6 Points to Consider When Outsourcing

This checklist will help agencies find the right partner and build the right relationship if they are outsourcing back-office functions.

More and more agencies are choosing to reap the benefits of offloading repetitive yet critical back-office tasks through outsourcing. Choosing the right outsourcing partner and the structure of that relationship will mean the difference between success and failure. Having spent nearly a decade helping agencies choose and implement outsourcing solutions, I’d like to share six vital components that will set this important relationship up for long-term success. Every relationship requires commitment. It carries with it the hope the union will be long-lasting, characterized by mutual trust and fulfillment. The right relationship can be incredibly rewarding when structured appropriately. It can help to motivate your team, maximize the value of experienced and knowledgeable staff and let the entire agency focus on what the people do best – building and retaining business. But how can agency executives be sure they are picking the right partner? As Patra celebrates its 10-year anniversary, we enjoy many positive, long-term relationships with our clients. If you’re thinking about outsourcing your back office, I hope these words of wisdom will help you ensure your investment pays off in the long run.
  1. Know your outsourcing goals
Before beginning your search for the right outsourcing solution, make sure the decision-makers within the organization are in agreement as to why you’re searching in the first place. Some agencies outsource because, in their labor markets, it has become increasingly difficult to find -- and keep -- good account staff. Others outsource because the growing burden on account staff to complete repetitive paperwork means less time to spend on higher-value tasks like building client relationships, upselling and cross-selling. Many agencies have simply determined that the best way to keep staff engaged, productive and, most crucially, happy is to take that important but time-consuming work off their desks. Being clear on your goals from the outset will help you start the right conversations with a partner -- and get the most out of the relationship.
  1. Communicate with your staff
A good outsourcing relationship extends your team, it doesn’t replace it. Outsourcers aren’t better than your staff; they make your staff better. As such, it’s vital to communicate your goals clearly -- before you begin! Successful agencies involve their staff at the start of the decision-making process. Use checklists to identify a partner who will meet both staff and management needs. Ask your staff for feedback on the ways in which they believe they could add value to the agency if relieved from mundane tasks like issuing certificates and policy checking. This may well lead you to restructure and create new roles within your agency. The new structure of your team that the outsourcing relationship allows will enable individuals to work to the top of their job descriptions and increase the bottom line of your business.
  1. Look for industry expertise
There are many outsourcing agencies out there. You would only consider hiring staff with insurance experience, so why would you consider hiring an outsource provider that doesn’t specialize in insurance? The right outsourcing agency will act as your strategic partner, helping you find shortcuts and introducing you to industry best practices that you may not be aware of. Do the due diligence and ask questions to make sure the agency has relevant industry expertise:
  • Have they worked with agencies of your size before?
  • How much of their onshore team is licensed?
  • How many of their overseas staff members are CISR- or CIC-accredited?
And, of course, talk to the executives at the companies that you’re interviewing to make sure they share your philosophy and business values.
  1. Clarify that outsourcing doesn’t have to mean offshoring
In the last decade, the meaning of the word "outsourcing" has changed from being synonymous with "offshoring" to include many services performed domestically. U.S.-based, client-facing outsourced partners are essential for a successful relationship. These onshore account-servicing teams are complemented by skilled, highly educated and experienced offshore teams. It’s important to assess your staff’s comfort with overseas work and ensure they understand that these services are not replacing the work they do; the services are enabling them to focus on work that is more engaging and vital for the agency’s success. Talk to the firms you’re interviewing to find out:
  • Is English a required subject in the public education system of the overseas location?
  • How much interaction will you have with overseas staff?
  • Will communication be by phone or e-mail?
  • How will the time difference affect communications?
  1. Know the limits -- and the true costs
Outsourcing is not a silver bullet for agency transformation. Agencies must have realistic expectations of the benefits they will derive from outsourcing. Common priorities are quality (for E&O and customer care reasons) and cost (for obvious reasons). The ability to provide rush service is another common need, although that’s usually negotiated with a special rate. Sometimes, agencies may expect that an overseas or outsourced partner perform tasks faster than an agency staff member. It’s important to realize that, for a single task, it will probably take about the same amount of time for an outsourced expert to do it as a trained staff member. The efficiencies come through better workflows and performing all of these tasks immediately and together, instead of crammed between the high-priority tasks that demand attention of your highly trained staff. Like the tortoise and the hare, any good outsourcing firm can complete a volume of tasks faster than an agency account manager. That’s the real “time” advantage of outsourcing. As for fee structures, there are as many pricing options out there as there are outsourcing providers. Hourly rates, FTEs, per-transaction fee-based and hybrid pricing all make it very difficult to evaluate options, apples to apples. Each has its positives, but there are some questions that are vital to ask:
  • Are there annual minimums?
  • Are there rush charges?
  • Will you pay more for overnight service?
It’s worth taking the time to read the fine print – some agencies have gotten burned by not noticing a clause in a contract requiring increased annual minimums, year over year.
  1. Read the cost reports and measure the value for yourself
You will need to set the benchmarks that will help show you the value that outsourcing has delivered to your agency. Measuring performance and success can be defined as increased time spent with clients, greater client retention, new business placements or whatever else is important to your particular agency. Reports will show you how much work your outsourcing partner has done. Keep the lines of communication open -- a quarterly call or meeting is vital to revisiting both the activity reports of your partner and the success metrics you use internally. A valuable last piece of advice It is often extremely helpful to start small with a pilot program. This will allow you to select and test individual, important pieces of your puzzle. Starting slowly builds trust and confidence and will allow you to work out communication and workflow kinks with your provider, and enjoy a successful and long-term relationship. Your checklist in looking for a partner:
  • Insurance industry expertise
  • Onshore client-facing presence
  • Flexible program options
  • Affordability
  • Ease of entry
  • Quality consulting staff
  • Accreditation and certifications
  • Reporting and communications systems
  • ROI measurement criteria
  • Range of services to meet your needs
  • Scalability for growth and fluctuations in quantity of work
  • English-trained offshore workforce

Jayme Beals

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Jayme Beals

Jayme Beals is senior director, client services, for Patra. Previously, she spent 15-plus years in various insurance roles, including account manager, director of corporate training and commercial lines manager.

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