Provider Streamlines Functions for SMB Insurers | Article

small to medium sized businessA couple of years ago, John Powter and David Springer faced similar dilemmas.

Their small-to-medium-sized (SMB) Managing General Agent (MGA) insurance firms specialize in niche insurance packages. Powter, president of Powter Insurance, a McKinney, Texas-based retail insurance agency, services personal insurance lines and workers compensation policies including many of the Domino’s Pizza franchises in the United States. Springer is the Program Division president of Woodbridge, New Jersey’s NIP Group, Inc. NIP underwrites a variety of specialized policies for businesses and municipalities across the country.

Both men knew they had to provide better levels of service to their customers. They realized the best way was to expand non-revenue-generating back-office staff and support activities. This growth challenge required finding and retaining qualified staff, ideally college graduates willing to do high-level data processing work in the process-heavy insurance industry. Each firm needed 24-hour back-office support.

But they couldn’t afford to do all this themselves.

Both men knew the key to their growth was finding cheaper ways to do business. So the answer for each was outsourcing. But at the time, 2005 and 2006, there were few domestic providers serving the SMB sector as most providers focused on the “big ticket” buyers. They needed to look outside of the box.

When they did, they got what they needed in provider ReSource Pro and its data processing center in Qingdao, China. The New York-based data management and BPO supplier targets SMB insurance agencies, MGAs, insurance program managers, and individual brokers.

Both Powter’s and NIP’s marching orders to their provider were simple, according to each executive. They wanted ReSource Pro to help them manage and categorize their data better, serve as another level of quality control to assure accuracy, and provide that support during off-peak hours in order to decrease turnaround time.

The success of these two firms and others in the insurance industry doesn’t surprise Lim Yen Suan, a senior manager of risk advisory services at KPMG. “BPO is becoming increasingly pervasive as companies grow more comfortable entrusting sensitive processes to outsiders in Asia. If done right, it allows companies to focus on core competencies while accessing skills they lack in-house.”

About the time these firms were considering the outsourcing option, the Business Process Management Institute issued a study of its members. The data revealed that half of their planned back-office projects involved extending processes through their firewalls to partners and suppliers throughout their value chains.

Provider quickly assists Powter renew a big contract

Powter says he had initial misgivings outsourcing to a firm so far offshore.

“I had moral concerns, he says. “There was certainly a buy-in phase for our employees. But once they saw it as an asset that would make their jobs and lives easier, it worked well.” He adds that once everyone realized management was neither cutting jobs nor replacing employees, the outsourcing venture gained momentum, especially after running a test renewal to see how it would work.

ReSource Pro set up a mock Domino’s renewal, which in addition to easing employee fears, produced a data accuracy rate of 99.6 percent. “But they did it in half the time,” beams Powter, who adds that his staff was so swamped during previous renewal periods that it processed paperwork at no better than a 92 percent accuracy rate. The actual renewal of this large pizza retailer’s accounts produced identical results at almost lightning speed.

The renewal process is crucial in the life of any policy. The supplier collects, sorts, and checks volumes of data for accuracy so the underwriter can not only retain the business but assure that it is writing the proper coverage. All this data helps determine the risk-value in computing the insured’s rates and other policy terms, which underscores the need to do it quickly and mistake free.

Powter credits the quality and efficiency of the work by his outsourced four-person “China night shift.” “The value of the service went beyond just data entry and spreadsheets,” he notes. “They communicated responsively with us in English. “The overall outcome was much better when compared to the Web design work we outsource to India.”

“Getting started with ReSource Pro is remarkably simple,” says the provider’s CEO Dan Epstein. “There’s almost no up-front cost. Our expertise is in standardizing documenting procedures within client databases so we can easily train our people.” He adds that the company founders developed the firm specifically for the SMB insurance market. “These organizations struggle with commission and margin pressures. They don’t have the resources to build their own offshore data and back-office support, and they don’t want to downsize.”

Back-office data management and support in a month for NIP

NIP’s story is similar to Powter’s, to a point. In his case, Springer set out to redefine his operations and knew outsourcing back-office and data management in an “other than first shift” manner was the answer from the onset.

His challenge was mapping out this new operation and separating core from non-core competencies. After identifying pricing, decision-making, and underwriting as core duties to remain in-house, he decided he would outsource processing new submissions to ReSource Pro with the idea that if it worked, more support tasks would follow.

ReSource Pro quickly established Springer’s dedicated Chinese processing team and was up and running in about a month: logging submissions, confirming clearances, entering application data, and verifying it. NIP assigned each accepted submission an underwriter.

Springer’s initial apprehension about the language barrier quickly dissolved because the provider’s project manager in China impressed him. And the 13-hour time difference with Qingdao’s processing staff ended up being a benefit that added to productivity because it turned the carrier into a 24-hour operation. As his staff left for the day, China began ramping up and processing submissions. So what formerly took three to four days quickly shrank to 24 hours.

On the strength of this success, NIP began sending more back-office work overseas such as billing endorsement and cancellation, processing some policy audits, generating renewal letters, assisting the underwriting staff with general follow-up, and sending carrier-issued policies to brokers.

NIP’s remote staff in Qingdao, which started with four people, eventually grew to its current compliment of 10. And like Powter, NIP retained its entire staff at its New Jersey headquarters and didn’t add any data-processing employees.

A provider that once was a buyer

Until 2003, ReSourcePro – the former Distinguished Programs – was an insurance wholesaler. One of its prominent underwriters, Matt Bruno, realized his dream of moving to China but didn’t cut ties. Upon arrival, with Distinguished Programs in need of affordable data management and the back-office staff to support it, he quickly assembled a small, specialized staff, mostly college students and new graduates, and began providing those services to Distinguished Programs.

Almost simultaneously, Bruno and his associates in New York saw that there was much more work the Chinese workers could perform for other similarly-sized insurance SMBs. In early 2004, Distinguished Programs became Resource Pro and grew quickly, with Bruno overseeing the new China operation and its rapid expansion.

The buyer drives the growth, according to Epstein. “Clients don’t need to hire a bunch of people at the same time. We work incrementally.”

Behind the scenes, though, ReSource Pro continues to train new Chinese hires on each client’s system so when as the buyer wants to add staff there’s no delay. “We can train people quickly,” he notes. “Our approach is immensely scalable. But just as important is our developing each Chinese team for only one buyer so they become proficient with its procedures,” Epstein adds.

According to Powter, his work with ReSource Pro gives his nimble agency an advantage. If a large project comes up, China can quickly add the necessary people. This means Powter does not have to make an extended commitment to a new employee or go through the hassle of training a temp.

NIP’s Springer happily echoes the same benefits. “Future remote staffing from ReSource Pro gives us the flexibility to reallocate resources easily, relative to the ups and downs of future business cycles.”

Lessons from the Outsourcing Journal:

  • The SMB market in insurance outsourcing is showing growth. This is due, in part, because Asian providers are assuming greater duties as they display competitive value and gain greater trust from their American buyers.
  • By sending data management and back-office services that support it to Asia, North American SMB insurance buyers create a 24-hour support operation, which cuts turnaround time in half and, in some cases, can lower turnaround to a single day.
  • Outsourcing data management and back-office support to a “second-shift provider” allows SMB insurance operations to realize greater efficiencies and quicker service implementation. Suppliers can perform many functions overnight.

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