When it comes to outsourcing, the insurance industry is less than sophisticated.

While non-insurance companies are likely to be asking, "How much can we outsource?" the insurance industry is still thinking: "Should we outsource at all?"

The insurance industry is still, in general, in the early stages of embracing outsourcing. It is taking its first tentative steps, uncertain whether it works at all. In contrast, other industries are way ahead. They have taken the leap. They have seen the benefits. And they want to outsource more and more.

The dichotomy between the insurance industry and other sectors could be seen quite clearly at the outsourcing round table (page 32), whose attendees included Churchill and the oil company BP.

Churchill outsources nothing. Outsourcing is not part of the company culture. It does not want to lose control of customer service.

BP, on the other hand, outsources a number of functions, including HR and accounting. The company says it has been surprised by the experience.

For BP, outsourcing has strategic value. It is not afraid to exploit it and outsource functions that it has traditionally perceived to be core. The company also takes a pragmatic view when it comes to customer service functions, which are often seen as unsuitable for outsourcing. There is a distinction, it says, between customer-facing and customer service functions - the former can be outsourced.

The insurance industry could benefit from taking a more open-minded approach to outsourcing. This does not mean rushing in and outsourcing as much as possible. It does not mean that every company should outsource the same functions. It simply means that the industry should avoid the traditional knee-jerk reactions that occur whenever the subject is discussed.

Control does not have to be lost. Customer service does not have to be compromised. Strategic and cost advantages can be gained.

Outsourcing is an emotional subject. Companies are fearful of letting go of business processes. They want to be in control. Overcoming that fear is the biggest step, but once it is done the rest comes more easily.

Michael Faulkner
Markets reporter