In the insurance space, the practice of outsourcing continues to grow in popularity. A recent report from Verified Market Research shows the insurance business process outsourcing (BPO) market is expected to grow at a compounded annual growth rate (CAGR) of 4.20% from 2024 until 2031. More and more insurers are outsourcing key functions like claims handling to improve operational efficiency, reduce costs, and adapt to changing demand.
However, not all insurance BPO providers are equal. When outsourcing insurance claims handling, insurers should look for a provider that has industry expertise, a proven track record, compliance with data security regulations, clear communication channels, and scalability to handle varying claim volumes. These checkpoints ensure efficient, accurate, and compliant claims processing—even if your team is not directly involved in the process.
Below, we’ll discuss why insurers should consider outsourcing claims, what to look for in a potential BPO provider, and how to overcome the most common challenges that can arise with a BPO partnership.
The Power of Outsourcing
Whether you decide to outsource claims processing or other key insurance functions like customer support, underwriting support, or premium services, the main benefits of outsourcing apply to each.
Here are some of the top benefits of leveraging a BPO partner:
Streamlining Operations While Reducing Costs
Outsourcing insurance functions can help insurers improve operational efficiency and profitability. Of course, insurance BPO partners don’t work for free. However, if you’re deciding between hiring more in-house workers to handle claims processing or outsourcing this process to a third party, outsourcing is often more cost-effective.
The service fee insurance BPO providers charge for a dedicated support team is often lower than the cost of hiring a few full-time employees with salaries and benefits. This helps insurers achieve sustainable growth, keeping their team streamlined while tapping into expert support to enhance service delivery.
Focus on Core Competencies and Growth
When outsourcing time-consuming, non-core functions like insurance claims processing, your team has more time to spend on other strategic tasks that drive business growth. For instance, rather than fielding first notice of loss (FNOL) calls and emails from policyholders, in-office personnel can spend more time on outreach to attract new policyholders or develop new products and services to stay competitive in the market.
In this way, insurance outsourcing can help you grow. Your team won’t be stretched thin4 and responsible for a long list of tasks. Instead, they can devote their resources to primary business activities where they have specialized expertise, helping to improve policyholder retention and further expand operations.
Accessing Expertise and Scalability
Insurers are drawn to outsourcing because it gives them access to skilled experts and advanced technologies they wouldn’t otherwise have. Consider an insurer operating in a rural area without a robust labor market. They might struggle to find good local talent to handle claims processing to their standards, but outsourcing allows them to take advantage of a wider talent pool of top industry experts from across the country.
At the same time, outsourcing can help you be more scalable to meet changes in claims volume. With this flexible support, you can improve policyholder satisfaction and claims resolution times. When you experience a surge in claims volumes, BPO providers can immediately allocate additional team members as needed. Once levels normalize, these resources can be scaled back just as quickly.
Key Considerations for Successful Outsourcing
The specific benefits a BPO partner offers will vary depending on their areas of expertise, company culture, and established processes.
Here are some important considerations to set yourself up for success with insurance claims outsourcing.
Evaluate Your Needs and Processes
Before hiring a provider for insurance claims outsourcing, evaluate your specific needs and existing workflows. This will help you narrow down your options and eventually select an outsourcing partner that will support your operational goals.
First, determine the scope of the work you need to be supported—whether you’d like to outsource the entire claims processing workflow or only certain aspects, like FNOL. Then, consider your expectations and requirements for a potential partner, including both technical and soft skills. For instance, do you want the BPO providers’ team to be based entirely onshore? Do you need them to comply with specific data security protocols? What type of ongoing communications or reporting do you expect them to provide?
Research Outsourcing Options to Find the Right Fit
To find the right insurance BPO, make an initial shortlist of providers who meet your needs and exhibit the necessary skills. The top skills in expert insurance BPO companies include:
- Deep industry knowledge and experience.
- Data security and compliance expertise.
- Excellent communication skills.
- Technology expertise.
- Continuous improvement and innovation.
Insurance claims outsourcing partners should be well-rounded, offering the right amount of technical skills and expertise along with emotional skills like empathy and compassion that will need to be extended to your policyholders.
Set up a consultation with your chosen providers to see firsthand how well you might work together. After a thorough evaluation, you should be able to make your final selection.
Pave the Way For a Smooth Transition and Integration
Onboarding a BPO partner can take some time, and you shouldn’t expect integration to happen overnight. However, an experienced provider should be well-versed in the integration process and aid in a smooth transition.
Make backups of any data being transferred to the BPO provider to prevent issues if it’s lost or damaged during the migration. You’ll also want to provide the necessary training and resources to the outsourced team to help them deliver service according to your brand’s promise.
Throughout this period, maintain clear communication with your point of contact to quickly address any questions or concerns and ensure minimal impact on your policyholders. If done correctly, your policyholders may not even be aware you’ve outsourced claims handling.
Mitigating Risks and Challenges
Even when you find an expert partner for insurance claims business process outsourcing, there are bound to be some roadblocks when transitioning to this model. Though certain challenges are unavoidable, others can be prevented through proper preparation and partner selection. The following tips and suggestions can help you mitigate common outsourcing risks.
Maintain Control and Oversight
Even though you’re delegating certain functions to an outsourced provider, your name is still attached to the service. So, you need to ensure it’s being delivered according to your standards. You should select an expert provider that you don’t have to observe too heavily. But, regular quality assessments give you the confidence that your policyholders are receiving top-tier support on their claims.
To help manage expectations, define the clear key performance indicators (KPIs) or metrics that you will use to evaluate the BPO provider from the onset of your engagement. This gives you an objective way to monitor performance without needing to micromanage their everyday activities.
Ensure Data Security and Compliance
Insurers must meet certain data privacy requirements. These compliance obligations remain even when outsourcing to a third party. Before hiring an outsourced provider, inquire about the data security mechanisms they have in place, such as encryption, role-based permissions, and authentication protocols to keep your policyholders’ data safe.
Address Communication and Cultural Differences
Hiring offshore providers can create some communication challenges—both with your staff and your policyholders. You may not share the same native language as the provider’s team, which can impact the policyholder experience.
On a similar note, there might be cultural differences that impact the type of service your policyholders receive when initiating a claim, as customs and acceptable business practices can vary throughout the world. Onshore outsourced partners can help you navigate these challenges more easily.
Conclusion
Outsourcing insurance claims handling is a practical decision for insurers who want to improve operational efficiency and devote their resources elsewhere in the business. For the best outcomes, make sure you know which things to look for in an onshore insurance outsourcing partner when making your selection.
If you’re looking for a reliable onshore outsourcing provider that specializes in claims handling, turn to Covenir. Whether you need daily or surge support for your claims operating, we have experienced staff ready to take voice or electronic claims submissions 24/7/365.
At Covenir, we get the job done using the right balance of expert people and technology, helping your team look good and your policyholders feel great.
Contact us today to learn more about our insurance claims outsourcing service.