Outsourcing for Agents

“Insurance Agents using outsourcing resources to get more done.Do what you do best and outsource the rest “-Peter Drucker

Outsourcing may be defined as –Leveraging the expertise of a specialist provider to liberate internal resources maximizing productivity, performance and profitability.

Many IIAT members have inquired about outsourcing, also known as remote staffing, in general and have asked us to provide some information on particular services that are available in the marketplace for insurance agents. The focus of this article will be on backroom business processes or service tasks that agents might consider outsourcing in lieu of customer service functions or human resource functions.

In order to stay competitive in today’s insurance business environment, agents across the country are focusing resources on their core functions. Outsourcing some of your business processes may be the answer to providing top notch customer service and freeing up more time for sales and personal service.

Questions to be addressed:


Angela Ford
Continuous Improvement Director

What are some of the myths surrounding outsourcing?

  • It’s always cheaper. Not necessarily-although costs might be cut, the real measurement is overall cost-effectiveness. Will outsourcing specific tasks increase productivity overall?
  • I will lose control. With a well written contract and a trusted partner you will protect your agency from loss of control. Essentially, the vendor will do what you tell them, based on your requirements and specifications.
  • It is only to be used for short- term projects. Outsourcing should be used as a solution to free internal resources to fulfill other agency critical functions. Length of term should not be used as criteria in outsourcing, although it can be implemented as part of your long- term operational strategy.
  • Outside source will not care as much. It’s in their business interest to make sure you are completely satisfied and that your organization succeeds. You set the quality standards: they will meet them.
  • If I outsource, I can’t bring it back in house. True only if you relinquish too much control. Proper communication and monitoring will allow you to bring back the functions. This can be mitigated by outsourcing specific tasks in a “modular fashion” with well- defined procedures, monitors and controls.
  • My customers and staff will think that we are not capable of handling the outsourced function. Outsourcing is not a sign of weakness; you are actually strengthening your organization by becoming more focused on your customers. In most cases your customers will be unaware of outsourcing unless you tell them. Your staff is not in competition with outsourcing for the outsourced tasks. Their skills are needed on higher level work.
  • Staff members think their jobs are being eliminated. Outsourcing is not a staff reduction strategy, rather it frees experienced staff with skill sets to be more productive. Outsourcing is about growth not downsizing. Outsourcing as a strategy increases capacity of your highly skilled staff.
  • Outsourcing will provide standardization of my workflows. On the contrary, you must establish the processes and standards that you want the vendor to follow. By establishing these workflows and procedures you will gain operational efficiency.

What are the advantages of outsourcing?

  • Accepted as a sound business practice by leading US organizations
  • Allows agency to focus on their primary mission by shifting activities that can be performed better, faster and sometimes cheaper by outsourcer
  • Facilitates growth and boosts productivity
  • Increases Cost efficiency
  • Optimizes back-office operations
  • Allows Flexibility
  • Access to specialists skills
  • Provides dependable resources, to combat turnover, absences of internal staff and reduces the need for overtime or part-time help.
  • Reduces staff strain
  • Retain control of systems and security
  • Optimizes resources: Cash, Fixed Assets , People
  • Reduces management oversight and frees up time of owners

What can be outsourced in my agency?

  • information technology
  • web development
  • publications
  • financial and agency accounting services
  • Agency license database maintenance for multi-state operations
  • Data entry, policy checking, claims reporting, billing and loss summaries, issuing routine certificates, endorsement requests, direct bill reconciliation, assembling submissions and more.
  • Data conversions and “crunch “processing needs related to business acquisitions.

To outsource or not to outsource? The following questions need to be fully answered by the agency before an informed decision can be made

  • Why do I want to outsource this particular process?
  • Does my agency process at least 8 policies a day or 160 per month (suggested minimum)? It is recommended that agencies have about 15 employees and at least 50 % of their business be commercial for outsourcing to be cost effective. However, outsourcing arrangements are available for any size organization. The benefits depend on current fully-loaded costs and the consistency of the flow of work to the outsource group.
  • Am I wasting money on seasonal temps or staff overtime often during the year?
  • Do highly skilled (and higher paid) staff have to fill in on lower level work?
  • How much time and money is being spent on training and retraining of certain functions in my agency?
  • Do the math-know the fully loaded cost of the function you wish to outsource
  • What bottleneck, problem or opportunity will outsourcing help me address?
  • What outcomes do I expect?
  • How can I involve my staff members in this process?
  • How will success be measured?
  • What monitoring will be put in place?
  • Will I be able to bring it back in house if necessary?
  • What do their references say?
  • In considering an overseas vendor make sure they maintain a home office or branch in the U.S. - Check educational level and proficiency in English. International outsource arrangements may not involve contact with your customer (that is up to you): Most, if not all communications with you may be in writing.
  • Consider ease of implementation

What are the most common disadvantages, agencies give for not implementing an outsourcing program?

  • Creation of poor office morale if not communicated well and accepted by key staff members
  • If outsourcing relationship was made public in the community, some might have issues with jobs/work being done by foreigners or those outside the community
  • Management unwilling to develop and enforce standardized procedures and work processes
  • Using outsourcing as a strictly cost-cutting device
  • Expanded job responsibilities for employees , who might now be out of their comfort zone
  • Trust required to work with outsourcing partner

What are the steps to follow once deciding to outsource?

  • First develop a detailed definition of what you want to achieve.
  • Determine total cost of vendos set up fee and monthly charge
  • Define your expectations and scope. Quick return or longer- term objective? How will you measure success, over what timeframe?
  • Define your service requirements-Which processes do you wish to outsource and which can current staff provide?
  • Make sure you have detailed agency procedures for each function to be outsourced
  • Obtain buy-in of key personnel
  • Communication Plan- Agreement between you and your outsourcing partner on a communication and reporting plan
  • Consider only industry specialists, or an outsource arrangement that can design a process to your specific requirements.
  • Incorporate the above in developing a Request For Proposal
  • Perform due diligence
  • Ask for a free trial or testing/calibration period

What qualities should I look for in an outsourcing partner?

  • One that fits your agency culture and shares your values
  • Experienced, proven vendor Understands your needs
  • Open communication- someone you feel comfortable with that wants to build a relationship
  • Experience with like customers
  • One that demonstrates continued staff development, experience and low staff turnover
  • Outsourcing firm that will dedicate employees solely to your agency
  • One that will assign an account manager that is responsible to you for the agreed upon outcomes
  • Ability of vendor to connect remotely to your agency management system