BPO: Not Just for Legacy Blocks

The traditional play for business process outsourcing (BPO) in the insurance industry could be characterized by the following slogan: Your Mess for Less. BPO providers would work with insurers to address 30-40-year-old blocks running on antiquated COBOL, PL/1, and Assembler systems supported by a dwindling number of subject matter experts on both the business and technical side. Companies embarking on a policy administration system (PAS) transformation program have come to realize that trying to convert these legacy blocks to a digital platform will add significant complexity, cost, and time to these programs.

BPO vendors have matured and developed robust operating environments to facilitate the migration of the processing and IT support for closed business. For some, where contracts allow, the process entails lifting and moving the existing admin systems from the insurer’s environment to the BPO’s, then integrating them with the proprietary operating infrastructure. This infrastructure includes all the surrounding systems required to service the contracts, such as call center, workflow, billing, claims, correspondence, print and mail, financial, underwriting for contract changes, and customer/agent-facing service portals. These service providers bring a set of best practices for business operational migration, ongoing operations, and execution frameworks, providing operational efficiencies that benefit insurers.

BPO vendors can provide fixed, per-policy pricing for a block of business that is decreasing over time, allowing insurers to reduce internal operating costs as carrier margins continue to thin. BPO services have also been instrumental in enabling companies to augment their service models with more variable resources. This allows insurers to dedicate their best internal talent toward both the kinds of initiatives that add direct value to the overall operational and strategic goals of the insurer and toward the kinds of work that best optimize their institutional knowledge.

Recently, as insurance carriers strive to adapt to changing marketing conditions and the next generation of consumers (who have different expectations for both product and service), the need for BPO has been driven by the urgency to support new capabilities rather than to cut costs of current operations. Many insurers are looking to BPO providers to assist them with entering new markets and setting up greenfield operations. BPO providers are tapping into the innovation arm of their consulting organizations to provide turnkey operations that have a digital-first orientation. Since much of the infrastructure required to manage and scale multiple, disparate environments focuses on tight integration between all systems, BPO providers can more easily provide full back-office services utilizing a self-service experience. This affords insurers the opportunity to quickly stand up direct-to-consumer sales and service operations to achieve a competitive advantage.

Business-Process-as-a-Service (BPaaS) utilizes cloud computing to provide a customized set of services that can be tailored to the specific needs of an insurer to help accelerate market entry and provide a flexible, cost-effective solution that can grow with the business. BPaaS solutions can take advantage of new cognitive technologies such as artificial intelligence, chatbots, and robotic process automation. For these types of engagements, vendors are able to provide a richer, more immersive, end-to-end customer experience connected to a scalable and robust back end.

For more on current options in the BPO-BPaaS market, see Novarica’s latest BPO-focused Market Navigators, BPO-BPaaS Providers for P/C Insurers and BPO-BPaaS Providers for L/A Insurers. Each report provides detailed profiles of 13 vendor solutions with information on each vendors’ capabilities, technology, and market position to help insurer CIOs understand their options in the marketplace.