Tag Archives: outsource

Is It Time to Outsource Printing?

Determining whether to shut down your internal print and mail operation and outsource to a print service provider, or keep it in-house and potentially make a capital investment in new technology can be a tough conversation.

Those in favor of the latter option will cite concerns over sending customer data outside the organization and advocate that investing in new technology will improve operational workflows, enhance the customer experience and increase brand recognition by adding color to documents, as well as potentially generating a better ROI for the organization. Proponents of outsourcing believe that print is not a core competency and argue that outsourcing to a service provider would be the less expensive alternative.

While there may be a variety of reasons that cause an insurer to consider closing the print shop, a few factors can create the perfect storm.

1. Decline in transactional print volumes

Electronic delivery of customer communications was a high priority for many organizations as a cost-reduction strategy. While adoption rates may have varied, electronic delivery nonetheless caused transactional print volume to decline, even causing some enterprises to consolidate production into one site. Print volumes decline, unit costs go up and outsourcing becomes more financially attractive.

2. Equipment has reached end of life or end of lease

Insurers in need of a technology refresh may not be willing to make the investment or be able to justify the expense. New technology can speed production, streamline operations, enhance documents with color capability and reduce risk; however, if priorities have changed and the customer communications management (CCM) strategy has shifted toward enhancing the digital experience, convincing management to invest in print technology may be a tough hurdle to overcome.

3. Limited or no color capabilities

Some in-plants can only produce output in monochrome, or have very limited color capability. With the demand for color increasing, internal lines of business may look to an outside vendor to meet their requirements for color, and corporate marketing may have already beaten them to it. From a financial perspective, this is a double whammy. Outsourcing a subset of documents to a third-party provider decreases the volume for the in-plant facility and further exacerbates the impact on unit cost. In addition, outsourcing low volume to a third party can be costly for two reasons: higher unit costs from no economies of scale and additional conversion costs if the organization decides to consolidate all print volume with a single service provider in the future.

See also: What Tasks Should Agencies Outsource?  

4. Increased regulatory pressures require full document integrity

Non-compliance with regulations can be costly from a financial and reputational risk perspective. Production issues such as double stuffs or incorrect document breaks create privacy issues with personally identifiable information (PII). Organizations must take the appropriate measures to ensure that sensitive data is secure. Software that provides factory controls and tracking capabilities for each mail piece throughout the entire manufacturing process is critical to ensure correct and complete packages.

5. Single-site operations must rely on third-party providers for disaster recovery and business resumption services

If an enterprise operates one site, or has consolidated sites due to decreased volume, then disaster recovery and business continuity services must be contracted with a third party. Acquisition of facilities due to a corporate merger may not always provide the ability to transition print files from one site to the other if software, equipment and infrastructure differ. Worse yet, sometimes older equipment gained by acquisition must be kept due to machine-specific print jobs.

6. Change in management philosophy

Even without the previous five factors, sometimes a change in senior management philosophy might be the one driver for the decision to outsource. C-level management may believe that print and mail is not a core competency of the overall business and thus should be outsourced to a service provider. While it makes sense to consider outsourcing if print volumes have been on the downward slope, there is no magic number or volume threshold that dictates the exact time to do so.

Understanding the benefits that can be obtained by outsourcing may help to reduce anxiety and clear up the stormy skies clouding the decision process. To start, no capital investment in new equipment is required. Unlike an in-plant operation, service providers have the ability to spread the cost of capital across multiple clients and have made the investment in color technology. Due to greater economies of scale, service providers have great buying power for consumables such as ink, paper and envelopes. In addition, a reduction in postage expense could be realized if postal densities for five-digit and three-digit rates are met.

To remain compliant with certain regulations, service providers must have strict production controls and data security procedures to ensure that sensitive data is protected. File-based tracking tools ensure that files are received on time and that record counts are accurate, while piece-level or page-level tracking ensures that each mail package is correct and complete. Detailed production reports with key performance metrics (KPIs) are available via a dashboard allowing clients to log in, view production job status, request document pulls or re-directs and even create customized reports. To facilitate testing, quality reviews can be performed prior to releasing files into production via a review-and-release capability.

