Back in the day, the need of insurance organizations was to fill a gap in staffing, solve backlogs or take on tasks no one wanted to do. We provided those services at a substantial savings on an internal solution and we were all off to the races.
The traditional notion of outsourcing was providing insurance organizations an arbitrage on the cost of recruiting, training and maintaining in-house employees who probably weren’t too enthused anyway about spending hours inputting data across multiple systems.
Over time, we realized that this was merely an entry point into a much more exciting journey of value creation.
Let’s say the fully loaded hourly cost of a CSR is $50, and you can half that cost through “outsourcing,” this may seem attractive but it completely misses the bigger opportunity. That same employee may be supporting $250 per hour of revenue. So instead of swapping an in-house employee for an offshore resource for a $25 saving, what if you could generate an additional $250 of revenue with that same employee?
One model generates a 2x return and the other model generates a 10x return. It’s clear which is more accretive to agency value by a meaningful factor.
All insurance organizations have to add new business just to stay in the same place, let alone achieve organic growth. The problem is that the activities that drive growth often lead to waste and inefficiency, and create a drag on profitable growth.
You see this when a large new account comes in. Team members drop other activities to make sure they win the account. There’s a lot of frantic activity and then the pieces have to be picked up on the previous work everyone was engaged in. This is when things fall through cracks, complexity, errors and inconsistencies occur.
The other way growth is chased is by hiring new producers or specialists. The problem is that they typically come in with their own ways of working with their teams and this creates more process variability, complexity and waste.
What we have found is that the biggest profitable growth opportunity is to create greater alignment between activities and strategy. In other words, segmenting accounts so team members focus on the right accounts with the right service levels, standardizing ad hoc tasks, triaging workflows, getting quality right the first time, and sourcing the right work to the right people.
Doing this can yield dramatic improvements in productivity. It’s not over ambitious to create 20-30% additional in-house capacity for existing team members. Just think, writing 20-30% more business with the same overheads. Most of that drops to the bottom line. Drop a multiple on that baby and see how the value of the agency increases!
This kind of focus requires a shift from outsourcing transactions to a more holistic approach that’s driven by analytics and an understanding of what it takes to shift internal insurance processors back to the insurance professionals they and their clients always wanted them to be.
It’s got to be about operations excellence first, then the growth will rapidly follow.