For many years, insurers turned to business process outsourcing (BPO) providers to handle operational aspects of their businesses that, while necessary, are not necessarily competitive differentiators. Now the universe of insurance-specific outsourcing services is widening to an extent that the term BPO may no longer be sufficient to precisely convey the true nature of these services.
Indeed, two new Market Navigator reports from New York-based
“The acronym BPO has entered common use over the past decade and has come to mean a wide variety of functions, from technology hosting to broadly horizontal services such as contact center operation to such core insurance processes as claims adjusting and underwriting. Novarica believes that the widespread use of the term BPO has led to unnecessary confusion in the marketplace,” Novarica Principal Martina Conlon and Novarica Researcher Lis Maguda write in US BPO/Virtualized Insurance Company Operations: Property and Casualty 2011.
Accordingly, Novarica has coined the term “virtualized insurance company operations” (VICO) in order to delineate the subset of providers offering true insurance-specific processing from the very large field of traditional BPO vendors.
The report analyzes offerings from 11 VICO vendors in great detail, and says the increasingly focused nature of these offerings merit careful consideration from carriers.
“While few insurers are aggressively moving to BPO their entire operations, VICO can create significant value for insurers who need to expand into a new area and don’t have the resources to build their own capabilities, or need to create more flexibility in their own infrastructures,” the report states.