Once the decision to outsource has been made, it is time to set sail and begin the journey. Because price will most likely be a significant factor in vendor selection, here are a few tips that should be kept top of mind:

  1. Create a complete inventory of all printed communications to be included in the request for proposal (RFP). Consolidating all print – what is produced internally or by external vendors – with a single provider is the best way to maximize volume pricing.
  2. Understand what is included in transition costs, which can vary significantly by provider. To secure a contract award, some may include a certain number of free hours of development time as part of the transition cost.
  3. Standardizing address location on documents eliminates the need for multiple types of envelopes, streamlines the manufacturing process, allows for jobs to be concatenated together and helps to keep production costs down.
  4. Review SLAs for all applications to determine if there is flexibility.
  5. Contract duration will typically affect price; therefore, annual pricing quoted in a five-year contract will be less than in a three-year contract.

See also: Go Digital… but Don’t Change Who You Are  

Deciding whether to outsource print requires consideration of a variety of factors, but with a detailed analysis of the pros and cons of both options, an informed decision can be arrived at more easily. Many insurance organizations fear losing control because the print shop is not within arm’s length, but the security, output quality, and efficient manufacturing controls implemented by top tier service providers should help to alleviate that fear. No transition is perfect – but the technology, processes, and depth of knowledge offered by a print service provider will ensure smooth sailing.

What Tasks Should Agencies Outsource?

A primary challenge for the leaders of any evolving business is how to best allocate limited resources to achieve desired business objectives. This is particularly true with insurance agencies, where the vast majority of firms are small- to medium-sized businesses.

These firms (and, particularly, startups) must decide whether to handle core functions such as payroll or human resources internally or to outsource such functions to a specialized provider.

Outsourcing can be an effective tool for maximizing resources — but only when certain criteria are met. Some functions are outsourced by default; IT services are a typical example. Most agencies lack the expertise or critical mass to take on this function internally, so they contract with external experts to handle their computers, networking and other information infrastructure. Several other business functions could potentially benefit from outsourcing, but the case is not always so clear.

The agency principal should consider three important questions when evaluating outsourcing opportunities:

1. Is the function critical to your business operation, but not a core part of your strategy?

If a function is not critical to the business, it should almost certainly be outsourced (if it cannot be eliminated). For tasks critical to a business, the manager should consider if the task is a central element of the business strategy. Critical tasks that are not core to the business strategy are prime candidates for outsourcing

2. Is the function shareable?

When a business identifies a function that may be outsourced because it requires special expertise and investment, “shareability” is another consideration. Outsourcing works best when the provider of the outsourced service can leverage its investment in intellectual capital and infrastructure across a pool of similar clients. A robust solution that might be unaffordable for a single firm may become practical and cost-effective when shared as a “multi-tenant” solution (e.g., payroll and HR).

See also: A Revolution in Risk Management  

3. Does the function require significant management oversight?

While it is important that the outsourced service provider give the management team visibility into the function performed, outsourcing efforts often fail if the management team is still required to spend significant, valuable time directing or overseeing the work of the service provider.

The Case for Outsourcing License Management and Compliance Services

The management of insurance licenses and credentials as well as other compliance services is an outsourcing opportunity that all well-run agencies, brokerages and third-party administrators (TPAs) should consider. Let’s look at how license and compliance management aligns with the questions posed above.

Is the function critical to your business operation but not a core part of your strategy?

Insurance licenses must be carefully maintained. Over the last several years, state regulators have become more aggressive in sanctioning agents and carriers for non-compliance. As a result, carriers are less tolerant of violations by their agents and are more selective in the agents, brokers and TPAs with whom they will contract. But accurate and timely maintenance of licenses and other compliance functions is not a central driver of the business strategy. In fact, most agency principals consider license maintenance as a “necessary evil.”

Is the function shareable?

A recently released report by the Professional Insurance Marketing Association states:

“The proliferation of laws and regulations have made it more difficult for carriers, agents, brokers and third-party administrators to satisfy their (compliance) obligations. As a result, regulated entities will likely need to dedicate additional resources to compliance, including personnel and systems….”

