Tapping The Internets Potential, E-Outsourcing Cuts Costs And Risks

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Businesses across almost every industry have rapidly adopted Internet-based technology to differentiate themselves from competitors. Internet-based applications for marketing, e-commerce, and customer support have made it easier for companies to compete and reach a huge market that knows no geographical boundaries.

The insurance industry is no exception to this trend. Certainly, the stampede to create a presence on the Internet in the last five years has given the insurance industry a taste of the technologys potential. Carriers are testing the waters today with marketing-driven Web sites and, in some cases, basic customer or agent-support services.

But the true value of the Internet is just beginning to be recognized–outsourcing Web-based applications through application service providers (ASPs).

Carriers originally took advantage of outsourcing operations to reduce costs and lower the risks of hosting certain business processes in-house. By outsourcing non-differentiating operations, such as human resources, payroll, financial management, and other systems, carriers could focus more on their core competencies while relieving themselves of the high costs and risks associated with developing, running and supporting business systems in house.

Now, a new breed of outsourcer, the ASP, is tapping the Internets potential with new, Internet-based e-outsourcing.

In e-outsourcing, like traditional outsourcing, ASPs help lower a companys risk and costs by hosting the technology platform for the carriers business operations. Company employees connect to the ASP using a standard Web browser to run the necessary business applications.

ASPs with a proven track record can provide carriers with high-quality solutions that can be quickly deployed, are highly scalable, and have a high degree of availability. Carriers can also take advantage of subscription or “pay-as-you-go” pricing options.

Yet, ASPs capabilities go far beyond traditional outsourcing capabilities. Before the Internet, it was nearly impossible to communicate and collaborate outside a companys walls or private wide area network. Thanks to the Internets platform independence and far-reaching network, it is now possible for all process stakeholders–employees, agents, the insured, and suppliers–to access Internet-based applications using a standard Web browser. They need not be concerned about the underlying technology platform, software or physical location.

In fact, the Internet is a new channel for essential business operations, serving as a virtual, but common, application infrastructure for insurers. The Internet as a networking platform allows carriers to e-outsource virtually every operation, from back office and workflow systems to front office, outreach, and customer service–and all without significant investments in hardware, software, deployment time or IT personnel.

As companies start using the Internet more for business operations, ASPs can show what is possible to achieve using Internet-based technology. Insurers are then free to expand their horizons and to think about “what could be” rather than being limited by “what is.”

Although just the tip of the iceberg, ASP-delivered insurance applications that help spark thoughts of “what could be” might include:

–Collaborative claims litigation. Collaborative claims litigation management applications can significantly reduce the total claim outcome of litigated files through proactive communication and process management between a carriers claims personnel and outside legal counsel.

Real-time communication, enabled by intranets, extranets and other collaboration tools, enables lawyers and claims professionals to strategize, share claims and case information, set budgets, monitor case progress, work on documents simultaneously, and manage calendars.

Instead of arguing over after-the-fact legal bills as they do today, both sides can focus on resolving cases fairly and timely, keeping costs under control, and ensuring the best outcomes for all parties.

–Niche product development, deployment and administration. Too often, insurance carriers have missed significant market opportunities because they have been unable to get a product to market quickly, or the market opportunity did not warrant the resource commitment.

E-outsourcing provides carriers with new alternatives to the age-old time-to-market challenge, while enabling them to continue managing their core businesses in house. By using specialty ASPs who have experience bringing products to market quickly–or servicing niche or specialty markets–carriers no longer have to walk away from a good opportunity.

–Agent and Insured Services. Getting closer to policyholders and making it easier to do business with carriers have long been major goals of almost every insurer. Existing strategies, such as reaching the insured through CRM applications, have not yet come to full fruition. The Internet advances these goals by bringing together carriers, channel partners (i.e., agents, brokers, TPAs), and the insured.

Using Web-based applications that leverage legacy or new technology systems, agents and policyholders can quickly compare quotes, submit new applications, check underwriting status, or file a claim report online. While in-house staff might be technically competent to develop, deploy and support these agent/insured functions, ASPs enable carriers to take advantage of existing ASP-delivered applications and focus their energies on core business functions.

These are just a few of the many potential Internet-based applications, and they illustrate what insurers need to think about when pursuing an Internet strategy.

Until now, carriers have been slow to adopt ASPs and have not yet fully embraced the Internets potential. Insurers need to look beyond simply “porting” todays in-house applications to the Web.

To reap the rewards of the Internet, carriers should look at what has not been possible before due to a lack of in-house expertise, technology deficiencies, or a seemingly unmanageable and geographically dispersed user community.

It should be noted that while outsourcing processes and development can have a significant and positive impact on a business, there are also disadvantages to the process. For example, some carriers may feel a loss of control over commonly outsourced processes. This could include systems-related tasks like disaster recovery, user support, bug resolution, version control and data security.

Also, a carrier may not want to rely on an outside party for this level of technical expertise.

Another tradeoff to ASP outsourcing is the dependence on network reliability. If a Web-based application can only operate when online, then a companys entire user base may be dependent on connection to that network and downtime is not an option.

Finally, although not always the case, another concern with choosing to outsource using an ASP solution is a lack of flexibility for customization. The beauty of the ASP model is that one solution can support many different users. But what happens if your business has strategic IT requirements that result in a need for customized solutions? Unless your vendor is willing to build it for you, you may not gain the competitive advantage you need.

Is outsourcing right for your organization? The answer lies in:

Careful evaluation of the good, the bad, the beauty and the ugly of outsourcing (i.e. removing the rose-colored glasses),

Talking to like references to ensure that the vendor under consideration delivers on its promises, and

Verifying that your concerns are addressed to your satisfaction in the vendors service level agreement.

Only after these things have been done should you proceed and sign on the dotted line.

is chief technology officer of Visibillity, based in Chicago.


Reproduced from National Underwriter Life & Health/Financial Services Edition, September 16, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.