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Independent Insurance Agencies Embrace Outsourcing to Thrive in a Challenging Market

It’s not easy being an independent insurance agent these days. Margins are down, the market is soft and direct sellers are promoting a virtual, ‘click-and-pick’ approach to an industry traditionally built on personal relationships and trust.

To increase profitability, these agencies have to run lean, automating as many processes as possible. However, even with the latest agency management systems and real-time quoting tools, some manual tasks remain.

So, instead of spending time prospecting and interacting with customers, valuable staff members are checking insurance policies, reviewing loss runs and handling paper. According to The National Alliance Research Academy’s most recent Producer Profile: Compensation, Production, and Responsibilities, the average producer – the undisputed money maker of any agency – spends only 41 percent of his or her time on sales.

Although insurance carriers have long embraced BPO for application and claims processing, agencies were slow to go for the outsourcing option. With today’s new challenges and a potential staffing shortage in clear view, all of that’s starting to change. Success, for some agencies, requires a fundamental shift in the way they manage their businesses, with outsourcing playing a key role in their go-forward strategies.

“We’ve been looking at the possibility of outsourcing for a few years,” Stephen Moriyama, senior vice president of Hayward Tilton and Rolapp Insurance, a California-based, full-service, eight-location agency handling $100 million in premiums. “We spent a lot of time researching the different providers, talking to other agents about how they were using outsourcing and zeroing in on the model that would work best for us. I think the biggest surprise was seeing not only how many options were out there but also how many agencies were already doing it.”

An Outsourcing Option for Every Agency’s Need

The new needs of insurance agencies have not gone unnoticed. Within the past few years, a number of smaller, insurance-specific BPO providers have opened their doors, each with its own unique model.

New York-based ReSourcePro was one of the first of these boutique providers, offering back office processing and analytical support delivered by college-educated, English-speaking professionals in its facility in China. The idea for ReSourcePro came when its parent company, an insurance managing general agent (MGA) was working with a carrier that went out of business. It had to quickly transition 13,000 accounts to a new carrier in three months – and didn’t have the staff to handle the extra work.

“At the time, one of our ex-employees was teaching English at a university in China. He said the skill level and English comprehension was so great that if we set up an office with computers and a connected terminal there, he could put together a team who could remotely cancel and rewrite these accounts,” explained Dan Epstein, CEO of ReSourcePro. “They got done in 10 weeks what it would have taken us 13 months to do. Our company was born.”

Unlike traditional BPO operations, which pool resources and leverage these across multiple clients, ReSourcePro dedicates specific workers to each client. Another very visible difference is the work environment itself – there are no phones on any of the desks, no Instant Messaging or texting – nothing to interrupt the staff from the tasks at hand. All that exists are secured remote desktops, which mirror the clients’ agency management systems.

On the other hand and on the other side of the world, WAHVE, LLC gives insurance agencies a U.S.-based outsourcing option. WAHVE, which stands for Work at Home Vintage Employees, matches retired insurance professionals, age 55 or older, with insurance agencies needing anything from insurance processing to back-up customer support.

The concept is the brainchild of Sharon Emek, an insurance industry veteran who saw two needs: agencies that couldn’t find qualified personnel and retired Baby Boomers who, for economic or personal reasons, wanted to keep working – but not in a traditional, stress-filled office environment.

“In the past, insurance carriers would take kids out of college and train them in the insurance industry so they could work with those carriers or in agencies – and that’s just not happening anymore,” Emek said. “We take established talent, go through an extensive vetting process and match the right people with the right agencies on an outsourced basis.”

By employing a work-at-home model, where each WAHVE connects remotely to the client’s agency management system, Emek reduces overhead. As a result, she can provide agencies with a low-cost outsourcing option without going the offshore route.

This is not to say that larger, enterprise BPO providers are ignoring this growing market need. Accenture, for example, with nine global insurance processing facilities, serving more than 85 percent of the world’s top 40 insurance companies, also markets to the smaller agencies.

“The business needs of the SMB market are very much aligned with those of the larger players. To make BPO successful, expertise in the specific business function rules the day,” said Michael Costonis, partner, North American Insurance Industry Lead for Accenture. “The primary benefit of working with a larger player is access to expertise at scale, which provides deep experience where needed, the flexibility to add key players in anticipation of business demands and the shared learnings across multiple clients.”

Although a wide range of providers, geographies and models are available to insurance agencies, one commonality exists: it’s not about headcount reduction. The idea, with each provider we spoke with, was getting more value out of existing staff by moving more task-oriented, back office work to an outside provider.

A Cultural Shift that Could Change an Industry

Stephen Moriyama, for one, is happy to have options — and saw different values in each outsourcing option he researched for Hayward Tilton and Rolapp. The key, he believes, is finding the model that most closely aligns with the agency’s culture and specific business needs.

“For us, a dedicated staff in China gave us a ‘night shift’. They work from 6 p.m. our time until 2 a.m. our time. We come in the morning and the work is done,” he said. “We liked the concept of dedicated employees, although we knew that meant giving up some of the benefits of a pooled resource model. For example, we still have to deal with vacations and sick days – whereas in pooled model, you don’t.”

According to Moriyama, one of the most challenging parts of transitioning to an outsourced back office model was explaining the strategy to the agency’s 95 employees. “Our employees definitely had questions when they heard the word ‘outsourcing.’ They wanted to know why we were sending jobs overseas,” he said. “We explained that we really don’t see it that way. We see outsourcing as a way to focus our dedicated staff on building revenue, and focus our efforts on generating income in a market where premium rates and profits are down. In a way, outsourcing is giving our internal staff job security.”

But, the proof is in the output.

“In a 45-day period, our outsourced team has checked more than 300 policies. It would take us four times as long to do that same sort of checking in house,” Moriyama said. “And honestly, when English is a second language, you’re more accurate. You see the difference between ‘Inc’ and ‘Inc-period’ (Inc.). Those details are important in our business.”

In speaking with other agencies, Moriyama believes that outsourcing has the potential to be as important to agency survival as technology and automation – regardless of the provider or the mode of adoption.

“To grow an agency in today’s economy, to remain profitable against all odds, you can’t keep doing business as usual,” he said. “Outsourcing can be a great way to gain efficiencies, improve quality and refocus your producers on what they do best – generating income for the agency. Technology makes us more efficient; outsourcing makes sure we use our people where they bring the greatest benefit. Ultimately, that’s what will separate the winners from the losers in this industry.”

What’s the outsourcing option your business has gone for? Let us know!

Sources: (alphabetically):
Michael Costonis, Partner North American Insurance Industry Lead, Accenture
Sharon Emek, President and CEO, WAHVE, LLC.
Dan Epstein, CEO, ReSourcePro
Stephen Moriyama, Senior Vice President, Hayward Tilton and Rollap Insurance


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