maintaining as much control as possible by retaining the core claims handling process in-house.
Technology facilitates procedural management and seamless integration between the business referrer and the contracted third party. Internet technology can be employed to provide reporting and auditing facilities for the client to monitor the progress of their contract, retaining full control at all times.
Outsourcing of first-line response calls overcomes a host of problems; for instance, the difficulty of recruiting, retaining and motivating call centre staff, and releasing resources for more valuable tasks. Brand identity and reputation are kept intact, as the caller will not be aware that they are conversing with a service provider. Customer satisfaction and service levels are monitored to maintain service quality. Furthermore, the client, be it insurer or broker, can focus core skills on doing what they do best.
If you are investigating outsourcing, here are a few handy tips:
Of course, the bigger players already have economies of scale and may continue to resist the trend. The question I would ask them is why not turn a fixed cost into a variable one – linked to the business they write, written when and at the rate that suits their business? If underwriting decisions were made on the basis of these judgments, not simply to gain market share to feed someone's ego, there might be rather more stability in the market.