CYRIL TUOHY, managing editor of Risk & InsuranceŽ
Looking to send core competences like underwriting, loss control and surveillance offshore to Bermuda? No thanks. How about to India? We'll take a pass, thanks very much. No? Well then, how about giving China a try, it's still fairly cheap? Not over our dead bodies.
That about sums up how risk managers and brokers feel when it comes to sending three key insurance processes abroad.
Those opinions, not surprisingly, are reflected in a recent survey of trends in claims process outsourcing, which found that respondents were less likely than they were two years ago to send the responsibility of underwriting, providing loss control services, and offering surveillance and investigations services to companies located offshore.
"Most companies are already doing some offshoring--they are not talking about it, but they are doing it," said workers' comp consultant Maddy Bowling, who conducted the survey. "And they've thought about what they can offshore and what they can't."
A total of 23 percent of the respondents said underwriting was an activity that could be sent offshore, compared with 25 percent in 2006. Just 12 percent said loss control services could be sent overseas, compared with 15 percent two years ago. And 14 percent of the respondents in this year's survey said surveillance and investigations could be sent offshore compared with 16 percent in 2006.
The results for the three categories don't come as a surprise, said Bowling, as the areas of loss control and surveillance and investigations require higher levels of customer contact because they deal with helping clients mitigate losses as opposed to administering procedures required after a loss has occurred.
"Loss control's all about being with my client and helping them control their losses and provide safety and prevention," she said.
The soft market of the past two years has also made compensation managers wary of delegating the responsibility of underwriting in particular to people who are not familiar with the nuances and the subtleties of workers' comp risks, said Bowling.
By contrast, the survey found that compared with two years ago, respondents were more receptive to sending work offshore in every other category of workers' comp claims processing, from claims triage to lost-time claims adjusting to medical-bill review to paper conversion and document management, to reporting and data analysis.
"I don't think there's a company out there that's not either doing it or considering do it. All the big guys are talking about it. Now, they are going to be careful about what they offshore, as they should be, and clearly that's what the survey showed," Bowling said.
Workers' comp and disability risk managers have not been keen about sending claims processes to offshore locales, and let the industry know as much. Two years ago, during a panel discussion at the 15th Annual National Workers' Compensation and Disability Management ConferenceŽ & Expo in Las Vegas, risk managers booed chief executives of third-party administrators who who suggested that sending claims process offshore was a viable idea.
With the economy entering its 13th month of recession and a new administration aware of the unpopularity of moving jobs overseas, sending more claims processes offshore will remain a politically sensitive issue within the industry for the next year or two at least, said Bowling.
January 1, 2009
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