Understanding outsourcing: a strategy for insurance companies.

Today's threatening, rapidly chaning environment requires insurance companies to reevaluate their business strategies to survive competitive turmoil. To satisfy customer demands, organizations must rethink their business objectives and their strategies for reaching them, maneuvering to greater productivity and efficiency. They must shift their focus from a product sales strategy to a needs fulfillment orientation to effectively meet customer expectations. Often, the challenge to meet evolving market demands presents obstacles an insurance company cannot overcome alone. In this situation, firms are increasingly considering outsourcing as a strategic option.

Outsourcing may help insurance companies move toward greater customer satisfaction by helping streamline inefficient internal operations. This is essential to improving ] customer servoce and can be achieved through carefully planned information technology strategies. Linking the various core activities -- actuary, product design, marketing, sales, customer service and operations--via information technology facilitates a faster, more integrated response to customer needs.

One internal inefficiency that insurace companies encounter results from their system's history. In the 1960s, many systems were designed and built using Basic Assembler Language (BAL). When first developed, these systems were considered state-of-the-art. However, technology innovations have since proven assembler-coded systems cumbersome and inflexible. As new business requirements have emerged and new technologies have become available, these systems have failed to offer the competitive strength needed to approach the volatile trends of the …