Carriers Look to Strike ITO Balance
Insurance Networking News, October 1, 2008
Yet, just as college education is widely viewed as a necessity in the workforce, the rationale for insurers outsourcing non-core IT functions also is gaining credence among insurers. While most insurers have the wherewithal to accomplish a range of IT functions for themselves, the question is why. Indeed, carriers burdened with a complex IT environment may view outsourcing as a way to simplify their infrastructure, allowing them to concentrate on core competencies, assaying risk. "They are starting to question what it means to be an insurance company and define the activities they need to keep at the heart of their business versus the things they need to do at an average, minimal level," says Kimberly Harris-Ferrante, research VP at Stamford, Conn.-based Gartner Inc.
Kimberly Harris-Ferrante
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CALLING COLOMBO
"Five years ago we couldn't done this," says Thad DeBerry, SVP for information technology at Franklin Lakes, N.J.-based Western World Insurance Group, of the company's decision to outsource some of its IT functions to Sri Lanka. "The increased capacity of remote access systems has really made this possible."
Also making the agreement possible was the realization by Western World-a privately held, small to midsized carrier that sells excess and surplus lines P&C in all 50 states-that trimming costs was a necessity for it to thrive in the marketplace. "The competitive environment is forcing us to be cost conscious," DeBerry says. "We're trying to squeeze everything we can out of the resources that we have."
DeBerry acknowledges that cost containment is but one of the reasons the company chose to partner with Dublin, Ohio-based 3SG Corp., which maintains a production center in Colombo, Sri Lanka. Another primary reason, he says, is the flexibility the arrangement affords him. Indeed, flexibility is key for DeBerry because the company's location in an affluent part of northeast New Jersey makes filling IT positions no simple task. "Where we are, it's especially difficult to find folks that want to do this kind of work," he says. "We had no choice but to address this and find somebody who could be an extension of our internal staff."
While initially tasked with a document scanning project, over the past few years, the relationship has evolved, and the focus has shifted to policy processing, DeBerry says. The upshot is that Western World is now able to do more with the less. Despite a 35% reduction in staff, the company is handling 20% more transactions. "We're now are to do as much or more with the same or fewer resources," DeBerry says.
Yet, the move did present some challenges. For starters, DeBerry had to sell the idea of outsourcing within the 44-year old company, long accustomed to doing things internally. Once that was accomplished, he had to focus on data quality and standards. To make sure the outsourced work is being done properly, DeBerry audits 20% to 25% of the work coming in from the staff in Sri Lanka, holding them to the same standards as internal staff.
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