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Key Facts About Insurance Outsourcing Overseas & Cost Saving!
The insurance industry is analogous to any other industry where firms leave no stone unturned when it comes to saving costs. If we talk about the insurance firms, one of the best cost-saving methods adopted by them is that of outsourcing. This is the reason a majority of firms have started to leverage outsourcing to the best of their benefits. These cost-saving benefits manifest when the work is outsourced to low-cost destinations.
The Outsourcing Need
Although cost-cutting remains the prime reasons for almost 59% of insurance firms to outsource, there are several other factors due to which they prefer Insurance BPO, such as:
- 57% prefer to focus on core business tasks
- 28% prefer to seek support from talented professionals
- 47% prefer to resolve capacity issues
- 31% prefer to increase the quality of service
- 17% prefer to enhance their business’s working environment
Irrespective of whether you are an established insurance enterprise or a start-up, outsourcing can help stay ahead of the competition. So, let us dig deeper and gain more clarity!
1. Local Resource Cost vs. Offshore Cost
When firms consider outsourcing their work overseas, the first thing they focus on is the cost comparison between local personnel and an offshore resource hiring (this includes overheads, salary, infrastructure, administration, and more).
Apart from this, there exist multiple costs incurred to an insurance firm while hiring resources locally, like payroll, taxes, and others. As per various reports, for every resource that is hired locally, employee costs have scaled up to an approximate amount of $56,770 yearly.
If you wish to figure out the actual outsourcing cost, enable a company like Cogneesol to take care of your project needs. All you need to do is add $56,770 to the entire hiring cost of a local employee and compare the same with the quote you receive from Cogneesol. A simple calculation will let you know how much you get to save with the outsourcing option.
2. The Time Factor
Let us explain this with a previous example. A situation occurred where the client came back to Cogneesol to let us know that he had chosen a local agency over us due to two major reasons. The first reason was the fact that he had to pay them only £40/hour, and the second one being his service requirement was less than 30 hours/month.
The ground for the confusion was formed due to the reason that both the agency and Cognessol were charging the client a similar amount of £1200/hour. Now, since the client had to pay the same amount to both, he assumed that the outsourcing option could be a risky choice.
However, this type of estimation and calculation was not relevant since he would have got 176 service hours for the same. When we tried to convince the client for the same reason, he was not ready to understand since he was of the view that more value was offered to him by the local agency.
So, Cogneesol decided to look into the matter deeply and checked the website of the local agency for the value proposition offered by it, discovering that its own website was not maintained properly.
What the client failed to understand was that he could avail service hours 5 times more with the same payment amount. This actually defines the objective of outsourcing and cost-saving. The real outsourcing cost is not restricted to the amount paid to the offshore partner but also considers the total number of service hours availed in exchange. So, considering only the cost factor is irrelevant and unwise.
3. Perceived Value vs. Accurate Value
There are multiple times when firms do not make the right decision with respect to cost savings coupled with work quality, and the reason is a poor query structure. For instance, if A costs $ 1500/month in the United States and B costs the same in India, most of the firms will opt for option A.
However, firms need to make the right decision by asking the right queries regarding the capability of a local agency and an outsourcing company. Now, considering the above example, if A was someone who just came out of a Graduate School and B had a work experience of more than 5 years with a Fortune 500 Company, choosing A over B would not be sensible at all.
This clearly shows that insurance firms need to do their homework right when it comes to gaining clarity on actual and perceived value. They need to understand their specific requirements, and based on the same, should make the right decision.
Also Read: How Do Insurance Market Fluctuations Pave the Way for Outsourcing?
4. The Psychological Factor
There is no denying that speculations arise in the mind of firm owners when it comes to considering the remote option as compared to the local resources and that appears to be pretty practical as well. However, just as we discussed above, owners need to consider other factors as well while making a decision.
For instance, a client hired in-house staff or a local resource and was committed 30 hours of service, and Cogneesol too emerged as a prospective vendor.
When the client connected with us, 172 hours of service were committed to him. Apart from this, it was learned that the local resource was a 2-member group with no experience at all. Comparatively, Cogneesol comprised team members with rich industry experience in serving clients across the globe.
This clearly states that the decision of insurance business owners in selecting the right vendor for managing their work should be based on competency and not just price. One must not compromise accurate and on-time deliveries for physical proximity. Choosing a local vendor whom you might meet every day but does not possess the required potential for timely deliveries is not sensible.
One can communicate easily with a remote worker every day over the video call/chat and know the work progress. Also, one gets assured that the project is in the safe hands of a highly skilled and experienced team. So, insurance firms should consider cost-saving, but they should also focus on the massive ROI that comes along with the outsourcing option.
Are you looking for a highly reputed and experienced Insurance Business Process Outsourcing company for managing your back-office burden? Meet Cogneesol- An industry leader serving clients proficiently globally since 2008! Get started with your free trial by getting in touch today itself!
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