The outsourcing option is not a new concept for insurers. Indeed, our cover story in September 1999 noted that "stagnant premium growth, industry consolidation, rapid technological change and financial service market convergence are among the key drivers forcing insurers to rethink outsourcing."Fast-forward to 2004. Although the primary market drivers are somewhat different today, the industry still is wrestling with increased competition, new regulatory requirements, the inability to differentiate products, aging IT infrastructures, and the need to reduce expenses-business issues that are directly associated with implementing new technology.

IT executives are under the gun to do more with fewer resources: 75% of CIOs and CTOs surveyed last summer by Boston-based Celent Communications Inc. said shrinking budgets, cost containment pressures and increased demand on IT to deliver more projects were their top priorities.

These demands and others have led insurance technology executives to research the bevy of outsourcing options now available, including onshore, nearshore and offshore outsourcing for IT and business processes. The most common processes that carriers are outsourcing are software development, system maintenance, core systems hosting and other systems hosting, according to the Celent survey. Call centers and policy processing are the top uses of BPO, followed by claims handling and underwriting.

Carriers have long recognized that outsourcing enables them to realize the cost-saving and productivity benefits of new technologies without the upfront cost of purchasing and implementing new hardware and software. However, there remain long-standing fears about shifting internal resources-people and systems-to a third-party provider, and concerns about how IT morale will be adversely affected once an outsourcing provider is engaged.

This month, Insurance Networking News will be hosting a conference on insurance outsourcing. The conference addresses benefits and challenges of IT and BPO outsourcing according to insurance company executives. If your organization is currently outsourcing technology or business processes, or considering these options, check out the conference agenda on pages 22-25. I hope to you see you in Tampa.

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