Companies can obviously make investments in infrastructure and training of compliance personnel, but the costs can be prohibitive for small- to medium-sized firms, and the results are less than certain. Compliance managers with significant experience are in high demand and, in certain parts of the country, command salaries in the low six figures. When companies decide to invest in training an employee in this area, they run the risk of losing the employee to a competitor once she has obtained the relevant expertise.

For most small- to medium-sized insurance agencies, the individual responsible for licensing and compliance also bears other responsibilities and lacks deep compliance expertise because he (1) spends much of his time on non-licensing activities and (2) does not receive adequate education and training.

License requirements vary by state, but they apply uniformly to all agency entities. This means that a shared resource (the outsourced license management partner) can assemble a best-in-class service that can be delivered to multiple agency clients on a more cost-effective basis than if the agency built the function internally. With critical mass and an exclusive focus on the licensing/compliance space, an outsourced partner can also stay current on developments across all jurisdictions while maintaining relationships with state insurance regulators to assist clients in avoiding regulatory issues and providing informed remedies when issues do arise.

By assembling an experienced team of professionals, the outsourced license management partner can also marshal investments in systems and infrastructure to make license management more efficient and reliable. Today, most agencies track their licenses on a spreadsheet, which can result in errors, missed deadlines and other issues.

A related issue faced by agencies is continuity of the licensing function. In-house compliance personnel have historically managed licensing and renewals on an ad hoc basis using Excel spreadsheets or conventional paper filing systems. These approaches may work on a very small scale, but they offer very little in the way of checks and balances because institutional knowledge is not easily translated within the organization and is often lost when the person assigned to manage compliance leaves. Because these firms typically lack robust systems and procedures, the compliance function is difficult to transfer to the new compliance manager.

Does the function require significant management oversight?

Agency managers should not need to concern themselves with day-to-day maintenance, while still having ready access to the status of their compliance programs so they can take advantage of business opportunities.

See also: Insurance Coverage Porn  

Here are three case studies of how outsourcing has worked when put in practice by ACCEL Compliance, which specializes in providing outsourced service options for license management and compliance functions for insurance agencies, brokerages and TPAs. ACCEL’s experience illustrates how these functions meet the key strategic criteria for outsourcing.

CASE 1:  Nationally Licensed P&C Brokerage

A nationally licensed property and casualty broker specializing in large complex commercial and municipal construction projects lost its in-house compliance manager and needed to fill the role rapidly.  The firm engaged ACCEL to take over the compliance function, saving the firm the time, expense and risk of recruiting a new hire.  The firm’s president said it saved money and got increased visibility into its compliance function, while ACCEL seamlessly picked up its renewals.

CASE 2:  Nationally Licensed TPA

A nationally licensed third party administrator of life, health and employee benefits for a number of the largest U.S. insurance companies and affinity programs also recognized benefits in outsourcing its license compliance function. The internal compliance manager said, “While we understand that licensing is necessary to our continued operations, it does not drive our business strategy.  Worrying about lapses in licensing was an unnecessary distraction for myself and our executive management team.”

CASE 3:  Small, Independent P&C and Surplus Lines Agency

A small but growing independent property-casualty and surplus lines insurance agency based in the Southeast faced a rapidly expanding licensing footprint. As with many independent agencies, its founder and CEO had grown the business without adding significant administrative staff and the related expense. He recognized the opportunity to outsource his compliance and license management function and engaged ACCEL, which he said “frees me up to manage the growth of the business and drive revenue.”

How to Embrace Workforce Flexibility

Because of the economic crash in 2007, many people were left scrambling for work, any work.

Those who were determined, but still came up short, looked inward to their skill sets and assets to find relief.

The answer quickly became obvious; what is now referred to as the flexible workforce or sharing economy, is made up entirely of freelancers and independent contractors.

This new group of freelance workers now makes up more than 35% of U.S. workers and earned more than $1 trillion last year.

This information is found in a recent survey, “Freelancing in America: 2016,” which was published by Upwork, one of America’s largest freelance workplace platforms.

