This is the third in a series of posts focused on the origins and evolution of insurance industry outsourcing. In this post, we discuss how outsourcing became a relevant business solution for the independent broker.
As previously discussed in this series, business process outsourcing (BPO) or ‘outsourcing’ in the insurance industry has been around for quite some time. Initially, outsourcing was leveraged almost exclusively by large insurance organizations. But what about the rest of the industry? Small and mid-sized companies were either unaware of how to outsource or were unable to efficiently use the available technology to make it practical. For the most part, these large insurance companies used outsourcing as a wage arbitrage solution, looking to cut costs or manage expenses through lower cost labor. But as outsourcing became a viable solution for the rest of the industry, evolving market challenges made wage arbitrage a secondary, rather than a core, benefit of outsourcing.
ReSource Pro Pioneers Outsourcing for Small and Mid-Sized Insurance Organizations
In the early 2000s, Matthew Bruno, co-founder and COO of ReSource Pro, had been working at Distinguished Programs when he decided to change the direction of his career. He moved to China and began teaching English. On a visit home, Matt visited his former colleagues at Distinguished and they shared a challenge they were having. Needing to return to China, he offered to see what he could do to help from there. As it turned out, a remote access connection allowed him to work as if he was in the NYC office. He knew there were college graduates nearby and offered to hire a few people to see if they could tackle the project at hand. After all, he knew the business, understood what needed to get done and communication was no longer an issue because of advancements in technology. And that was the start of outsourcing for the ‘rest’ of the insurance industry.
Matt soon realized that by using these highly educated, English-speaking university graduates he could scale the processing work he was handling for Distinguished. It soon became apparent that by standardizing processes, and without interference from other responsibilities, ReSource Pro’s people could complete a range of given tasks accurately and efficiently.
The benefits of insurance process outsourcing immediately became clear. Not only did the company (Distinguished) gain wage arbitrage, they were able to increase productivity of their most valuable employees, improve customer service and reduce risk. This ability to scale, also provided a cushion against the ever-present staffing pressures. As Distinguished’s carrier partners saw the impact it was having, they shared the idea with others in the distribution space and soon ReSource Pro was servicing a range of companies across the industry.
Outsourcing Solves Staffing Issues
One of the insurance industry’s most significant challenges today is attracting and retaining talent. This issue isn’t a new one; it began impacting organizations as far back as the 80s and 90s. According to a McKinsey & Co. report, the average age of an insurance agent in the US in 2014 was 59. This points to a lack of new talent being introduced into the insurance industry over the past several decades. As the workforce aged, it also struggled to attract young people to the industry. During periods of low national inflation, these factors have combined to put acute pressure on insurance organizations.
Not just a problem for large organizations, ReSource Pro pioneered insurance process outsourcing for the rest of the industry to address this ‘staffing’ challenge. In the late 90s and early 00s, small and medium-sized insurance firms were finding it difficult to attract, hire and retain talent to support their growth. In an industry dogged with a perception issue – research shows young talent perceives the industry as ‘boring’ – coupled with much of the work including low-value, repetitive processing, it was a challenge for these companies to find consistent, reliable talent. This was the case for Distinguished Programs, a New York city-based Program Administrator, and ReSource Pro’s sister company.
Insurance Outsourcing Expands its Reach
A new industry has emerged – and matured – over the past decade, helping insurance organizations solve their talent challenges, increase productivity and improve profitability. Since its founding nearly 14 years ago, ReSource Pro has grown to over 3,000 employees and operates service delivery centers in China, India and the US; serving more than 300 clients exclusively in the insurance space. Increasingly, insurance organizations of all types and sizes are using outsourcing to support their growth.
This brief exploration of the industry’s history tells only part of the story. The insurance outsourcing, or BPO, industry has undergone substantial change in the past decade. In our next post, we’ll discuss how some outsourcing providers have evolved and their role in today’s market.
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