At the core of any insurance agent's business is the ability to attract new customers and retain existing customers throughout the periodic renewal cycles -- a task that requires strong personal relationship-building and networking skills. This becomes especially important when you consider that agency revenue is primarily driven by the commission an agent receives from the insurer as a result of new business and renewals.
In order to create more time during which they can concentrate on the core tasks of marketing, prospecting, and selling, an agent can outsource several administrative and support procedures that can be otherwise time-consuming. The basic day-to-day practice management of any producer can generally be divided into four categories: new business, commission, policy maintenance, and renewals. Each category features multiple administrative and support activities that can be outsourced to third-party vendors. For example:
- New business
- Maintenance of prospective customer data
- Scheduling and coordinating prospective client meetings
- Preparation of standard policy quotes
- New-business follow-ups
- Scheduling medical check-ups, follow-ups, and data collection for premium determination
- Policy follow-ups from insurer to policyholder
- Commission
- Commission calculation
- Payment follow-ups prior to due date
- Payments record maintenance, including accounts payable and accounts receivable
- Policy maintenance
- Customer satisfaction calls
- Correspondence and communication between insurer and policyholder
- Renewals
- Policy follow-ups prior to renewal
- Mailing of renewal letters/notices
- Renewal premium follow-ups
- Coordinating issuance of renewed policy
Before outsourcing any administrative and support operations, an agent must carefully identify the appropriate outsourcing partner that meets their individual needs. The selection process is critical, since an outsourcing vendor's capabilities must align with the agent's customer service, revenue, and cost-savings objectives, as well as any potential budgetary constraints.
The first step in the outsourcing process, then, is to identify the tasks that the agent wants to have outsourced. Next, an agent will want to locate vendors that specialize in that particular area. All of the above tasks are considered back-office support tasks, and a variety of outsourcing vendors specialize in this area. In the case of a life and health insurance business, an agent will want to identify vendors who have expertise in outsourcing back-office support tasks for life and health insurance companies. This is important because if a vendor has worked with this type of information before, it can help eliminate errors.
Once a variety of potential outsourcing vendors are identified, an agent must secure proposals from each one. These proposals should include the vendors' financial backgrounds and detailed project management capabilities. The chosen partner should have a proven track record in managing projects similar to the one the agent is seeking. Additionally, the outsourcing partner must be able to provide a structured communication plan that encourages transparency and a healthy working relationship.
After selecting a vendor, the agent must decide how to implement its new outsourcing program. This will largely depend on how much risk the agent is willing to take. For example, a rapid and simultaneous transition of all tasks carries much more risk than a gradual transition that focuses on one task at a time.
While there are several benefits to outsourcing your administrative and support tasks, some challenges remain. Errors may occur during the outsourcing process that could lead to the loss of new business and, consequently, a direct loss of revenue. For instance, a lack of timely communication updates can lead to the incorrect calculation of commission. Similarly, the inaccurate interpretation of policy language may lead to confusion as well as a delay in a claims payment, which in turn could lend itself to customer dissatisfaction. With careful planning and proper training during the initial outsourcing phases, however, the potential for such errors can be minimized.
Additionally, outsourcing can lead to the development of dependency on the outsourced partner. While the outsourced partner manages the project on behalf of the agent, as the key stakeholder, it is the agent's responsibility to remain informed of all major strategic decisions. A structured communication plan between the agent and the outsourced partner is a critical component of any outsourcing relationship.
Periodic communication helps both parties maintain confidence and support for each other, thus enabling a strong partnership.
Despite the traditional nature of the insurance industry, certain administrative tasks can be outsourced if an agent chooses to do so. The agent must be sure to choose the correct partner with a strong communications plan and sound reputation in the outsourcing industry. With this information in mind, an agent is well on their way to a successful outsourcing strategy and the possibility of considerable cost savings.
Nimish Soni is managing director of the BPO division for Cambridge Solutions. He can be reached at nimish.soni@cambridge-asia.com.