The Gig Economy: A Brief Introduction

The gig economy is a term that describes a portion of the U.S. economy that is made up of freelancers. It is often used, interchangeably, with “sharing economy,” “collaborative consumption” or “access economy.”

This growing army of gig workers has become an integral part of the workforce, available on an on-demand basis.

This has allowed innovative businesses to pivot and remain nimble. Indeed, in an era where consumers are increasingly more interested in access over ownership, flexible workforces have become powerful tools for businesses.

Although many believe this segment of the workforce may be a fad that will soon to be diminished when unemployment numbers eventually plummet, a closer look at available data indicates otherwise.

Reportedly, the gig economy has grown every year over the past five, and there are solid indications that this trend will continue.

See also: 9 Impressive Facts on Sharing Economy  

What the Feds Report

Well, they haven’t quite caught up yet – although they’re getting there.

The labor experts in D.C. minimize the gig economy by referring to gig workers as “contingent workers” (any position not expected to last longer than one year).

The feds report that that this segment makes up about 4% of the total workforce.

Looking more closely, however, one can easily determine that the most recent survey numbers used by the Bureau of Labor Statistics refers to data accumulated more than 10 years ago.

I don’t feel like we need to delve into why that’s an issue, correct?

How the Gig Economy Is Growing

The gig economy continues to increase as traditional companies look for solutions to workforce issues.

Although “outsource” is a term that consumers and traditional employees detest, no one has a problem with a temp in the workplace.

But when you use the word “outsource” (which is what a temp employee is), many Americans think of good American jobs being sent overseas where workers will work for pennies on the dollar.

The gig economy is growing because entrepreneurial gig workers now have the means to share with others how they can become freelancers and realize their dreams of being self-employed.

Platforms such as Upwork, Airbnb, Uber, TaskRabbit, WeGoLook and many others seamlessly connect this new freelancer class with those who have paid work available.

This entire process is all facilitated by innovative mobile technology and apps.

What’s not to love about that?

It’s certainly not for everyone, but for those who even feel a mild burn of the entrepreneurial spirit, they can use their skills or assets to become part of the gig economy.

Why The Gig Economy Is Growing

The gig economy (flexible workforce) continues to grow because America needs it to grow.

Companies can access skilled on-demand workers for one-off or continuing tasks.

Thanks to on-demand worker platform, businesses can now access expert freelancers to perform critical functions that are temporarily needed.

According to Jobshop, nearly one-third of B2B companies plan to hire gig workers over the next five years.

Further, a report by Fieldglass indicates that 95% of B2B companies not only understand, but recognize, the need to incorporate the gig economy into their business models.

The American workers are changing. Many regard employment as a job totally unrelated to what their life goals may be.

Goals that were formed in their minds at a young age and continue to burn deep in their hearts.

Even highly skilled workers earning terrific incomes imagine what it would be like to do what they love to do rather than what they have to do.

Although born out of necessity, gig work has become a compromise for millions of hard-working Americans.

Freelancing allows them to choose to do what they love and what they are best at. It provides the flexibility to work the hours of their choice, spend more time with family and become highly skilled experts in a field they love.

Embracing the Flexible Workforce

The insurance industry can embrace this growing flexible workforce made up of skilled freelancers in a number of ways.

For starters, insurance carriers can use skilled gig workers to create efficiencies across many channels in their organization.

Although major insurers have embraced technology, they continue to fumble the ball streamlining their processes and supply chain.

Similar to the federal government, large insurers have many layers of bureaucracy that at times put the breaks on workflow, innovation and even communication.

The result typically frustrates the consumers they have committed to serve.

In the digital age where consumers crave access, convenience and timely services, cumbersome policies and bureaucracies will fade. Quickly!

Areas that need rethinking and refocus are those where consumer interaction is critical.

Communication

There are many critical areas of communication that need not be assigned to full-time workers.

These tasks are generally performed on-demand and for specific reasons and following certain events.

Using a skilled freelancer who can be available on an as-needed basis for a short period makes more sense than using a highly paid (when you consider compensation plus benefits) full-time employee.

See also: Benefits: One Size No Longer Fits All  

Claims

Streamlining the claims process is a priority for every insurer because it’s not only a profit-earning department, it has many functions considered menial to an experienced licensed adjuster.

