Insurance Services Outsourcing

The insurance industry worldwide has witnessed immense upheavals such as product commoditization, reduced investment return and negative underwriting profits in the recent past due to increased international regulation and focus on accounting and actuarial standards.. Firms are therefore increasingly focusing on operational excellence and effective cost management, thus paving the way for the adoption of Business Process Outsourcing. Within insurance, actuarial services have grown tremendously, and actuaries are finding themselves increasingly placed within core business areas, in addition to the more traditional actuarial exposure areas. Insurance companies can augment their actuarial function and strengthen its effectiveness for more active decision-making support through the services of BPOs such as WNS, to provide offshore actuarial services utilizing a cost-efficient delivery model, enabling customers to effectively deploy their valuable actuarial resources to strategic tasks.

The manner in which an insurance company manages its recovery and subrogation function makes a huge impression on its value to both shareholders and policyholders. As an insurer's claims service function can offer a clear opportunity for a company to distinguish itself in the marketplace, insurers must invest in achieving operational improvements with respect to claims management. Claims management is a highly challenging operation involving multiple processes, and subrogation recovery is a particularly challenging component within claims management. If the subrogation recovery process is managed efficiently, policyholders who have had to pay the deductible can realize an added value from the insurer. Many insurance firms are plagued with outdated technology and cannot conduct this function effectively.  With limited staff and increased workload they are unable to focus on this aspect of claims management. Insurance firms can significantly improve the subrogation recovery aspect of their claims services by partnering with BPO companies to bring in increased effectiveness and efficiency.

General insurers across the globe have a fiercely competitive market with a supplier-customer chain model driving approximately 70 percent of the overall sales generated by any insurance company. Intermediaries are critical to supplier-customer chain management. The phenomenal amount of premium generated brings along with it the complexity of managing multiple broker relationships. The 30-60-90 day brokerage credit-line period builds a self-delinquent model, which needs to be managed based on relationships and strong credit controls coupled with reconciliation and cash application. Delinquency management creates a cross-section across the supplier-customer chain model and is critical to the cash flow of a business. WNS has evolved over the years to provide specialized collections services through its global offices present in key geographies. WNS has tailored a unique collections model that is effective in reducing the high delinquency plaguing the industry. This article provides an overview of WNS's end-to-end capability in a recovery model space as well as relationship management and reconciliation both of which are critical for ensuring cash flow and maintaining reduced delinquency levels, and substantiates this with a case study which presents WNS's intervention in supporting its client with the implementation of a more efficient credit control.

The overall trend in the general insurance market is one of falling premiums and rising claims. Claims indemnity spends or claims leakage is the largest component of an insurer’s expense base. The most costly form of general insurance claims fraud is opportunistic retail fraud where a genuine claim is inflated in order to increase the value of a payout. Claims leakage takes place due to other factors like human error, and costs towards customer service and customer retention. Being a leader in the insurance domain in terms of outsourced offerings, WNS can address these concerns by leveraging technology and processes to significantly reduce the costs incurred by insurance companies during claims processes. WNS’s Center of Excellence model can provide solutions to real-world insurance challenges, and accelerate value creation for general insurers by reducing operating costs, increasing efficiency and ensuring insurers remain competitive.

Despite the recent growth rate, the Middle East region still remains one of the world’s least developed insurance markets, or one with the greatest implied potential for insurance growth. However, the sector faces a combination of significant challenges and great opportunities, which has increased the attention investors pay to insurance markets and operators. Growth is the medium and long-term outlook for this industry. The lack of development of the insurance sector is a matter of concern, as the sector is known to play an important role in financial and economic development. The article discusses several key recommendations to accelerate the development of the sector in the region, and through two case studies shows how WNS has been able to support clients to transform their current operating model to achieve greater efficiencies and hence strengthen market position and gain a competitive edge.

Insurance companies have to deal with closed book policies that involve high cost of maintenance, managing legacy systems and low returns. Insurers are now exploring additional methods to extract value from their closed book operations by integrating it with the overall client management strategy. For progressive life insurance carriers, focusing on cost savings, increasing operational efficiency and staying connected with customers, life and annuity closed book administration has taken center-stage. Given the challenges that life and annuity insurance companies have had to face with respect to closed book management, they would do well to consider the option of outsourcing closed book management.

