Carriers operate in a complex environment that challenges their ability to do business efficiently and cost effectively. As regulations become more complex, customer needs, behaviors and demographics, distribution channels, product design and service delivery models are changing. Although technology is key to product and service delivery, most insurers struggle with outdated applications and infrastructures, while facing the looming brain drain as baby boomers retire.Once IT outsourcing was considered merely a method of reducing cost through labor arbitrage. Now the situation is more complicated, with other factors, including regulatory compliance, weighing heavily in many outsourcing decisions. Business continuity-that is, how to stay in business should a major event such as a natural or man-made catastrophe or a pandemic occur-is an emerging reason for outsourcing or distributing some business functions or support facilities across geographies. Each insurer organization is different and the reasons for determining what and when to outsource vary within industry sectors and by business model.
There is an odd notion in some insurance companies that things are moving so fast today that strategy is an obsolete idea, and that all an organization needs is to be flexible, adaptable or "agile." However, agility is no substitute for strategy, especially when making decisions about where, how and why to do business. After all, outsourcing vendors have a strategy: to move as much of your business as possible outside of your organization and into theirs. Without a plan, an insurer may become part of the vendor strategy.
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