This is the second in a series of posts, wherein we’ll be discussing the origins and evolution of insurance industry outsourcing. The first post discussed the economic origins of insurance industry outsourcing. In this post, we discuss how technology enabled outsourcing for new markets.
Technology is the Necessary Enabler
Technology has had a transformative impact on the way almost every industry does business over the past 20 years. It has made some businesses obsolete – Blockbuster and Kodak are two of the big ones that come to mind – but it has also enabled so many more, including outsourcing / business process outsourcing (BPO). Once reserved for only the biggest insurance organizations, technology leveled the playing field and made BPO services available to the broader insurance industry.
Effective BPO Requires Smooth, Affordable Communications
It wasn’t that long ago that you were charged for every phone call and international calls were considered prohibitively expensive. Given that the telephone was the only efficient mode of communication available at the time, business process outsourcing was an unrealistic option for all but the biggest companies, because they had the volume of work that made it cost-effective to leverage the benefits of a distributed, highly-educated, inexpensive workforce to process back-office functions.
But in the 1990’s things changed. We experienced the emergence of three foundational technologies that would transform the way we communicate and do business: email, broadband, and cellular.
The convergence of these three technologies made business process outsourcing for all industries, including insurance, a cost-effective option to solve a whole host of business challenges. Here’s why:
Instant, easy, clear, and virtually free communication. Email is an ideal communication channel between companies and outsourcing partners. It is simple to use, can serve as a record of events, and its cost is negligible. Email enabled the efficient communication flow necessary for effective BPO service.
While you can use email to communicate about work, the actual ‘work’ needs be transported or transmitted back and forth. The expansion and availability of broadband allowed companies to send work files in seconds, at a very low cost. This solved the issue of efficiently being able to transfer work that companies want to delegate. The early years of sending boxes of paperwork offshore to “process” was replaced by an Internet connection and access to Terminal Server, Citrix or VPN.
Cellular and VoIP Communication
Cellular communication’s impact on BPO outsourcing was more indirect, but still impactful. Simply put, cell phones drove down the price of standard communications to the point that all telecom charges, including international calling, became much more affordable. Today, VoIP (voice over Internet protocol) technology, such as Skype, has further brought down communication costs, to the point that they’re incidental in most cases.
BPO Becomes Relevant for New Markets
It makes complete sense that one of the pioneer BPO providers, Accenture, started as a division of one of the world’s premier accounting consulting firms at the time, Arthur Andersen. They understood the financial benefit of outsourcing and were providing BPO services to their big professional services clients. But with communication becoming so much more efficient and no longer a cost factor, outsourcing became a viable option for almost any sized service business – not just for the biggest players.
And while technology was an enabler that made outsourcing cost-effective, new drivers in the insurance industry have made it an increasingly attractive solution that extends beyond savings on labor costs.
In our coming posts, we’ll discuss how the state of the insurance industry has created new drivers for BPO services, including a growing talent issue; the need to innovate; increasing customer service demands; new disruptive technologies and players; and more. We’ll talk about how both insurance companies and service providers are responding to this new disruptive business environment.
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