Insurance BPO stands for insurance business process outsourcing. It involves an insurance company hiring an outside firm to carry out some of its business activities. Generally insurance BPO does not involve core business activities, particularly those specific to insurance. That said, it is still important for an insurer to be sure a BPO provider meets requirements for both performance and security.
There are many reasons why a company would use outsourcing. With smaller companies it is simply a matter of cost: with some activities, such as delivery of goods, it isn't financially worthwhile to employ full-time staff to carry out the activity. With larger companies, it is more a case of economies of scale and specialization.
One example would be an insurer whose level of phone calls from the public varies greatly throughout the year, such as a travel insurer who sells more policies in the spring as people book summer vacations. To deal with these calls in-house could mean having some staff sitting idle in quiet periods, being understaffed in busy periods, or having the expense and hassle of bringing staff in on short-term contracts. Outsourcing to a call center provider can give the company certainty that all its calls will be dealt with, but without the risk of paying for excess capacity. This is because the call center will be dealing with multiple clients and can thus assign staff based on each client's varying demands.
In theory, any element of an insurer's business can be outsourced. In practice, most insurance BPO is in more general business areas rather than the specialized activities of an insurer. For example, an insurer is unlikely to outsource the task of assessing policies and setting premiums: a company that didn't have its own skilled staff with particular expertise at these tasks likely wouldn't venture into the insurance field in the first place. That said, some specialist tasks are sometimes outsourced, for example in vetting claims to look for potential fraud cases.
A company using insurance BPO may need to put checks and procedures in place to govern the provider's behavior. For example, the insurer will remain responsible for the security and confidentiality of customer data. It will therefore need to make certain the provider has strict policies for protecting this security, both on a human and technical basis. In some cases the relationship between the insurer and the provider may be subject to government or industry regulations.
