Conning: P&C Insurers Will Continue Offshoring Business Processes

As many insurance experts’ conversations lately have revolved around the financial crisis and its effect on the business, many of those experts will agree that it has put more emphasis on stringent spending. This stringent spending, combined with expanded service offerings by offshore providers suggest that property/casualty insurers will continue or even increase their business processes offshoring, according to a study by Conning Research & Consulting.

"While the property/casualty industry has been sending business processing work offshore for about two decades, offshore providers have now developed a wider breadth of services that expand opportunities to outsource beyond cost savings to meet strategic needs," says Clint Harris, analyst at Conning Research & Consulting. "As we researched the field, we surveyed offshoring providers to the property/casualty industry to understand how these providers are perceiving and responding specifically to property/casualty insurers' objectives and how they are controlling offshoring risks. While the survey data confirm an average expense savings expectation of 32%, data also indicate that more strategic objectives have been dominating insurers' decision to offshore."

The Conning Research study, "Expense Management for Property-Casualty Processes: Evaluating the Offshore Bargain" identifies the key goals, opportunities and risks for insurers seeking outsourced services through offshoring providers.

"Offshore providers now offer a full range of property/casualty insurance business processing services, from policy management to claims and underwriting services," says Stephan Christiansen, director of research at Conning. "Current demand for expense savings in the near term may accelerate interest in the cost savings offered with these services. At the same time, our survey suggests that offshore providers will continue to build out their service offerings toward services that demand increasing levels of intellectual capital. However, there are significant risks associated with offshoring, including systemic risks that go well beyond security and quality failure. Performance controls need to measure offshoring processes within the context of the full process supply chain and be sensitive to cultural barriers."