The New Rules of Outsourcing Insurance Technology

In times past, outsourcing used to be a solution for challenges that came with highly predictable parameters. It was a viable option for projects that required a stable staff size on a fixed-capacity job taking place over a relatively long period of time. Today, that table has turned. For outsourcing, the new rule is flexibility, agility, scalability.

Same service, different animal

When it comes to tech, outsourcing is no passing fad. Today external services consume 20 percent of insurers’ IT budgets on average, said Carrier Management contributors Tom Benton and Chuck Ruzicka. Within the average enterprise, 20-40 percent of the IT team is comprised of external staff.

“The current trend in outsourcing is more toward blended or variable agreements,” said Benton and Ruzicka. “These new agreements enable carriers to establish cost structures for variable levels of capacity in advance, with defined lead times and service levels. This transfers some risk to the services provider but can reduce administrative overhead for both parties and establish more effective strategic partnerships.”

Insurers use outsourcing to address major challenges in operations, talent and costs. For example:

The pressures that built the trend

• Shifting expectations for customer service pressure insurers to deliver a better experience
• Limping legacy systems necessitate core system replacement, which can be resource-intensive
• IT processes must be sophisticated enough to control costs and enhance service
• New platforms and capabilities require support that may not be feasible to handle in-house
• The persistent talent gap, paired with difficulties around retention, make talent hard to find

“Outsourcing firms that have certified, repeatable processes and access to large labor pools can address these needs,” said Benton and Ruzicka.

The benefits that come with outsourcing

• Lower infrastructure costs
• Application support during transition away from legacy systems
• Ability to move faster on development projects
• Scalable project team through blended staffing models

Outsourcing has evolved a great deal since those early days, and it’s brought a whole new level of efficacy to business tech. With FAST teams, carriers can leverage established processes to streamline speed to market for deployments such as mobile apps or advanced analytics. With co-sourcing, they can grow their team as the need arises while continuing to manage internal and external facets as a whole. With the cloud, insurers can leverage seamless assistance to implement and manage new platforms.

Have you considered what outsourcing can do for your organization? Learn more about how Silvervine can help by downloading our Overview Brochure.