Tasks such as consumer visits, picture taking, damage verification and more could easily be assigned to a local gig worker.

Why maintain a network of thousands of field employees nationwide when you can access hundreds of thousands of on-the-ground gig workers when you need them?

Although claims activity can be forecast to a certain degree, many insurers are caught off guard with the arrival of events such as a natural disaster.

This often leaves carriers scrambling to recruit independent contractors, who sometimes are unwilling to perform many of the tasks that a freelancer can provide.

Marketing

Because marketing is about communicating with various market segments, it makes sense to contract with gig workers who specialize in that particular demographic.

For example, millennials communicate differently than Generation Xers, who talk differently than Baby Boomers.

Although each category can have similar insurance product needs, they prefer to learn about it, and make the purchase, in different manners.

Whether you are an agency or an insurer, outsourcing your marketing needs to a gig workers can make more sense than loading your payroll with different personality types so that you can accommodate the preferences of the various market segments.

Or, many companies are electing to leverage gig workers to augment their current full-time staff. Gig work isn’t a full-time or part-time discussion – they can be complimentary.

Whether you designate this growing on-demand labor force as the flexible workforce, gig economy, freelancers or outsourcing, there is no doubt that this workforce can provide skilled on-demand workers to the insurance industry.

These are workers who are doing what they know best and are passionate about.

Principals in the insurance industry should look to this flexible workforce to streamline processes that affect consumer satisfaction and save payroll dollars in the process.

As the gig economy continues to grow as a viable employment alternative for many, traditional insurers can get ahead of the curve by leveraging them and embracing flexibility.

Rethinking the Claims Value Chain

As a claims advisor, I specialize in helping to optimize property casualty claims management operations, so I spend a lot of time thinking about claims business processes, activities, dependencies and the value chains that are commonly used to structure and refine them. Lately, I have been focusing on the claims management supply chain — the vendors who provide products and perform services that are critical inputs into the claims management and fulfillment process.

In a traditional manufacturing model, the supply chain and the value chain are typically separate and — the supply chain provides raw materials, and the value chain connects activities that transform the raw materials into something valuable to customers. In a claims service delivery model, the value chain and the supply chain are increasingly overlapping, to the point where it is becoming hard to argue that any component of the claims value chain couldn’t be handled directly by the supply chain network.

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Which creates an intriguing possibility for an insurance company — an alternative to bricks and mortar and company cars and salaries, a virtual claims operation! Of course, there are third-party administrators (TPAs) that are large and well-developed enough to offer complete, end-to-end claims management and fulfillment services to an insurance company through an outsourced arrangement. That would be the one-stop shopping solution: hiring a TPA to replace your claims operation. But try to envision an end-to-end process in which you invite vendors/partners/service providers to compete to handle each component in your claims value chain (including processing handoffs to each other.) You select the best, negotiate attractive rates, lock in service guarantees and manage the whole process simply by monitoring a performance dashboard that displays real time data on effectiveness, efficiency, data quality, regulatory compliance and customer satisfaction.

You would need a system to integrate the inputs from the different suppliers to feed the dashboard, and you would also need to make certain the suppliers all worked together well enough to provide the ultimate customer with a seamless, pain free experience, but you are probably already doing some of that if you use vendors. You would still want to do quality and compliance and leakage audits, of course, but you could always hire a different vendor to do that for you or keep a small team to do it yourself.

Your unallocated loss adjustment expenses (ULAE) would become variable, tied directly to claim volume, and your main operating challenge would be to manage your supply/value chain to produce the most desirable cost and experience outcomes. Improved cycle time, efficiency, effectiveness, data accuracy and the quality of the customer experience would be your value propositions. You could even monitor the dashboard from your beach house or boat — no more staff meetings, performance reviews, training sessions — and intervene only when needed in response to pre-defined operational exceptions.

Sounds like a no-brainer. Insurance companies have been outsourcing portions of their value chain to vendors for years, so why haven’t they made their claims operations virtual?

