Advisory firm Celent recently published a report on insurance business process outsourcing trends, and noted that parts of the claim process are being commonly outsourced by P&C insurance providers. To find out why, Claims spoke with Mike Fitzgerald, senior analyst in Celent's insurance practice and the author of the report. His background includes research that has focused on, among other things, business processes and operations.
What does business process outsourcing mean and why is it getting the attention of insurers?
Business process outsourcing involves contracting with a third party to perform tasks related to a specific function. Cost savings is the traditional motivation for outsourcing a process. Savings can range from 20-40 percent. In addition to cost reduction, quality can also improve. Often, a vendor can focus and perfect a process to a level that a single insurer is not able.
You said in your report that claims is one of the most commonly outsourced processes. What parts of the claim process are typically outsourced, and what are some of the benefits insurers typically see?
Call center customer service (including first notice of loss), coverage verification, and claim payments are the three most frequently outsourced claims processes. Again, cost reduction is the main benefit in these areas.
Have you observed noticeable trends in customer service levels in those companies that implement business process outsourcing?
We do not have any data to support a judgment either way on this.
Is the field claim adjusting professional in danger of being outsourced? Why or why not?
No. Claim adjusting that has been outsourced is generally at very low levels for very routine types of business. More often, insurers outsource to increase the capacity of current claim technicians to handle more complex, higher severity cases.
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