Fall 2007 / No. 73
Outsourcing…at your peril
Outsourcing, partnering, or joint venturing? Whatever you call it, more and more carriers are looking at their options in an effort to seize a competitive advantage or increase their speed to market. These arrangements have many advantages and quite a few pitfalls. But for this article, let’s start at the highest level.
The array of functions involved in these arrangements covers the gamut: specific product development and management, distribution, administration, enrollment, claims, and on and on. But a common question carriers ask us is simply, “Which functions should we never outsource?”
The first answer is obvious: you have to be taking a significant part of the risk on your key product(s) /your entire portfolio (whichever is most appropriate). After all, that’s the business you’re in. A little more controversially, we think carriers should maintain control over the underwriting/risk management functions for their core
product(s)/entire portfolio. Claims management makes the list, but only with an asterisk. Claims for simple, transaction-oriented products or for non-core products can be outsourced under the right conditions. Almost every other function: marketing and distribution, administration, billing, etc. can be (and often should be) outsourced.
The one function we don’t include until the end of the discussion is enrollment. Today, enrollment is routinely outsourced to the writing broker, Specialist Brokers, enrollment companies, or vendors. Group companies still see enrollment as a part of the implementation process rather than as the key to sales success. And too many individual carriers still think of enrollment as a one-time sales opportunity. Enroll it and move on.
But some carriers are challenging those conventional viewpoints. Some are realizing that for the ultimate buyer (the employee), this is the only experience they may ever have with the carrier. This group of companies believes that outsourcing their customer experience and allowing different customers to have very different experiences is bad business. A second group is beginning to look at employee purchase behavior as, ideally, the beginning of a long-term relationship. They are investigating the possibility of changing the nature of the account relationship, looking at cross selling, repeat contact strategies, etc. Either way, these companies are coming to believe that enrollment may be a function they don’t dare outsource.
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