If you are running an insurance company claims operation, you probably know why. Many (probably most) claims executives are proud of and comfortable with their claims operations just the way they are. They believe they are performing their value chain processes more effectively than anyone else could, or that their processes are “core” (so critical or so closely related to their value proposition they cannot be performed by anyone else) and thus sacrosanct, or that they have already achieved an optimal balance between in-house and outsourced services so they don’t need to push it any further. Others don’t like the loss of control associated with outsourcing, or they don’t want to consider disruptive change. Still others think it might be worth exploring, but they don’t believe they can make a successful business case for the investment in systems and change costs. Unfortunately, this may help explain why claims executives are often accused of being stubbornly change averse and overly comfortable with the status quo, but I think it is a bit more complicated than that — it all begins with the figurative “goggles” we use to self-evaluate claims operations.

If you are running a claims operation, you have an entire collection of evaluation goggles — the more claims experience you have, the larger your collection. When you have your “experience” goggles on, you compare your operation to others you have read about, or seen in prior jobs, or at competitors, to make sure your activities and results benchmark well and that you are staying up to date with best practices. At least once a year, someone outside of claims probably demands that you put your “budget” goggles on o look for opportunities to reduce ULAE costs. or legal costs, or fines and penalties, or whatever. You probably look through your “customer satisfaction” goggles quite a bit, particularly when complaints are up, or you are getting bad press because of your CAT response, or a satisfaction survey has come out and you don’t look good. Your “stakeholder” goggles help you assess how successful you have been at identifying those who have a vested interest in how well you perform, determining what it is they need from you to succeed, and delivering it. You use your “legal and regulatory compliance” goggles to identify problems before they turn into fines, bad publicity or litigation, much as you use your “no surprises” goggles to continually scan for operational breakdowns that might cause reputational or financial pain, finger pointing and second guessing. Then there are the goggles for “management” — litigation, disability, medical, vendor — and for “fraud mitigation” and “recovery” and “employee engagement.” Let’s not forget the “efficiency” goggles, which help you assess unit costs and productivity, and the “effectiveness” and “quality control” goggles, which permit you to see whether your processes are producing intended and expected results. And of course your “loss cost management” goggles give you a good read on how well you are managing all three components of your loss cost triangle, i.e., whether you are deploying and incurring the most effective combination of allocated and unallocated expenses to produce the most appropriate level of loss payments.

Are all those goggles necessary? You bet. Claims management involves complex processes and inputs and a convoluted web of variables and dependencies and contingencies. Most claims executives would probably agree it makes sense to regularly evaluate a claims operation from many different angles to get a good read on what’s working well , what isn’t and where there is opportunity for improvement. The multiple perspectives provided by your goggles help you triangulate causes, understand dependencies and impacts and intelligently balance operations to produce the best outcomes. So even if you do have a strong bias that your organization design is world-class, your people are the best and all processes and outcomes are optimal, the evaluation should give you plenty of evidence-based information with which to test that bias and identify enhancement opportunities — as long as you keep an open mind.

No matter what you do, however, there will always be others in your organization who enjoy evaluating your claims operation, and they usually aren’t encumbered by such an extensive collection of goggles. They may have only one set that is tuned to budget, or customer experience, or compliance, or they may be under the influence of consultants whose expensive goggles are tuned to detect opportunities for large-scale disruptive/destructive process innovation or transformation in your operation. On the basis of that narrow view, they just might conclude that things need to change, that new operating models need to be explored. Whether you agree or disagree, your evidence-based information should be of some value in framing and joining the debate.

Will we ever see virtual claims operations? Sure. There are many specialized claims service providers operating in the marketplace right now that can perform claims value chain processes faster, cheaper and better than many insurance companies can perform them. The technology exists to integrate multiple provider data inputs and create a performance dashboard. And there are a few large insurance company claims organizations pursuing this angle vigorously right now. I fully expect the companies that rethink and retool their claims value chains to take full advantage of integration of supply chain capabilities and begin to generate improved performance metrics and claim outcomes, ultimately creating competitive advantage for themselves. Does that mean it is time for you to rethink your claims value chain? I think the best way to find out is to put on your “innovation” goggles and take a look!