How Outsourcing can Help to Maintain Regular Productivity for your Insurance Company?

Last updated: 25 Feb, 2020 By Mohit Sharma | 6 Minutes Read

How does outsourcing help the insurance sector maintain productivity levels and retain the competitive edge? The buzz word in today’s business scenario is optimizing productivity and towards this end, all energies are being channelized by the business sector.

The focus is on eliminating any activity that does not form the core of the related industry. So far as the insurance industry is concerned, the core business is devising new schemes, chalking out competitive products and planning on capturing increasing market share.

Anything else, namely support services are considered an impediment on the path of its smooth functioning and maximizing profitability. Thus, the common refrain for insurance companies is outsourcing all non-core activities in a bid to increase productivity and is also the primary reason why the growth curve of insurance outsourcing services are steeply climbing north.

Before going into the details of how outsourcing can help to maintain regular productivity for an insurance company, it will be in order to quickly know what productivity actually is and why it is one of the more important factors to measure the worth of a company. The main purpose of a business is to convert the different inputs into outputs. Productivity is a measure of how efficiently the inputs are transformed into outputs.

In short, Productivity = Output/Input and typically – this list is not exhaustive – inputs include such components as labor and financial investments while outputs are revenues and business inventories. Hence for sectors with high productivity levels, the ROI will be high.

How does outsourcing help the insurance sector maintain productivity levels and retain the competitive edge? The simplest explanation is that the cost of inputs is reduced in the productivity ratio by outsourcing while ensuring that the outputs increase and in the worst case scenario remain constant at least.

Reduced cost of manpower –

The modern line of thought is that hiring highly paid manpower for undertaking non-core activities is a waste of precious resources when the same can be spun off to outsourcing services at a fraction of the cost. This is especially true for the insurance sector that has a host of non-core activities – claims, commission, data processing, and policy management.

Specialist insurance outsourcing services hire human resources who are experts in their individual field and offer the same level of services that in-house personnel would have done. Thus lowered cost of input helps stabilize productivity levels even if there is a seasonal hike in the insurance business.

Reduced cost of infrastructure development –

The growth rate of insurance companies today is phenomenal given the increased threat perception the world over. The resultant exponential growth in business necessitates matching and massive investments in infrastructure development, namely in data processing and the need to upgrade existing hardware to meet the volumes of business.

This would have dragged productivity levels down for the insurance industry if it were not for insurance outsourcing services that spend heavily to create new systems to take up the increase in the insurance business.