Insurance Back Office Services: Here's What You Need To Know

Just the other day, I was reading a news from GlobNewswire while seeping my morning coffee - that the insurance business process outsourcing (BPO) market is forecasted to reach USD $10.4 billion by 2033. With an expected growth rate of 3.57% per annum.

That's great news for BPO companies that serve the insurance industry but to tell you the truth the growth is nothing new.

Insurance industry has been one of the major industries that has been fully reliant on outsourcing from the start.

In fact, it has been one of the forerunners to adopt outsourcing as a cost-efficient way to handle a wide variety of business tasks and operation.

And so in the last 20 years the outsourcing market in the insurance industry has only grown year-by-year.

The demand to outsource has become more prominent after Covid, because in the 2019-20 the insurance industry saw its profits take a major dive downwards - almost 49%!

And when your profits sink, you need to cut your costs and what better way to cut your costs while ensuring your operations run smoothly other than outsourcing?

This is why I wanted to write this article: to help insurance companies looking to outsource their back office tasks understand a bit more about back office support services and how it can help their businesses.

Types Of Insurance Outsourcing Services

The insurance industry outsources a wide variety of tasks to third party BPO companies. Below is a breakdown of these services:

1) Claims Processing: An insurance claim is when a policyholder makes a formal request to the insurance company to receive financial compensation for a loss or damage that has been covered by the insurance.

A BPO service provider handling claims processing will either manage the back-end of the full process or part of it. This involves verification and adjudication of the claims, entering data and information, fraud detection and investigation and first notice of loss (FNOL): which is an initial report you make following a loss of an asset covered by an insurance policy.

Furthermore, the service provider also handles back-end communication with all parties involved.

2) Insurance Underwriting: Underwriting is a complex process that involves evaluating an insurance application to determine the risk involved with insuring a person or his/her assets. After which he determines the pricing, terms and conditions under which the insurance contract will be offered.

Through AI tools a part of this process is now automated to run the tasks more efficiently.

3) Policy Administration: This involves the back office process of managing and servicing the insurance policies and financial contracts (annuities) using Policy Administration platforms.

4) IT Services: This involves providing Cybersecurity and IT infrastructure to ensure data security, providing software development and maintenance, providing cloud services and providing data analytic services.

5) Fraud Detection: Insurance companies are now using advanced AI tools to detect fraud. These AI tools use algorithms to detect specific activities that are related to fraudulence. Such as finding fake emails, social media profiles, and suspicious IP addresses that aren't owned by the insurance policy holder.

This helps to review data with exceeding efficiency and lets insurance companies find fraudulence before major issues occur.

6) Actuarial Service: Actuarial service involves actuarial analysts who uses statistical models to analyze costs of risk and uncertainty for the client. They support the insurance companies' financial planning and risk management, contributing to the client's long-term sustainability and profitability.

7) Compliance Check: Compliance officers ensures that the client's insurance activities comply with relevant laws and regulations. This helps mitigate legal risks and maintains the client's reputation.

Benefits of Outsourcing Insurance Back Office Management Services

When you try to focus on core competencies, you probably leave a number of tasks behind. Outsourcing provides many game-changing opportunities for insurance companies. It lets you prepare your insurance company’s foundation for growth by streamlining tasks for future expansion.

Some benefits of outsourcing insurance back office management services are:

Cost reduction on salaries and employee benefits: When you outsource not only are you reducing costs on wages and salaries, you also do not have to count on the number of employee benefits when you outsource back-office management services. It will reduce your employment budget. Also, you will save on the cost of office utilities.

Skilled Professionals: Business process outsourcing provider companies train each of their executives before delegating their clients’ tasks. Thus, you will get access to skilled professionals who master insurance knowledge.

Improved Client Satisfaction: Outsourcing insurance back office support expedites data and claims processing. It improves your client satisfaction. Customers become more loyal to your insurance company when they get urgent responses.

Compliance and Security: Insurance companies handle loads of client data that needs to be confidential and secure, by hiring a third party cybersecurity team they ensure that their client's data has maximum security.

Challenges Faced by Insurance Companies in Managing Their Back Offices

There is always some risks involved when outsourcing. Below we discuss on some of the risks and challenges you can face when you are looking to outsource:

Communication Issues

In order for the business and the outsourcing provider to work together effectively, communication is essential. The issue arises since all communication takes place online. Language barriers also hinder communication.

Quality Control

Sometimes the quality of work diminishes when you appoint a third party to handle the tasks. Insurance companies must impose quality control procedures that guarantee quality standards before signing an outsourcing contract.

Back Office Support Providers For Insurance Companies

If you are looking to outsource your back office operations to a BPO service provider, here are a few you consider:

1) ASL BPO: One of the top BPO firms in Bangladesh that specializes in providing back office support services to North-American and European Companies

2) Flatworld Solutions: A renowned Indian outsourcing company that provides its outsourcing

services to many industries including Insurance companies

3) Invensis: A BPO firm that has 25+ years of experience in providing outsourcing solutions to insurance firms.

4) Megallan Solutions: A BPO company from the Philippines that has 17 years of experience providing outsourcing solutions to SME as well as large enterprises.

Hope this blog post helped! if you found it helpful, don't forget to comment, like and share!