The recent trend in the insurance industry, due to the increased use of internet to buy insurance, has thrown up several challenges around the traditional sales model. Third-party outsourcing partners offering flexible operating models are finding a fit in the current environment. Volume-based businesses like auto insurance or health insurance are now looking at new ways of doing business, where they can share the investments and the risks. This means that in both the sales and underwriting processes, the role of third-party service providers like WNS has increased. With deals getting more strategic in nature in this phase in the evolution of the insurance industry, how does an outsourcing service provider fit into this scenario?

The European Court of Justice ruling, that gender cannot be a risk factor in determining an insurance premium, will come into effect from December 2012. Women who have been paying lower premiums than men while buying car insurance and life insurance, whilst suffering with lower pension annuity rates, will now have to face a hike of over 25 percent. Insurance companies are now faced with the grave risk of losing women customers as a result. To sustain its women client base in motor and life insurance and grow it in the years ahead, insurance companies will have to look for newer ways to make its product pricing attractive, and introduce different products for different sorts of risks. An offshore company with the right R&A capabilities can help an insurance provider come out with a new pricing model based on a different set of risk parameters and new products designed for different categories of risk.

As Solvency II laws continue to tighten their grip in Europe, the Small and Medium sized insurers will be under pressure.  While the intent of Solvency II is to establish a more robust and competitive EU insurance market, the demands of increased regulatory compliance, corporate governance and capital reserves have meant that smaller insurance players struggle to maintain operational efficiencies and reasonable profit margins.  Read on to find out how small and medium sized insurers can approach this strategically and can turn the potential  challenges into opportunities.

Insurers in Europe will see the advent of a new regime, come 2012 ─ Solvency II. Its predecessor and European Union’s regulation, Solvency I, which came into effect in the late 1970s, laid out a simple, but robust framework for assessing capital requirements of insurance companies to pay potential claims in the future. Since then, insurance portfolios have undergone changes, and markets have evolved.
This document aims to understand the nuances of the regime and the challenges in the path ahead.

Insurance fraud costs companies and the insured tens of
millions of dollars.
In auto insurance alone, the focus of this article, fraud is
staggering. As per National Crime Insurance Board estimates,
auto fraud in the U.S. costs companies an estimated
USD 30 billion per annum.

The rise of the internet has had an enormous impact on the insurance industry with the emergence of price comparison sites and web-only players. Post, in association with WNS, hosted a roundtable gathering industry professionals to find out its influence on product delivery.

Some months ago, a New York City court convicted 13 people
including six medical professionals who had, over several
years, milked auto insurance companies of millions in
fraudulent claims. How did they do it - by staging ‘fake’
accidents in rental cars and then ‘treating’ the alleged victims
to a battery of unnecessary tests including expensive EKGs
and MRIs.

As the economic slowdown continues, insurance companies continue to worry about how to retain their most profitable customers.

Customers who continue their business relationships with the
insurer are more than revenue generators. Satisfied customers are, indeed, a company's brand ambassadors.They spread the word about positive experiences they have had with their insurer to others they come in contact with.This word-of-mouth marketing is valuable for a company, especially in these tough times.

This is not the best of times for insurance companies. To better understand the decline in the industry, there is a need to examine customer satisfaction trends. Customer experience can make or break a deal for insurers. The older – more traditional – players have had to invest significant resources to move to a direct-to-consumer business model as compared to the more traditional third-party broker or independent insurance agent model. Insurers must overcome six challenges which affect the growth of their businesses.

Underwriters assess risks associated with new products and
determine payments of premium. As a result of increasing
attrition and the need to launch new products including niche
ones, underwriting talent has become scarce. One estimate
suggests a 40 to 50 percent shortfall in underwriting talent in
North America alone. And only a few companies can afford to
invest in training, contributing to the lack of trained resource.

While insurance companies already outsource highly transactional processes such as claims and payments, new business processing and underwriting support, they can gain significant additional value by leveraging BPO for other processes. For example, outsourcing research and analytics for actuarial support can optimize pricing and more accurate premium calculations helping the company target additional consumers based on demographics, groups and risk profiles.

A fundamental shift in outsourcing is just now discernable in the insurance industry, triggered by a new definition as to what is the core business.

In most industries, outsourcing of business processes has been used primarily as a tool to reduce cost. Identifying the so-called non-core functions, typically from the back office, for consolidation to and delivery by third party providers has been the rule rather than the exception. But outsourcing activity in the insurance industry has begun to veer dramatically from this approach.